bg-arrow-down icon-arrow-up icon-back-to-top icon-linkedin icon-menu icon-search icon-twitter logo-white slider-arrow-left-gray slider-arrow-left slider-arrow-right-gray slider-arrow-right

This Week in Retail Banking | April 18, 2020

The industry experienced another difficult week as jobless claims have topped 22 million over the last four weeks, PPP funds were officially depleted, stimulus checks hit some consumer bank accounts and online banking systems crashed at many banks across the industry.

Consumers and businesses desperately need to connect with their banks, but it is clear that banks are having trouble meeting the demand.

At the same time they grapple with these significant service issues, banks must start planning for the gradual re-opening of the economy and the accompanying implications for branches.

ARE BANKS FUMBLING THE OPPORTUNITY TO DRIVE DIGITAL TRANSFORMATION?

Banks are doing everything possible to keep their heads above water at a time when branch access has been drastically scaled back, consumer anxiety is high and people are trying to reach the bank to talk about PPP, stimulus checks, deferring loans, or fee waivers. Unfortunately, this drastic shift in the contact channels has resulted in many banks failing to meet consumer expectations for the ability to transact. This could have implications on both checking switch rates and the long-term transformation to more remote servicing.

Call-center wait times are extraordinarily long – hold times of more than an hour aren’t uncommon. Many consumers are struggling to interact with the bank digitally for all of their needs. In addition, many banks experienced major issues with their online banking platforms this week just as consumers were trying to access much-needed stimulus money that was flowing into their accounts.

Over the last several weeks, Novantas has been conducting flash surveys on FindABetterBank.com to understand how consumer choice is evolving during the current pandemic. The good news is that almost 80% of people feel that they are able to manage their finances remotely. The bad news is that about half of those who experienced trouble said that they were unable to reach customer support. Others mentioned issues with large deposits or complex transactions.

One of the core issues for retail banks is that the remote processes were never meant to fully replace in-person interactions. Instead, they were developed as an alternative channel for a majority of transactions. As a result, bankers assumed that many transactions like large check deposits or large wire transfers would remain branch-based.

Banks should consider more flexible policy decisions during this time in order to ease hurdles for customers who are following social-distancing guidelines. These include restrictions on amounts for mobile-deposit capture transactions, limits on wire transfers and funding limits for DAO at time of open. To reduce fraud risks, banks can focus on easing the restrictions for the most loyal customers. Such actions will not only ease customer frustration, but can also build up some good will toward the bank.

Obviously, it isn’t simple to lift limits associated with all activities, but it is important to re-frame the discussion on channel availability for customers. This is especially important because many of the more complex transactions tend to be from higher-balance customers. Banks want to ensure these customers don’t have a negative experience using digital capabilities.

In a further example of the danger associated with inadequate capabilities, the surveys conducted on FindaBetterBank.com over the past two weeks have revealed a significant increase in the number of respondents who said they were shopping because their bank’s capabilities don’t meet their need. With a rough week for banking digital systems, that number will likely continue to rise.

ISSUES MANAGING FINANCES REMOTELY (%)
REASONS FOR SHOPPING (%)

Source: Novantas Customer Knowledge | Covid Pulse Survey #1, sample: FABB shoppers (N=420)
Note: week 1 is 3/30 to 4/6 (N=193), Week 2 is 4/7 to 4/13 (N=227);  Other (Issues Managing Finances Remotely) includes depositing large checks, depositing cash, unable to meet in person; Other (Reasons for Shoppping) includes first account, need for remote check deposit, need for a separate account

DEPOSIT TRENDS SHOW LOWER-BALANCE CUSTOMERS UNDER PRESSURE

An industrywide analysis of the $3 trillion in account-level deposits covered by the Comparative Deposits Analytics dataset shows the emergence of a clear trend in balances. Before stimulus payments hit accounts mid-week, lower-balance customers were seeing average total balances shrink while higher-balance customers augmented their balances.

These trends suggest that mass-market customers are drawing down savings to cover everyday expenditures and suggest that banks may need to continue helpful fee policies and monitor whether stimulus payments or ongoing drawdowns of cash buffers dominate forward trends.

Checking-account acquisition trends have remained generally flat for the third week in a row.

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

Industry Consumer HH Production*
  • Acquisition
  • Attrition
  • Net Growth
INDUSTRY CHECKING ACCOUNT PRODUCTION*
  • 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

How should branch-based workforces be re-tooled to adjust to the new reality?
Join Novantas for a webinar hosted by CBA as we explore how to navigate the changing landscape successfully.

BUILDING THE BRANCH RE-OPENING STRATEGY

With the announcement of the phased re-opening of the country, branches will be dissimilarly impacted by COVID-19 over the next three-to-six months.

As states start to consider plans to re-open their economies, banks should consider how they will prepare for the re-opening of the branch network. Novantas suggests banks pursue a multi-pronged strategy that aligns with phases being pursed in each market. Higher foot traffic in certain areas will help guide branch decisions on where demand can be expected. Of course, traffic patterns will vary widely in markets.

In the first phase of a market’s reopening, there will be limits on groups of more than 10, employers will continue to emphasize working from home, schools and daycare facilities will remain closed and non-essential travel will be limited. Because many retail stores and malls will remain closed and white-collar work centers will still see limited traffic, it makes sense to keep these branches closed. Locations near grocery stores should be prioritized for necessary enhancements to ensure maximum safety as branches open more fully. Banks might consider more fully opening select locations in high traffic areas where activity is closer to BAU, while in other locations continue to limit in-person visitation without an appointment and encourage drive-through visits.

The second phase will see bigger group gatherings, although they will still likely be limited to 50. Employers will still emphasize telecommuting, but schools and daycares will re-open. Large venues will be permitted to operate with moderate physical-distancing protocols and non-essential travel will resume. Traffic in work centers will increase as schools and daycare facilities re-open, but will still likely be 30-50% below normal levels (especially with many parents choosing to skip sending children to summer camps). Malls and shopping complexes are likely to become more active again, though many consumers will still be hesitant to visit them. Nightlife areas also will begin to re-open.

In this phase, branches in work centers may choose to re-open with limited service, such as only appointments and drive-throughs. On the other hand, some of the higher density retail areas may make sense to open more fully, with protective measures in place.

In the final phase, employers will resume unrestricted staffing of worksites, low-risk populations will still consider minimizing time spent in crowded environments and large venues will operate under limited physical-distancing protocols. Work centers will likely return more closely to prior levels (though still down), leading to more branches re-opening at complete capacity albeit with revised policies and more flexible-staffing levels.

% CHANGE IN U.S. AVERAGE DAILY STORE VISITS
(VS. JAN 30 – MAR 4)
  • Grocery
  • Pharmacy
  • Department
  • Mall
  • Home Improvement
  • Bank

Source: Novantas Analysis, NovaLocation, PlaceIQ

NEWS OF THE WEEK

A growing number of bank CEOs sounded the alarm about the long-term impact of the COVID-19 pandemic, saying they are building reserves to prepare for a surge in borrower defaults as unemployment continues to rise. A forecast from Goldman Sachs predicted the global economic impact will likely be four times worse than the 2008 financial crisis. Separately, the IMF said the “Great Lockdown” will result in the worst economic downturn since the Great Depression.

The chain that owns Ruth’s Chris Steakhouse was one of the first public companies to disclose that it received a PPP loan. The upscale chain reported in a securities filing that it received $20 million in forgivable loans. Meanwhile, the construction industry has been a big recipient of the loans, according to the Wall Street Journal.

A flurry of non-banks announced plans to participate in the PPP program, including PayPal, Intuit and Square.

The Wall Street Journal reported that General Atlantic is launching a $5 billion fund to help companies that have run into financial trouble due to the COVID-19 pandemic. The distressed-investing fund, called Atlantic Park, is a joint venture with credit investor Tripp Smith’s Iron Park Capital Partners LP. It will provide structured-equity and debt financing to hard-hit companies.

Nearly three million homeowners, representing 5.5% of all mortgages, are participating in COVID-19 mortgage-forbearance plans, according to Black Knight Inc., a data, software and analytics company that tracks homeownership trends.

One in four small businesses have temporarily shut down due to the pandemic, according to a survey from MetLife and the U.S. Chamber of Commerce. Another 40% reported it is likely they will shut temporarily within the next two weeks.

The president and CEO of a community bank in western Pennsylvania took to LinkedIn to encourage prospective borrowers to give him a call, “If your bank or credit union is not willing to process your application for a (PPP) loan, you should call Mid Penn Bank!,” wrote Rory Ritrievi. He included his phone number.

The FDIC announced it is postponing plans to update its signage at banks and ATMs to reflect the industry’s digital transformation.

Morgan Stanley CEO James Gorman and Dean Bass, CEO of Spirit of Texas Bancshares, are among a number of corporate executives who have recovered from COVID-19.

Stay up-to-date on the latest banking trends

For more information, contact Novantas Marketing

+1 (212) 953-4444


Related Materials

article

This Week in Retail Banking | June 6, 2020

The U.S. is grappling with heightened uncertainty this week. For retail banking, this includes assessing myriad supply and demand issues to determine if the business and behavioral changes experienced during the pandemic are temporary or permanent.

article

This Week in Retail Banking | May 30, 2020

Despite continued reopening around the country, the prolonged COVID-related disruption and mounting retail bankruptcies are creating much uncertainty about how quickly banks should resume more normal branch operations.

article

This Week in Retail Banking | May 23, 2020

As the country continues to ease COVID-19 restrictions, banks want to know what to expect across different markets when cities begin to reopen.