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Written by: Ewan Edwards
Digital banking has gone from an option to a necessity during the Covid-19 pandemic, producing a dramatic shift in consumer behaviour and banking operations as they both move towards the digital space.

Banks have adapted their products and services to reach their customer base predominantly via digital means. Bank branch closures have pushed customers towards educating themselves and adopting digital banking.

In 2021, the full impact on the banking sector will be seen as consumer behaviour is cemented from a spike due to necessity to a long-term trend.

Covid-19 facilitates the adoption of digital banking

This process feels inevitable now after nearly a year of lockdowns and social distancing meaning branches have diminished in preference. Instead customers now rely on online services to speak to advisers, with 40% of consumers across France, Germany and the UK saying the way they bank has changed due to the pandemic (1).

This has brought to the fore questions around how comfortable customers are with using such services and what more needs to be done by banks to enhance user experiences.

Aldermore Bank (2) research surveying 4,000 UK adults found one in three (32%) individuals have become more comfortable with digital/mobile banking since the beginning of the pandemic. Yet, there is a generational divide emerging, as just one in five (19%) of those aged 55 or over affirmed the statement.

Consequently, we are witnessing a digital transformation, from switching current accounts or opening savings accounts online to a digital transformation of bigger financial transactions such as buying a home.

However, there remain people who are less inclined to change the way in which they bank, opting for traditional lines of communication. This is an important consideration banks will need to account for as they begin to migrate more of their services online.

Balancing virtual and face-to-face customer interactions

UK Finance predicts that just 9% of payments in the UK will be made using physical currency by 2028 (3), illustrating the rising popularity and comfort people feel using contactless payments and online banking.

This has been further exaggerated by the pandemic, which encouraged the used of contactless payments in order to reduce the spread of the virus through physical cash.

As we look ahead, we can predict such behaviours to come further entrenched in our daily lives as we continue to grapple with the pandemic and lockdown restrictions in 2021.

Cybersecurity now a vital consideration

According to EY’s 2020 Global Corporate Divestment study (4), 60% of banks are intending to divest within the next 12 months. Typically they will look to allocate funds to maximise their digital technology capabilities and refresh outdated technology systems, such as investing in areas such as AI and robo-advisers.

While this provides a great opportunity for banks to adopt innovative technology and enhance operational efficiency and customer experience, cybersecurity will be a key consideration.

The move to digital banking provides speed and convenience. In some cases this has been empowering for consumers, as seen in wealth made by early-adopters of cryptocurrencies or the recent tug-o-war battle over GameStop stocks between hedge funds and retail investors.

But digital banking is not without perils as the pandemic has triggered an increase in fraudulent activity, phishing attacks, and call centre fraud.

Looking ahead, banks will need to continually beef up and evaluate their security measures; from surveillance issues on video-conferencing tools such as Zoom to ensuring all employees have the ability to securely access the bank’s servers.

There is also a need for banks to provide education to their customers on scams and their methods via their websites, social media and video content, back their digital banking platforms with alternative points of communication such as call centres, and pre-emptively secure IT systems from being compromised from security attacks.

The Covid-19 pandemic has forced banks to confront their outdated technology systems. While the abrupt switch to remote working has put a strain on IT systems in the short term, it has accelerated digital transformation.

This provides the opportunity to better serve customers and enhance their experience through the use of efficient digital banking services, ultimately making customers’ transition to digital banking an easier, more comfortable experience.

Notes to Editors:

  1. EY Future Consumer Index, July 2020
  2. Research conducted by Opinium between 27 November and 6 December 2020, with a nationally representative sample size of 4,011 UK adults
  3. UK Finance Payment Markets Report 2019
  4. EY 2020 Global Corporate Divestment Study

Ewan Edwards is director of savings at Aldermore Bank

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