Consumer and Business Lending Post COVID-19
COVID-19 has had an unprecedented impact on our lives and it has caused significant economic hardship.
Banks in several countries are offering deferred payments on credit cards, loans and mortgages for consumers and businesses facing hardship due to COVID-19. UK Finance reported that financial providers granted 1.6 million payment holidays as of 24 April 2020.
COVID-19 has increased the financial industry’s focus on digital offerings and increased demand from consumers to use them. With bank branches shut and long waiting times for phone support, even previously nervous digital users have turned to these channels.
According to PYMENTS . com, the number of accounts opened through digital channels was up 200% in April 2020, and mobile traffic had increased by 85%. These are trends which could last, as only 40% of bank customers are intending to return to branch banking post-COVID-19.
Banks have to respond by putting increased efforts and resources into developing their digital channels. One of the key pain points for customers is the on boarding process where only part of the process has been digitalised. Many customers still need to go to a branch for ID and verification.
A recent study of financial institutions (FIs) in North America by ISMG and OneSpan highlighted that improving the customer experience is their top business objective for digital account opening in 2020. For 49% of respondents, the biggest obstacle for to digital account opening for FIs was legacy, manual ID verification and 35% found that knowledge-based authentication tools had become a point of friction to on boarding.
Banks are realizing that partnerships with technology providers are critical to making progress with digital on boarding. Most lack the digital expertise and agility to achieve this in-house. 41% of respondents in ISMG’s survey planned to invest in new or existing partnerships to deliver a better digital on boarding experience.
Data from The World Bank has predicted a 5.2% reduction in GDP in 2020, making it "the deepest global recession for decades, despite the extraordinary efforts of governments." The OECD’s data suggests that the economies likely to be worst hit in 2020 are France, Italy and the UK.
It will take time for consumers to feel confident doing all the activities that they used to, such as eating out, going to concerts and travelling abroad. Businesses and financial providers must adapt to changing customer habits and ensure that their online offerings are robust and customer-centric.