COVID-19 has radically impacted retail consumer behaviour worldwide. Banks are questioning that will these changes last with lockdown and pandemic end. Before the COVID-19 era, consumer expectations were gradually changing through digital and technology transformation programs, banks were also shifting the way they delivered products and services to consumers. In the BCG Consumer Sentiment Survey, 2020 cited by the study titled “Turn the Tide”
The Fundamental themes which are impacting consumer purchase behaviour highlighted in the “Turn the Tide” reports are:
- Social distancing is the new normal for consumers.
- Health and hygiene is top of the mind of the consumer.
- Income uncertainty is going to stay for some time and it is also the biggest concern of the time. These themes are applicable across the industries and banking system which are not properly spread whereas these are the backbone of the country’s financial Industry.
Based on the analysis of the report these are four different ways by which we can understand the changing retail consumer’s banking behaviour in response to COVID-19.
- The way people bank has changed, but it might not (yet) be permanent: The way people bank has changed due to restrictions of lockdowns and curfews imposition in the country. This is perhaps unsurprising since lockdowns have limited the choice of physical channels and efforts from service providers and regulators have made the use of digital platforms more important in customer journeys. However, banks should be cautious in seeing this catalyst to digital channel adoption is permanent. Because banks can’t assume customers won’t revert to their previous channel preferences. If banks want these behaviours to stick, even in the current environment, it will be necessary to invest in marketing, to build awareness of the options open to customers, to share the successful experiences of new digital customers, as well as to support vulnerable customers or those that still do not feel at ease using digital channels.
- The end of cash has never been closer: Use of cash has been in decline for some time, but COVID-19 has certainly hastened its decline. With many companies closing their brick and mortar channels, consumers are going online to buy essentials. At the same time, concerns have been raised about whether physical cash could spread the coronavirus. Though Government is also discouraging the use of cash by measures like introduction of section 194N in IT act and recent amendments for making the act even tougher for levying TDS on cash withdrawal after a certain limit for deterring transactions in cash. But the Indian’s love for doing business transactions in cash is going to stay.
- Responsible banking is more important than ever: For all banks, behaving ethically and doing the right thing will be important to consumers’ purchasing decisions. Many surveys indicate that customer’s future purchasing decisions will be impacted by banks actively supporting the community, being transparent in all they do, and ensuring they are doing good for society. Also in those surveys, customers also say that their purchasing decisions will be negatively impacted where they see banks focusing on maximizing profits during this time. Banks are on the front line, supporting their customers through the crisis, both in their role transmitting government stimulus measures, offering forbearance and emergency funding to clients and donating to relief efforts. Banks must remain acutely aware of the reputational risk they face where customers feel they don’t get the support they need. It has never been more important to ensure the right processes are in place, and communication with customers and stakeholders including government and regulatory authorities are clear and consistent.
- Customers will want greater flexibility and security: The current pandemic crisis is a great financial shock for many. Recovering from this crisis will require relying on extended support and flexibility from banks to help customers get back on their feet. At the same time, while some people may see the crisis as a once in a lifetime risk – others are likely to be more mindful of other ‘black swans’. Banks will have a role in helping customers become better prepared, through savings, investments, insurance and income smoothing products. In fact, this crisis may accelerate the adoption of some subscription-based models for financial services, with many customers showing a willingness to pay a premium for products that promote well-being, the link between health and wealth may emerge stronger than ever.
These four points suggest that those with a mantra of customer centricity and responsible banking is likely to emerge as strong as ever.