July 29, 2020
COVID-19 has had some profound effects on the banking system and it’s clear that the fair treatment of customers is required more than ever. The fallout of the pandemic creates an opportunity to change banking culture for the better.
The original deadline for forbearance measures such as payment holidays for cards, loans and mortgages has already been extended and the only clear next step is the wave of debt that will hit many in society as payment holidays expire and furlough payments dry up. This uncertainty leaves a huge gap for innovation and banks should be exploring new types of products or services which can help their customers through these difficult times.
But it’s not clear what these should be – COVID-19 has had some really interesting banking side effects. From those customers who have become more prudent with their savings, to those who have taken a break from their outgoings (without the due need caused by COVID-19), through to those who have struggled with daily living expenses and, on the opposite extreme, those who have been using their cards to facilitate daily Amazon deliveries.
Going forward, banks need to continue to be supported by the Government to aid those customers who have been severely financially impacted by the pandemic and help them feel empowered to take control of the financial situation they find themselves in.
This can be achieved through the movement towards financial capability and banks ought to become more aware of their customers’ needs to ensure they provide the right support towards this when needed.
Access to financial education is an excellent preventative measure. Equipping customers with the ability to understand the technicalities of personal banking and be empowered to make their own decisions, would be a true win coming out of this pandemic.
Financial capability also goes hand-in-hand with financial inclusion and a hot topic coming out of lockdown is how society has coped with limited access to branches.
The Financial Conduct Authority has been careful about urging banks to open their branches – the key messaging has been that banks must ensure that they continue to follow Government guidance to balance the needs of customers with the safety of their staff.
They have asked firms to prioritise the most vulnerable, reinstating access to cash and most importantly communicating alternatives where branches aren’t quite safe or ready to open. Alternative ways to bank through outlets like the Post Office have shown their value over the last few months.
Banks will be asking themselves, ‘if customers have coped without branches during COVID-19, why do they need them at all?’
Branch closures in the past have been met with such emotion from customers. However, the global pandemic has forced the hand of so many customers into embracing technology – mostly through the prohibition of cash in many outlets facilitated by the increase in the contactless limit.
Whatever happens with branches, we must be mindful of the need to maintain access to cash and essential banking services for those who need it, so it will be a real balancing act between cost efficiency, delivery of services and compliance with laws and regulation.
Womble Bond Dickinson
Womble Bond Dickinson’s financial services team has advised multiple clients on implementing the necessary legal and regulatory steps to comply with the Government’s COVID-19 measures.
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