April 19, 2020

Compassionate Banking For Customer Resiliency

Jody Bhagat, President of Americas – Personetics

The banking industry plays a vital role in supporting customers during crises such as the current COVID-19 pandemic.  Many banks have been responsive and taken immediate action to support customers by:

• Creating greater liquidity for increased borrowing
• Providing payment relief for customers that are experiencing hardship
• Ensuring access to banking services through digital and remote capabilities
• Proactively communicating with customers

With the crisis continuing to unfold, numerous banks are restricting branch services to drive-thru only, and some are closing branches entirely to comply with health experts’ recommendations of social distancing in public places.

Much uncertainty and hardship remain as we rally to combat this crisis, but we will eventually persevere and a state of normalcy will be restored.  Moving forward, it’s important to consider the enduring changes and implications of the crisis so that banks are better prepared to support customers during future hardships and times of uncertainty.  We believe there are four systemic implications that are important to recognize and act on in the near term, even as we combat the current crisis:

1. Social distancing and remote life will accelerate the current secular trend towards greater digital transactions (currently ~80%) and digital active customers (currently ~70%).  For those customers that have held out or aren’t fully leveraging digital capabilities, banks will need to reemphasize educating them through contextual interactions, online demos, and tailored outreach so they are fully leveraging the banks digital capabilities and services.
2. Personalized interactions and insights through banks’ digital channels will become a basic necessity.  While already the primary source for servicing, digital channels will soon become the predominant source for advice and needs based sales.  It’s vital for banks to interpret their customers’ financial transactions and cash flows, and deliver personalized insights and advice through digital means to help customers manage their day to day banking.  Furthermore, fulfillment through the digital channel needs to be simplified to deliver a complete experience to customers.
3. As a result of declining branch traffic and interactions, bankers will need to proactively outreach to customers and deliver personalized advice.  To do so effectively, bankers need to be armed with curated insights and customer events that guide them on which customers will benefit and what kind of advice to deliver.  The traditional models of providing bankers with a marketing “lead list” or even a “Next Best Action” list are insufficient.  These models are typically generated from a bank centric view rather than a customer centric view of context and needs, and is transparently perceived by the customer as simply trying to sell them more stuff.
4. Too many customers are just getting by financially without any emergency savings to manage a hardship (40% cannot afford a $400 emergency expense according to the Federal Reserve).  Banks need to be more accountable to help every customer create an emergency savings cushion and create borrowing capacity.  The COVID-19 crisis will unfortunately victimize those without a savings cushion and lay bare the low savings rate most people are barely getting by on.  Banks need to do more than simply offering savings products.  They need to create programs that stimulate customers to save or even save on their behalf (e.g Ally’s Surprise Savings), and then reward them for their positive behavior.  The same is true for improving customers’ credit score and borrowing capacity.  Only when both customers and banks have a vested stake in the outcome, will we see meaningful increases in customer savings rates and credit scores that allow customers to withstand an unforeseen hardship.

There are no silver linings to the COVAD-19 crisis.  It has the potential to tear at the very fabric of our lives including the way we live, work, and play.  We can, however, as an industry better prepare our citizens to be more resilient during times of hardship or great uncertainty.  It requires more than simply building out new digital features.  It requires a commitment to knowing your customers, delivering proactive advice, and looking out for them with personalized solutions that improve their financial resiliency and well-being.  In return, banks will be rewarded with a stronger customer franchise including higher satisfaction, deeper relationships, and greater profitability.