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This Week in Retail Banking | April 5, 2020

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Another week of lockdowns and the rollout of the CARES Act is adding an additional degree of organizational complexity for banks. In addition to grappling with a remote workforce and maintaining operations of the branch network with significant staff challenges, banks are building a new process for business loans.

Novantas is monitoring different data assets to provide banks with a clear view of developments in the retail-banking segment. All banks are scrambling to meet these financial, procedural and health burdens. Their preparedness will be key in determining the winners and losers for the next decade.


Which Small Businesses Need The Money The Most?

Banks are scrambling as they prepare for a flood of loan applications from businesses that are seeking funds under the CARES Act. Banks are likely to focus on existing customers due to anti-money laundering and other regulatory requirements that must be met for new customers. In doing so, they will seek to retain their best customers by providing exceptional customer experience during a challenging time. The biggest issue for banks will be to determine who needs the money most?

Small businesses typically have cash buffer to cover about 27 days of operations, although that can dwindle to about 20 days for some of the hardest-hit industries like restaurants and retail, according to research from JPMorgan Chase & Co.

Based on those estimates, Novantas analyzed foot traffic in San Francisco, which issued a shelter-in-place policy starting March 17, and Albuquerque, which issued a stay-at-home policy starting March 24.

In San Francisco, traffic volumes at restaurants and other retail locations started to decline on March 10, with a marked drop by March 18 and a continued fall-off since then. These trends impacted all industries except for big-box stores and groceries.

With many loans not likely being deployed for weeks as banks grapple with unclear guidelines and processing challenges, Novantas estimates that roughly half of retail-oriented businesses in the San Francisco market may soon be out of cash.

In Albuquerque, meanwhile, foot traffic started to decline around March 13, but at a slower pace than in San Francisco. Volumes have only started to drop off in the last week and only department stores and discount stores have dropped sharply. This suggests that businesses in the Albuquerque market may have a bigger cash buffer than markets that mandated shelter-in-place policies earlier.

There are even large variations within markets. Foot traffic in work centers, such as large downtowns, has dropped off much more aggressively and faster than in feeder markets where people are camped out near their homes.

This analysis reinforces the fact that businesses across the board are going to be strained. In the best-case scenario, Novantas estimates that about 35-40% of retail businesses in the early shelter-in-place markets will have revenue losses that exceed their cash buffers by the time they can get a loan.

Banks will need to make some challenging decisions to prioritize customers and get them through the loan process as quickly as possible.

Average Daily Visits (indexed to 100 in Jan)

San Francisco
  • Bank
  • Essential Store
  • NonEssential Store
  • Restaurant
  • Bank
  • Essential Store
  • NonEssential Store
  • Restaurant
San Francisco & Albuquerque

Source: Novantas Analysis, NovaLocation, PlaceIQ



With 10 million Americans filing jobless claims in the last two weeks (6.6 billion last week and 3.3 million the previous week), consumers are in dire need of the stimulus checks. Those who have direct deposit (or will set it up in coming weeks) will receive the stimulus much faster than those who will receive paper checks.

Fintechs are already developing creative solutions for consumers to access these funds. (See Chime item in News of the Week below.) So far, banks haven’t done the same, setting the stage for them to lose the chance of acquiring new customers. Checking-account acquisition for traditional banks already began experiencing major shocks in the week ending March 27. Banks that have the largest concentration in cities experienced acquisition declines of 60%, while some traditional retail banks only have experienced 25% shocks so far. Novantas expects those numbers to decline further as most of the country follows stay-at-home policies.

This is troubling news for traditional banks that were already seeing a significant increase in new primary checking accounts moving to neo-banks (Chime, Varo, etc.). Novantas research released earlier this year estimates that as much as 20% of the new primary checking accounts opened in 2019 flowed to these new digital players. By creating appealing programs for consumers, these new entrants are now poised to grab more market share and possibly shake up the low switching rates that normally protect traditional banks.

Banks can take the lead from fintechs and consider ways to get stimulus money to their customers as fast as possible, whether that means overdraft, cash advance or other programs. But they must also be cautious in considering the conditions under which they could launch such programs, including whether there are ways to provide access to people who didn’t use direct deposit for their previous tax refunds.

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

Primary Bank Checking Purchase Rate, By Bank Type and Year

  • National
  • Regional
  • Community / Credit Union
  • Direct
  • Neobank

Source: Novantas Shopper Survey (2019)
Note: Purchase rate shown is for aggregate segment (e.g., National = all purchasers of either Chase, B of A, or Wells Fargo) at a national level, Y-Axis % of customers changing primary bank


To understand how banks were responding to the shift in branch operations, Novantas surveyed banks between March 20-24 to assess trends in hours changes, staffing shifts and preparedness for teams working from home.

Although all banks expressed concerns about staffing, small banks seemed to be particularly stressed. Additionally, the survey found that less than 8% of the participating banks were prepared to have more than 30% of their employees work from home, with more than half the banks having less than 10%. This challenge will persist and potentially intensify across the industry as banks weigh the need for employees to work in the physical branch while practicing social-distancing guidelines.

Novantas is conducting another round of the branch operations survey beginning 4/5/2020. If you would like to contribute your responses and receive the full complementary report, please reach out to

It is critical for banks to start thinking about the longer-term implications of the shifts we are experiencing now. Even though banks have been classified as essential businesses, the traffic volume is declining drastically as customers find ways to avoid going into the branches for their everyday banking needs. In a survey conducted by Novantas’ last week, 43% of consumers said they would return to their regular in-branch activities when social distancing ends. But another 21% said it was somewhat or very unlikely that they would return to their prior branch activities. Novantas believes those numbers will only rise when social-distancing ends.

Many banks have anywhere from 10-20% of their branches that will come up for lease renewal in the next 12 months. That means management must start now to shape their networks for the future. With many banks vowing to not cut jobs in 2020, Novantas believes these real-estate decisions will become that much more important. Banks that plan to expand their networks, meanwhile, will likely have a choice of more prime retail sites in the next six months than have been available in the last 10 years.

Read more about branch changes in our recent Perspective.

How Difficult Has it Been to Staff Branches?

On a scale of 1-100, smaller networks voiced a larger challenge with staffing

Source: Novantas SalesScape Comparative Analytics

What Proportion of Your Branch Staff is Equipped to Work from Home?

Most respondents indicated that most branch staff, other than branch managers, had little ability to work form home:

  • Specialists can work from home (Size 300-700)
  • None of the branch work force can work from home (Size 100-300)
  • Only branch managers (Size 100-300)
  • Responses

Source: Novantas SalesScape Comparative Analytics


Direct banks have maintained elevated pricing in early April, only moving down by 10-20 bp since the Fed cut rates by 150 bp last month. Direct players face a disincentive to be the first to reduce rates substantially as they would lose most balance acquisition and suffer some attrition. High-priced competitors could steal share efficiently by acquiring balances and reducing rates shortly thereafter. At the same time, direct banks want to avoid raising prices after the Fed’s reduction because capital markets might interpret “pricing up” as a sign that they need liquidity.

This standoff in direct-bank downpricing also is having an impact on branch-based pricing. While lead acquisition rates have declined, many banks are maintaining higher rates on higher-tier balances than product teams would prefer in order to stay within a reasonable range of the direct players.

Direct-Bank Savings Rates | Jan ‘19 – April ‘20

The direct-bank market has remained elevated
  • Ally Bank
  • Capital One 360
  • CIT Bank
  • Discover Bank
  • Marcus
  • Citizens Access
  • PurePoint
  • PNC
  • Effective Fed Funds

Source: Informa, Feb ’20; Individual bank websites to find certain rates; FRED | 1. Max Rate of all MMDAs; 2. Only offered to customers outside of footprint, including Kansas City and Dallas, where PNC has opened/is building new branches;


Digital start-up Chime randomly selected 1,000 customers who would receive immediate access to the $1,200 that will be sent to Americans as part of the $2 trillion emergency relief legislation. Saying the three-week timeframe for people to receive the money is too long, Chime provided access to the funds through its program that allows customers to take their account negative without incurring fees while they wait for their next payroll direct deposit.  “It’s more important than ever for us to have our members’ backs,” the company said.

In a sign that online lenders are already hurting, Kabbage suspended credit lines to small-business customers.

A growing number of small banks are offering unsecured, interest-free small-dollar loans.

Banks are struggling to keep up with a flood of customer calls as a growing number of call-center workers are getting sick.

More banks are offering deferrals on mortgage payments, with many offering relief of up to 90 days without penalties. BMO Harris and Citi are among the banks that are waiving penalties for early CD withdrawals.

Bank of America, HSBC, Citigroup, Visa and others are vowing not to lay off employees this year.

Companies that are being hard-hit by the virus are developing new ways to build loyalty at a time when even their best customers aren’t engaged. Hilton Hotels, for example, is extending elite status for customers by a year.

Other companies are developing new strategies to keep customers safe and their businesses running. Walmart is offering customers more no-contact options for pickup, payment and delivery. And some title companies are offering drive-through services so homebuyers can sign documents while in their vehicles.

Banks spent much of the week scrambling to set up online portals for the new $350 billion small-business relief program. Bank of America became one of the first banks on Friday to start accepting applications. Small-business owners are also seeking clarification on terms of the program.

Stay up-to-date on the latest banking trends

For more information, contact Novantas Marketing

+1 (212) 953-4444

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