Digital banking: Consumer flexibility & payment security

By Mandy Pattenden, Marketing Communications Director

There is little doubt that COVID-19 has forced radical changes in customer behaviors and increased their willingness to engage digitally. That is proving especially the case when it comes to how consumers bank.

During the pandemic, consumers had little option but to resort to digital channels to conduct their everyday life interactions. Whether that was shopping, working remotely, or conducting their financial affairs, digital channels provided the safer - and more convenient - option.

Unwilling or unable to visit their local bank branch, huge numbers of consumers were suddenly forced to discover what many other early adopters already knew. Digital banking is convenient, fast, and available 24/7.

A rapid and permanent escalation in digital banking habits

In a matter of weeks, COVID-19 forced massive and radical changes in consumer banking behaviors as populations around the globe found themselves living under significant 'stay at home' restrictions.

Unable or unwilling to visit a bricks-and-mortar branch, they had little choice but to take up digital and self-service banking options - and much of this usage growth came from seniors and so-called baby boomers who, until this point, had always been traditionally less inclined to adopt digital channels.

Condensing years' worth of changes into months and weeks, the sheer scale of the shift to digital banking triggered by the coronavirus pandemic has been monumental:

• By May 2020, 45% of Americans had changed the way they dealt with their bank.
• Wells Fargo reported a 35% increase in checks deposited digitally, more than a 50% rise in online wire transactions and a surge of mobile sign-ups by customers who previously stuck to bricks and mortar and call centers.
• In Europe, there was a 72% rise in the use of digital banking apps.
• In the UK, more than 1 in 5 customers tried online banking for the first time.
• More than 6 million UK adults downloaded an online banking app for the first time.

Even when the world returns to normalcy, banks are predicting that this recent customer transition to digital when undertaking routine activities like checking balances, payments, transfers and even credit card applications is set to become an embedded habit.

Indeed, according to McKinsey, 15-20% of US bank customers say they expect their use of digital channels to increase once the crisis has passed. Meanwhile, in Europe, consumer desire for handling day-to-day transactions digitally is as high as 60-85% - even among consumers aged 65 and over.

Having discovered the ease with which they can manage their financial affairs from the comfort of their home, it looks likely that in the future most consumers will only visit a brick-and-mortar branch when they need advice or support with a significant life event - such as a house purchase.

Indications are that serving customers remotely through multiple channels will become the new norm for retail banks, which is why so many are planning to continue with innovations like remote video consultations, even after their branch networks fully reopen for business.

Customers want greater payment flexibility and choice

The recent tidal shift in banking habits means that e-commerce and other service providers can expect a surge in demand from consumers for new payment methods that will enable them to manage their finances more effectively.

Having made the switch from cash and check payments during the pandemic, consumers are now looking for an even wider range of seamless and convenient payment instruments. As a result, direct bank transfers and payments are quickly gaining traction as a payment method of choice.

Indeed, in the US, internet-initiated consumer ACH payments for bills and other account transfers grew by over 15% in the final quarter of 2020 as growing numbers of consumers turned to digital channels to transact.

Providing an automated and convenient way to pay monthly bills like rent, gas and electricity, bank transfers eliminate the hassle of mailing a check and eliminates the risk of missing payment dates and being hit by late payment penalties.

Plus, consumers are also now benefiting from shopping with a growing number of e-commerce providers that offer discounts to customers who pay using an immediate bank transfer rather than paying by credit card or cash on delivery.

But, as we will discuss in our next blog, ensuring consumers feel confident to transact means organizations will need to ensure they can handle direct account transfer payments in a highly transparent, convenient and secure way.