COVID-19 has increased the use of online banking.
By Saba Azeem, Associate Professor Claire Matthews and Professor David Tripe
Prior to the recent pandemic outbreak, banking customers were feeling pressure to move online. In-branch interactions were being refocused towards customers who preferred not to use online channels. The growing popularity of smart banking and wearable devices was reinforcing the convenience and accessibility of online banking and understanding the role of online channels in increasing customers’ independence and financial outcomes was expanding.
Banks were building the capabilities of their digital platforms to provide services across multiple channels, including ATMs, to cater to broader service demands, reduce service costs, and boost customer satisfaction and loyalty.
COVID-19 and contactless payment
While the economic impact of COVID-19remains uncertain, it seems likely to hasten digitisation, making online banking ubiquitous. The pandemic has effectively compelled those who have been reluctant to use self-service online banking channels to do so.
Most banks in Australia and New Zealand have limited their in-branch banking to essential services like cash withdrawals or deposits, setting up debit cards, online banking registration and support for elderly and vulnerable customers. But they have urged customers to do their banking from their home as much as possible.
One of the changes brought forward by COVID-19 is minimal cash handling by retail businesses, including supermarkets and public transport. Being in contact with payment keypads and exchanging cash poses potential health risks so most supermarkets are encouraging customers to switch to contactless payment options like Visa PayWave or MasterCard PayPass. The transactional limit on contactless payments in both countries has been raised and mobile payment options, such as Apple Pay, Google Pay and Amazon Prime Now, have become increasingly accepted.
While a limited number of branches are opening for shorter hours to cater to customers who cannot use contactless or online banking, banks are also sending positive messages to remind customers of the benefits of contactless banking.
As people needed to isolate themselves in their bubbles, transacting remotely and avoiding personal contact, a paradigm shift in consumer spending, mindsets, learning interests and lifestyle circumstances has occurred. The increasing need for digital readiness has required more people to learn how to use online channels and banks are aiming to educate customers and make the most of this shift.
Blessing in disguise?
In the immediate aftermath of the pandemic, customers may expect banks to be more compassionate, more helpful and more available than before. This means personalised solutions to customers’ financial needs. Banks will need to innovate to respond well to existing customers, while tapping into newer markets.
Customers may expect banks to shift their focus from selling to helping customers. People lacking technological experience, or those feeling overwhelmed by digital offerings, will continue to require assistance. The challenge at hand is to remain sensitive to business and customer stress, while evaluating how customer behaviours may change over time.
Our research on the effects of customers’ age, gender, education, employment, marital status and household income on their use of online banking in New Zealand suggests people from both young and old age groups embrace technology, although their learning interests may vary. We found, while men and women equally prefer using the online banking channels, their information-processing abilities may differ.
The banking needs of less educated people can be different from those of more educated customers, and their response to digital banking uptake requires attention. The findings emphasise the role of socioeconomic characteristics, including education, employment and income, in predicting changes to customer behaviour.
The current pandemic is likely to affect the socioeconomic mix of online banking customers. While higher employment links with increased comfort with online banking, the unemployed, self-employed and student markets may be at risk of greater financial worry, due to an inability to access banking services, or online security threats.
While online banking uptake can improve banks’ outreach to remote customer segments, the automation of labour-intensive tasks and artificial intelligence-enabled digital banking assistants may need reinforcement. Banks need to utilise the true potential of their online platforms to find customer-focused solutions. The development of online tools for identifying scams, for example, can renew customers’ trust in the security and safety of their personal and financial information.
The current situation is both a strength and a challenge for banks. Radical digital transformation means increased digital traffic and more online banking activities, which requires banks to devise effective communications and strategies to cater to online users’ needs.
The future of bank-customer relationships
The preference for online banking will have a new motivation in the “post-COVID-19 normal”. Banks and other financial institutions need to explore how they can maintain connections with valuable customers while being physically apart.
The vitality of digital banking technologies is going to increase as much as the need for good two-way communications between banks and their customers. Anything banks do must support their business goals and profitability requirements.
Banking experiences before and after the current pandemic will not remain the same. The sector must use the opportunity to get up close and personal with those they serve and implement strategies based on effective analysis of changing customer behaviours.
Saba Azeem is a PhD candidate and Associate Professor Claire Matthews and Professor David Tripe are banking and finance academics at the Massey Business School.