By Daumantas Barauskas
The COVID-19 pandemic and the subsequent lockdown in many countries hit almost every sector of the economy, banks and FinTech companies are no exception. The effects of the pandemic look devastating: for instance, the four largest American banks are expecting borrowers to default on upwards of $71 billion in debt.  European countries are also under huge stress with a massive 45% decline of bank shares between February and March.  Retailers were and still are highly affected, as the forecasts at the end of March were distressing: point-of-sale payment volumes were expected to decline 30 to 40%. 
Thus, digitalization and transition to online services have become a strong competitive advantage for banks and Third-Party Providers (TPPs). However, not all of them were ready for it.
Before the coronavirus outbreak, less than 15% of banking institutions believed that they had succeeded in digitalization, according to a Cognizant’s Center for the Future of Work report. 
And, as you can imagine, the demand for the alternative to visiting traditional banks during the pandemic increased astronomically. According to a sociological survey conducted by Lightico, 82% of bank customers are now cautious to visit their bank’s branch, and 63% of clients are more inclined to use mobile banking and online services, than before the lockdown.
Moreover, 49% of respondents indicated that they are much less likely to get a loan if are required a visit to the financial institution.  And if that wasn’t enough, the World Health Organization directly recommended that people around the world make payments online whenever possible, avoiding cash payments. At the end of the day, it is expected that people will be more cautious about using paper money until the pandemic will waste away, or at least until scientists will confirm more information about the coronavirus spread.
Meanwhile, banks not only had to adjust to their customers’ needs but also to organize the work of their staff. For instance, 90% of the 200 000 employees of JPMorgan Chase & Co had to temporarily start working from home since the lockdown set in March.  And as of May, one of the biggest American banks is still not sure when all the staff members will be able to return to their offices – it is happening slowly and in waves. 
Also, a lot of companies, banks included, are embracing flexible working by letting some of their staff to work from home permanently. For one, the executives of British investment bank Barclays acknowledge that the practice of social distancing should continue after the lockdown, meaning they cannot put thousands of employees into one office building. Thus, they consider turning the local branches into satellite offices to provide more space for their staff. 
Ultimately, more CEOs may come to terms with the notion that a lot of banking tasks, like sales, research, and trading, can be performed from home – according to Goodbody’s financial analyst John Cronin.  But this provides a new challenge – the company’s corporate data might fall into the wrong hands if not properly protected, thus the executives will require even more technological solutions to deal with this problem.
Even when the global lockdown is over, the Coronavirus threat will likely remain and last for some time. The Center for Infectious Disease Research and Policy within the University of Minnesota forecasts that the pandemic will last for about two years with new waves of illness incoming this fall.
Taking all these things into consideration, it is clear that the pandemic crisis is pushing both banks and their clients to embrace changes necessary for the productive operation of the former, as well as the security and convenience of the latter.
But what are the main adjustments the banking institutions should draw out from the situation?
First and foremost, go digital. And while you are at it, make sure to update your security systems. The traditional banking model was considered out of date by a lot of people long before the coronavirus outbreak. A study from seven years ago showed that millennials found banks irrelevant and, and 73% of them would rather take an offer from BigTech companies like Google, Amazon or Apple, than from their own bank.  And a year ago a US survey revealed that 9 out of 10 clients prefer mobile banking to traditional one, and 79% of them think that their finances could be managed much better with the help of the AI.  And now, the COVID-19 crisis heavily emphasized the necessity for technological improvement of the banking system. Yes, digitalization takes time and effort, but it is a long-term investment in your company’s longevity and competitive advantage.
Another important thing is to partially switch from physical means of payments to digital ones. As was mentioned before, in the nearest future people will be more cautious about using cash, so make sure you provide them with more alternative payment options. Your online presence should also significantly increase – provide as much information about your services on the internet as possible, don’t make potential customers go to your branch just to find out what do they need to open a personal account. Speaking of which – you will likely need to close a lot of your subsidiaries and figure out a strategy on how to move all the communications with your client from branches to the Internet.
And lastly – try to help out your business clients as much as possible during these uncertain times, as their loss in revenue will directly display on your financial institution. This type of support will show your customers that you are a reliable and understanding bank or TPP, which will be a weighty argument when the company decides whether to continue the partnership. This could be anything, from a discount for your processing services to granting loans for a longer period at a low-interest rate. We at Genome understand the desolating effect this crisis can cause the retailers. Hence, we canceled service fees for all low-risk businesses until mid-July to facilitate their work during the COVID-19 outbreak.
About the author
Daumantas Barauskas is COO of Genome, Fintech expert.
Genome is a new-generation payment ecosystem founded in 2018 and licensed as an Electronic Money Institution by the National Bank of Lithuania. We provide financial services for both personal and business needs, carry out payment processing via credit cards, and other alternative payment methods. With us, you can open a personal IBAN, business and merchant accounts, use SEPA and SWIFT transfers, do currency exchange, etc. — all completely online. https://genome.eu/