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This Week in Retail Banking | April 11, 2020

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As the U.S. has begins to show some signs of “flattening the curve,” there are emerging signs that some of the changes in consumer behavior will have a permanent impact on the banking industry. People are settling into new patterns, visiting branches less often. And when they do go to a branch, it is close to home or the grocery store instead of near the office. Switch rates, while hard to predict, seem to be settling at low levels. Banks are waiving overdraft fees to ease financial hardship and reduce attrition.

As bank executives think ahead to a “return to normal,” these shifts in behavior will demand that banks re-assess their plans for 2020 and beyond, from determining which branches to close to finding new ways to acquire customers.


The week ended April 3 illustrated the first time since the end of February that we saw an increase in week-over-week checking-account acquisition. Even though rates are still down close to 50%, this could be a sign that we may have hit a short-term floor.

Reasons for Switching Accounts

According to a survey deployed over the last two weeks on, reasons for shopping for a new checking account are still event-based, such as moving, opening a first account, having a bad experience or getting charged a fee.

With a number of potential disruptions coming, it is possible that core relationships will get disrupted and therefore we could see near-term spikes in churn rates. This will be good for some banks and bad for others.

  • Stimulus Check Disbursement: If the PPP is any indication, building a new distribution channel overnight will naturally create hiccups. There will likely be winners and losers on the consumer side, with the potential for some banks to have large negative perceptions if they are unable to help consumers navigate the choppy waters of the stimulus plan. As an example, before the Fed lifted the lending cap on Wells Fargo, the bank suggested to businesses that they may want to go elsewhere to maximize chances of getting a loan before the dollars ran out. Several publications subsequently reported attrition that stemmed from this notification to customers. On the consumer side, we expect that several banks will find ways to get money to consumers early
  • Re-employment: Jobless claims now exceed 16 million as the country has shut down many non-essential businesses across the country. With the potential for a rebound when people start new jobs, this may be a moment of truth for banks because there is less of a lift to open a new bank account at this time. Banks that have communicated to the market (and non-customers) about the ways they have accommodated their customers could be rewarded by additional acquisition if they can capitalize on the goodwill.

And What About Long-term Switching Rates?

Annual switch rate (percentage of customers who switch their primary checking relationship) has been coming down steadily since the financial crisis. This has been driven by limited differentiation in the industry (why switch to another bank that has the same products and experience?), increased non-physical convenience and high barriers to switch the account.

The current pandemic is expected to drive significant increases in digital adoption, an uptick in direct deposit and decreased reliance on physical convenience. All of these would suggest that even as branch closures are likely to be on the rise, the general trajectory of account-switching behavior will likely fall over the next several years. While switching could rise briefly in spurts, this lower direction will be the new normal. Banks therefore need to think carefully about near-term reductions in marketing spend because luring new customers from other banks could become more and more difficult.

Consumer Household and Checking Account Production (Sales per Branch per Week)

  • Acquisition
  • Attrition
  • Net Growth
  • Acquisition
  • Attrition
  • Net Growth

Source: Novantas’ Comparative Deposit Analytics, representative sample of banks submitting weekly
Note: Average reflects all bank branches, does not exclude closed branches

Reasons for Shopping

Source: Novantas Customer Knowledge | Covid Pulse Survey #1 | Sample FABB shoppers (N=239)
Note: Other includes first account, need for remote check deposit, need for a separate account


As consumers across the country shift to social distancing, we are seeing a major shift in where people are going when they venture out of their homes. This isn’t just impacting retail stores, but also visits to the local bank branch. Grocery and big-box stores have maintained normal visitation rates while most retail declined by 30-80%. Home-improvement stores are actually seeing an increase in traffic.

This week, we examined trends in New York City and Memphis because they are fairly representative of the rest of the country. New York has been in lockdown for many weeks, with most people limiting movement. Memphis has seen a decline in movement, but people are still going out, albeit to different places.

Work Centers Aren’t The Magnet They Used To Be

As people have started to work from home and avoid large central business districts, we very clearly see that work centers have larger declines in traffic. In New York, this translates into midtown Manhattan and the downtown financial district with traffic down more than 75%. While we do see this same dynamic occurring in the Memphis market, traffic patterns are only down about 20-30%.

In looking at maps for both New York and Memphis, the markets that have had the least impact on traffic patterns and retail visitation are the “feeder” markets or those that have high residential population. This is intuitive as people are staying home from work: their center of gravity has changed and they are now transacting more around their current daily life.

Given this, it isn’t surprising to see that bank branch visitation appears to be closely tied to whether the location is near “essential’ stores. People who need to go to a bank branch aren’t going to their normal branch which may be more situated toward their daily commute. Instead, they are going to the branch near the grocery store.

With consumers changing their transaction patterns, this will likely have a lasting impact on branch visitation in the market. As people actively avoid the bank branch, digital adoption is rising. We would expect a long-term decrease in transaction volumes, perhaps as much as 20% below pre-COVID-19 trends – with the potential for more annual declines from there.

As we have seen with the temporary branch closures for floods or fire, behavior never fully rebounds at an old branch after you force people to go to new branches. While some people return to their old ways, many people just become accustomed to the new branch.

Many of today’s branch decisions are being developed for the short-term health crisis, such as directing customers to branches that have plexiglass or drive-through windows. But, intentionally or otherwise, these actions are likely to serve as a glide path to long-term changes in the network that will be in place for years to come.

New York City Traffic Patterns

legendsArtboard 1 copy-100
Market Type
Change in Avg. Daily Visits (3/26 – 4/1 vs. 1/30 – 3/4)
legendsArtboard 1-100

Memphis Traffic Patterns

legendsArtboard 1 copy-100
Market Type
Change in Avg. Daily Visits (3/26 – 4/1 vs. 1/30 – 3/4)
legendsArtboard 1-100

Source: Novantas Analysis, NovaLocation, PlaceIQ
Market Type Definitions:
Feeder = Markets with very few businesses and daytime population (residential) is much larger than nighttime population (working)
Hybrid = Markets that have a combination of workers and residential population within the market
Work Center = Markets where more people work than live


SoFi announced plans to buy payment-software company Galileo for $1.2 billion.

Shamir Karkal, founder of neobank Simple, announced a $7.7 million funding round for Sila, a start-up that aims to compete with the ACH system.

The CEO of OceanFirst Financial told CNBC that the healthcare providers represent a big chunk of the PPP loan applications being submitted to the New Jersey bank. Chris Maher said the bank had dispersed $3.7 million loans as of Wednesday.

Banks are still scrambling to deal with the flood of PPP applications. The Wall Street Journal reported that the money hasn’t started flowing yet.

The National Multifamily Housing Council reported that 69% of households paid their rent by April 5, down 12 percentage points from March 5.

The COVID-19 health crisis is impairing the livelihoods of 90% of small businesses across the U.S. and Canada, with more than one-third reporting that they have only a couple of weeks of cash, according to a poll of more than 200,000 small-business owners conducted by Alignable, a referral network for small business. The poll found that small businesses have been hardest hit in Alaska, Rhode Island and the District of Columbia. In Canada, Saskatchewan has been the hardest-hit province.

Three-quarters of corporate finance chiefs surveyed by Gartner on March 30 said they will permanently shift at least 5% of their workforce to remote positions after the COVID-19 crisis ends. The survey included 317 CFOs and finance leaders.

Goldman Sachs started offering personal installment loans of up to $10,000. The MarcusPay loans can be repaid over 12 or 18 months with interest rates up to 25.99%.

Small-business layoffs in March rocketed more than 1,000% from February, according to Gusto, a small-business payroll firm. The company also found that small businesses in March saw a 50% year-over-year increase in employees who experienced a significant reduction in hours worked.

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For more information, contact Novantas Marketing

+1 (212) 953-4444

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