What’s Next: How Banking Copes with COVID’s Near-Term Challenges

A snapshot of how the financial services sector is preparing for what lies ahead and a brand to branch checklist for mid-term success

In our last feature, we explored banking’s resilient response to COVID. Surely, the immediate impact on the banking system has been both deep and wide with most financial institutions hyper-focused on meeting day-to-day customer needs. Having a midterm strategy beyond survival is critical to not only meeting this moment, but the next one as well. As Accenture notes in their recent report on financial services, “In order to both deal with the current crisis and build those longer-term value-adding capabilities, the execution model should consider the short- as well as the medium-term time frames.”

Considering the mid-term view is especially critical as banking sees signs of what’s next on the horizon. As the Wall Street Journal is reporting, “The banks, a gauge for the broader economy, have signaled they anticipate a longer, deeper recession than they first expected in the spring.” While government stimulus helped create short-term stability, banks and credit unions must begin to take steps to position themselves now for a post-COVID future.

Community Banking on the Rise  

Normally released without fanfare, the FDIC’s quarterly banking report contained some sobering – if not unexpected – news for banks. While second-quarter income for U.S. banks was down sharply year-over-year – data that’s typically over-weighted by big banks’ financial standing and performance – there are some encouraging stats: Community banking has not only not seen a loss, it’s actually realized a 3.2% growth from the same point last year.

While modest, any gains during these times demonstrates how community banking’s commitment to lending, especially through PPP, is a win-win-win. Consumer lending is helping in three big ways: providing needed income to shore up the banking sector’s own foundation; deepening customer connection and loyalty by providing small businesses and consumers the funds they need to survive; and positively impacting local economies and communities.

Conserving Cash

Another interesting development during COVID is that while bank profits and overall consumer transactions are down, banks have been flush with cash from consumer deposits and fee income hitting a record high. The result is a large reserve of funds, but whether it’s expectation of loan or credit defaults or providing a stand-in for future lost fee income, banks are holding on tight to that cash now they might have previously invested.

This cash conservation has implications on more than just banking and financial services. Reverberations are felt across the entire economy, as the sector struggles to know where to invest next. Yet for the moment, banking remains on solid standing, largely from its healthy position as it entered 2020, a financial footing aided by government stimulus and investment.

What Comes Next?

Accenture finds that “Most banks today have significantly more capital at their disposal than they did at the time of the 2008/9 crisis. They are well positioned to emerge from COVID-19 as heroes to their embattled clients, not villains that caused or exacerbated the crisis. But to do so they need to resolve a host of conflicting priorities that matter greatly to regulators and shareholders as well as clients.”

While no one has a crystal ball for what will come next for banking, looking back at past crises reveals some key best practices for surviving and being poised to thrive post-COVID. Diving deep into your brand’s purpose and revising your long-term strategies will help ensure you’re well positioned to meet the future, no matter what the future holds. Here is our checklist of five key principles for planning and preparing for what’s next – from the brand to the branch:

  1. Know What You Stand For

Finding purpose in moments of adversity is what will shine the path forward. Solidifying your core brand strength will ensure your brand’s resiliency now and in the future. Brand values that were present before the pandemic are even more evident and relevant know. Dive deep into what your brand stands for and find the best ways to make that manifest in all the ways you serve and communicate to the consumer.

2. Invest in Brand

Using some of the aforementioned cash reserve to invest in your brand now will pay dividends –quite literally and in brand equity – now and into the future. With brand strategy overtaking analytics as a core marketing function, looking at how your brand is meeting the moment and primed for future prospects will help ensure your brand is better positioned to create meaningful connections for the future.

3. Build Relationships

Just because branches have limited hours, that doesn’t mean your customer relationships have to suffer. Focusing efforts on relationship banking crystalizes core values in a way that’s most meaningful to the customers you serve. Meeting consumers at the point of need has always been a central strength for community banks and credit unions and is now a key differentiator as consumers value trust over time.

4. Leverage Your Channels

Finding ways to creatively develop and deploy your channels – like new approaches for drive-ups or ITMs – isn’t just a way to address customer needs during COVID, but a crucial path forward in a post-COVID world. Looking at how consumer behavior is shifting, which of those changes will remain and reinvesting and reimagining channels with a new purpose in mind will help banking build a bridge to the future.

5. Optimize your Branch Network

It might seem to go against instinct while branch use is still limited due to appointment banking, but now is the time for investing in your network is now, since branch location remains one of the key drivers of banking success, even with in-person transactions on the decline before the pandemic. Surely, post-COVID some branches will close, but what better time to assess the branch network and establish or invest in prime locations with the most growth potential?

In our next feature, we will look at the coming wave of M&A activity in retail banking – and its implications on network strategy, brand and culture, and branch experience. To develop strategies for brands and branches during these challenging times, contact Adrenaline’s experts at covidready@adrenalineagency.com or (678) 412-6903. For more information on bank branch reopening in the post-COVID landscape, download the Roadmap to Reopening . If you need support for staffing, see the Frontline Staff Engagement Training series. Believe in Banking Logo