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This Week in Retail Banking | July 11, 2020

The uncertain environment continues to produce conflicting signs. More than one million Americans filed unemployment claims for the 15th consecutive week, but continuing claims fell sharply. Checking-account acquisition has continued to rise over the last five weeks, but future trends are murky due to a resurgence of COVID-19 that is leading to new business shutdowns and retrenchment.

CHECKING VOLUMES ON THE RISE?

Industry consumer checking sales volumes have been down about 40% since February/ early March through the end of June. This wasn’t surprising as markets were in lockdown, many branches had limited service and there were fewer triggers for account openings, such as life events or fee annoyances. Volumes have increased over the last five weeks, though, and were down just 20% last week from February/early March.

An analysis of the sales decline shows that new-to-bank account sales was much more impacted by COVID than the checking sales to existing customers. It turns out that sales to existing customers remained generally flat over the last several months while new-to-bank sales represented the majority of decline during COVID.

The fact that cross-sell activities barely declined during this period shouldn’t be overlooked. Since the lobbies were largely closed (or limited by appointment only), it means that walk-in traffic wasn’t driving this significant cross-sell of checking to existing customers. During this period, sales were maintained because many branch staff were focused on outbound activity, and some banks actually experienced increased relationship deepening because of enhanced touchpoints around the accounts. This is consistent with the trend experienced with branch consolidation – lost sales to new customers are very high, but cross-sell trends are generally flat. Some banks actually experience increased cross-sell activity when branches close because bankers are conducting more outbound calls as part of the customer transition, strengthening relationships and driving additional sales in the process.

The decline in branch activity underscores the need to enhance digital account opening, both during COVID times and when branch consolidations are being planned. Currently, experience gaps make it unpalatable to actively push people to open digitally compared with the branch. If banks can improve the digital experience, they can close some of the gap associated with new-to-bank losses that are occurring during the pandemic or branch consolidation in general.

Consumer Checking Sales: New-to-Bank vs. Cross-Sell

Accounts Sold Per Branch Per Week

New-to-Bank
Cross-Sell

Split of Consumer Checking Sales

New-to-Bank
Cross-Sell

Source: Novantas’ Comparative Deposit Analytics, representative sample of banks submitting weekly
Notes: Includes Interest and Non-Interest Checking; per branch reflects total branches in the network, not adjusted for closed branches; cross-sell is accounts sold to existing customers.

RESURGENCE OF COVID AND WHAT IT MEANS FOR RETAIL

Many states have experienced a surge in COVID-19 cases since the end of June. As we look at retail visitation patterns, we have seen only a marginal decline over the last two weeks- even in markets like Houston that have been hit particularly hard by new cases.

Many employers are concluding that in-office work policies will need to remain voluntary through the end of the year due to the health risks (and potential liability) of sending people to offices and significant uncertainty about whether children will be returning to school in the fall. This means that the temporary change in transit patterns (a large-scale refocusing near to where people live instead of work) could easily become a much longer-term reality.

Change in Retail Store Visitation:
Week Ending 7/1 vs. Pre-COVID

(JAN. 30 – MAR. 4)

Source: Novantas Analysis, NovaLocation, PlaceIQ

Banks will need to consider the implications on their reopening strategy. Given that each market is reacting differently to changes in COVID-19 cases, it is unlikely that a one-size-fits all strategy will work across markets. Banks should track traffic changes on a market-by-market basis in order to build a more dynamic opening strategy. As an example, the most dense urban areas are the places where visitation and transaction volumes have decreased the most, suggesting there could be much more significant long-term impacts in these markets. Additionally, the situation will likely oscillate across markets over the next three-to-six months so banks must be nimble and avoid reopening too quickly.

If the bank is planning for permanent branch consolidations, customer traffic is already down during this period so attrition is likely to decline. Furthermore, it’s unclear to what degree new-to-bank sales will rebound when branches reopen. This is why banks must continue the outbound calling and focus on evolving branch roles in this direction. It is clear cross-sell is less driven by the branch network itself than the people inside it.

With so much uncertainty, careful tracking of individual markets and scenario planning will be at the core of operating decisions over the coming months. The future of the network will depend on it.

Retail Store Visitation by State Type
(1.0 = Avg Weekly Visits from Jan. 30 – Mar. 4)

Currently In Second Peak
Risk of Second Peak
Low Risk of Second Peak

COVID Cases by State Type
(1.0 = Avg # of Cases from Mar. 26 – Apr. 8)

Currently In Second Peak
Risk of Second Peak
Low Risk of Second Peak

Source: Novantas Analysis, NovaLocation, PlaceIQ

LOW-TIER ACCOUNT BALANCES DECLINE

The big news for deposits is that lower-tier customers saw balance declines at the end of June, representing the first time this has happened at the end of a month since March. It is especially noteworthy because all balances typically increase during pay periods. This may indicate that consumers are becoming more financially strapped, a development that may be exacerbated later this month when federal taxes are due and some government stimulus programs expire.

As a result, the total end-of-month inflows were lower than historical norms. High-tier customers drove the aggregate increase, further increasing the bifurcation in performance between higher and lower tiers.

A full weekly deposit tracker is available to CDA clients. Contact Adam Stockton at astockton@novantas.com for details.

NEWS OF THE WEEK

Chime launched its first secured credit card that is aimed at consumers who are seeking to build their credit. The no-fee, no interest Visa-branded card works with Chime’s basic account to act like a debit card, requiring customers to move money onto the card from the account in order to use it. The Credit Builder card is issued by Oklahoma-based Stride Bank.

About a third of companies cut employee pay in response to COVID-19, although some of them have also reinstated the lost wages, according to a survey conducted by outplacement firm Challenger, Gray & Christmas Inc. The survey of 150 human-resources executives also found that 73% of respondents said they plan to keep some or all of their employees working remotely after the pandemic passes.

Retail Properties of America Inc., a real-estate investment trust that owns open-air shopping centers, said it collected 67.4% of April rent and 63.7% of May rent as of June 30. The company said that 90% of its portfolio square footage was open as of July 2 compared with 79% on May 29.

The Federal Trade Commission said that Americans have suffered more than $80 million in fraud losses tied to COVID-19.

Banks continue to grapple with decisions about offices and branches amid surging COVID-19 cases around the country. Several news outlets reported that Bank of America closed more than 50 branches in Central Florida due to a surge in COVID-19 cases. Separately, Bloomberg reported that JPMorgan Chase is indefinitely suspending plans to return employees to its offices in Columbus, OH. About half of its workers were slated to return on July 13.

Apple began allowing customers to book appointments to shop in its stores. The “Shop with a Specialist” service is similar to Apple’s “Genius Bar” in which customers can make appointments for tech support.

Pennsylvania extended a moratorium on foreclosures and evictions until Aug. 31. The four-month-old moratorium was set to expire July 10. Separately, WinnCompanies, the largest affordable-housing landlord in Massachusetts, extended a moratorium on tenant evictions through the end of the year.

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