Survey captures financial institutions’ matured responses, consumer payment patterns in a prolonged pandemic environment
SRM, an independent advisory firm serving financial institutions, has conducted its second diverse sampling among banks and credit unions to evaluate their ongoing response to the effects of COVID-19 in the United States, including observed trends across various consumer banking behaviors.
SRM’s initial survey in March focused on bankers’ early attitudes just as the pandemic reached the level of having national systemic impacts. The goal of the second survey was to investigate specifically the evolving landscape in digital transformation and payments as COVID-19 was re-asserting itself across the United States. Launched late June, it garnered a higher response rate from a healthy mix of banking executives and credit union leaders across geographies.
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Even as this survey was closing in early July, many communities were stalling or regressing in their reopening plans. Nonetheless, SRM’s poll results reveal a greater consensus is forming around the anticipated impacts and duration of COVID-19. Key findings indicate:
- Digital growth, as expected, is well above the pre-pandemic norm. 62.16% of responding financial institutions noted an increase in digital users of between 10 and 25%; the most common response was an uptick of 10-15%. Another 10.81% of respondents stated this growth exceeded 25%. With the temporary closure of branch locations across the U.S., nearly three-fourths of respondents reported more activity in their digital user base.
- When asked about changes in how customers or members pay for purchases, nearly half of the institutions reported decreases in credit card activity. At the same time, a correlating 48.65% saw increases across debit usage. This result aligns with the Federal Reserve report showing outstanding U.S. credit card balances falling below $1 trillion for the first time since 2017.
- Confirming many early speculations, 64.86% of responding financial institutions stated increases in Card Not Present transactions, and 75.68% reported the same for mobile payments. No respondents saw declines in either of these areas. 48.65% of respondents also noted a decrease in cash withdrawals. Increased consumer participation in the “delivery economy,” as well as a concern about the cleanliness of cash due to the ongoing pandemic, impacted both trends.
- More than one-quarter of respondents noted an increase in transaction values across all payment types, while 21.62% noted a decrease in transaction values. Understanding these dynamics will be critical over the next 12 months when negotiating high-stakes agreements with payments vendors.
- Asked to rank their forward focus in five areas, survey participants saw “Expand/Improve Digital Channels” as their most critical initiative going forward, with nearly two-thirds of respondents rating it their top priority, confirming the results of the earlier survey’s findings in this area. Even if a portion of consumers revert to old habits and abandon some degree of their newfound digital behavior, the digital channel has gotten a permanent and exponential jolt forward.
- “Use Automation to Replace Manual Processes” finished a clear (but distant) second, as an essential area of focus. This indicates that financial institutions are still in a due diligence stage when it comes to automation for operational improvements. The expectation is that this area will gain increasing focus as bankers move from the information gathering stage to trials in areas where the ROI is demonstrable in the new term.
- Interestingly, last among these proposed initiatives is “Decrease Branch Footprint.” The same dynamics at play regarding a focus on automation may be at work concerning this view on the branch. From conversations with SRM clients, it is becoming clear that physical locations – office space and branch operations – are being reviewed. However, more time will be required since the branch footprint is only part of a much larger set of questions being asked.
- As with the first survey, respondents were asked to estimate the length and type (respectively) of the impact on their institutions as well as local communities. The March survey had opinions on this point widely spread from “less than six months” through “18-24 months.” By late June, nearly half of respondents fell firmly in the 18-24 months range, with most of the remainder expecting a 12-18 month recovery. As for the communities they serve, 21.62% of the respondents believe the economic recovery will take years.
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Brad Downs, CEO of SRM, said, “In this second survey, our goal was to assess how institutions had progressed in their thinking from the answers provided during the first survey. With the country still combating COVID-19, these banks and credit unions have shown a deepening and near-term focus on critical areas, such as digital. Not only that, they’ve also begun a longer journey toward improving their operational efficiency through the use of automation and other digital tools.”
“Our industry and our lives have reached a point in time where everything will be reimagined as we move forward, and the ability to respond quickly will determine who thrives. SRM will continue to research the impacts of the pandemic on financial institutions and communities everywhere and make that information available as we navigate the future together.”
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