Decrease in branch traffic speeds digital transformation

Retail banks to further embrace digital transformation as lockdown causes increased use of online services by consumers

by | June 11, 2020 | bobsguide

Starting in March, banks including Llyods and HSBC have closed their branches due to government guidelines on health and safety – a trend that has led to a drastic change in consumer behaviour and that has accelerated the digital transformation of retail banks.

Mladen Vladek, general manager at FIS, says there is an “impact on the retail real estate” of the industry, where branches could stay closed despite end of lockdown.

The permanent closure of these branches, he says, could cause long-term effects on consumer behaviour.

“When I go to the store and my favourite brand that I used to buy for the last four, five, seven years is not available and I'm concerned about the wellbeing, safety and health of my family, I buy what's available. What does that mean in terms of the loyalty of the financial institution brand?”

“If I'm now getting comfortable with buying brands in the grocery store that I didn't care before but because of the shortage I must, is that going to encourage more people to rethink the relationship with their bank?” he adds.

Comparing banks to retailers, Vladek explains that consumers now choose services based on a “matter of preference” rather than “a matter of necessity.”

Data safety

The “substantial reduction” in bank branches, he says, has generated “an impact on the lending sector,” in which customers now apply for personal loans online.

According to a research released by J.D Power, nearly a third of bank customers now use digital banking rather than going to branches.

But the digital transformation of retail banks does not come without a cost. While decreased branch traffic has led to banks focus on digital tools, it has also raised cyberattack risks, meaning a greater risk for the consumers sharing their financial data online.

Recent findings from WMare Carbon Black data showed that cyberattacks against the financial sector increased by 238 percent from February to April 2020 due to coronavirus – a concern for consumers that banks want to tackle.

“Banks are going to make a cognisant effort,” explains Vladek, “for [consumers] to become more and more comfortable with sharing their financial data. They encourage consumer to educate them and make them aware of how they're going to be even more serious about the security of that data.”

By increasing their investment in cybersecurity, banks are encouraging consumers to share their financial data, creating a formula for success that could stay “beyond coronavirus,” according to Vladek.

A study conducted by FIS revealed that more than 45 percent of banked respondents have permanently changed the way they interact with their banks since coronavirus.

Nearly a fifth of respondents also use online or mobile banking to run their financial transactions that they would normally do in branches.

While a majority of bank transactions can now be conducted from home, Vladek says these are exciting times for retail banks wanting to reinvent their relationship with clients and the services they offer, calling for the financial institution sector to be “open for change” and “willing to find ways to accommodate new consumer needs” in this new climate.

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