SRM (Strategic Resource Management), an independent advisory firm serving financial institutions, polled its bank and credit union clients and prospect base to understand their early response and evolving strategy for combating the effects of COVID-19 in the United States on their operations.
Responding financial institutions vary in both size and region. Also, given the constantly changing circumstances around COVID-19, this information was gathered March 17-27 to capture more than a single point in time view. Key trends indicate:
- Of the responding institutions, 82% rated their online and mobile channels as “vital” to operations during the pandemic. None considered them less than “important,” meaning that all responses fell within the top two tiers of the five-point scale. While an increasing share of business has been migrating to digital for some time, banks and credit unions that have invested in both digital capacity and capability are experiencing less disruption as consumers practice social distancing and comply with “shelter in place” orders.
- Additionally, 79% of institutions have provided further education on the use of remote channels as a means of providing consumers unfamiliar or uncomfortable with digital channels access to their money and needed financial services during a time of high economic anxiety. While the extent that these methods of engagement will become permanent habits is unknown, it is not unreasonable to expect that the longer the restrictions remain in place, the more likely the convenience of digital will turn a stopgap measure into a habit. Institutions equipped to deliver a positive experience during the COVID-19 pandemic will generate greater customer satisfaction, loyalty and potential share gain now and after the crisis.
- Perhaps more surprisingly, nearly two-thirds of respondents are allowing more than half of their staff to work from home. Banking has traditionally been viewed as a business that would not accommodate remote work models due to the various regulatory constraints that define how things operate. However, it would seem that there is a considerable part of bank and credit union operations that can utilize a remote work model. Given the occupancy costs associated with commercial real estate, remote work (specifically working from home) may become particularly attractive to organizations across most verticals, including banking. For banking, this shift would have implications for branch density, further accelerating the elimination of branches.
- Over half of banks and credit unions expect “severe” impact (the second highest option on the scale) on their communities with nearly all other assessments split between “extreme” and “moderate.” What’s far less clear is how long this impact will persist. Survey responses place estimates of the expected duration of the economic hangover almost evenly spread from “less than six months” all the way to “18-24 months.”
- This lack of clarity also plays out in banks and credit unions’ approaches to internal projects such as new feature rollouts and system upgrades. Four-fifths of financial institutions expect to delay either most of their projects or “non-essential” ones. It’s somewhat surprising that only very few respondents expect most projects to be cancelled, although this could change if the duration or severity of the situation increases.
SRM anticipates that financial institutions will renew their focus on realizing additional cost savings through vendor relationships, business process improvements and the application of automation. Most banks and credit unions have already made appropriate, successful shifts to operate in a state of doing more with less. The economic impact and future uncertainty about the length of a recovery will heighten the pressure to uncover cost savings and improve process efficiency.
Brad Downs, CEO of SRM, said, “Though it is unlikely that any financial institution expected to break the seal on the pandemic continuity plan in 2020, the respondents of our survey appear to be taking the steps required to limit the impact of COVID-19 and, hopefully, expedite a recovery. Early indicators from our clients have shown that one critical focus will be on any project that can save money without sacrificing relationships with the consumers and businesses they serve. SRM will continue to research the impacts of the pandemic on financial institutions and make that information available to banks and credit unions in the future.”
SRM (Strategic Resource Management) has helped more than 1,050 financial institutions to realize $3.6 billion in critical areas such as payments, digital transformation, core processing, artificial intelligence and operational efficiency. Our decades of experience have lowered costs, enhanced revenues, increased productivity, expanded customer satisfaction and provided a competitive edge for clients in an environment of constant and accelerating change. Visit www.srmcorp.com for more information and follow the company @SRMCorp.