MEMPHIS, Tenn.–A new survey of the “forward focus” of bank and credit union executives finds, not surprisingly, an emphasis on expanding digital channels, while also revealing trends that should be understood when CUs negotiate agreements with payments vendors over the next 12 months, according to the analysis.
The survey, conducted by Strategic Resource Management (SRM), an independent advisory firm serving financial institutions, was the second conducted by the company of banks and credit unions to evaluate their ongoing response to the effects of COVID-19 in the United States.
According to the company, the goal of the second survey was to investigate specifically the evolving landscape in digital transformation and payments as COVID-19 was re-asserting itself across the United States. The survey was conducted in late June and early July.
The Findings
Among the findings:
- Digital growth, as expected, is well above the pre-pandemic norm, with 62.16% of responding financial institutions noting an increase in digital users of between 10% and 25%; the most common response was an uptick of 10-15%. Another 10.81% of respondents stated this growth exceeded 25%. With the temporary closure of branch locations across the U.S., nearly three-fourths of respondents reported more activity in their digital user base, SRM said.
- When asked about changes in how customers or members pay for purchases, nearly half of the institutions reported decreases in credit card activity. At the same time, a correlating 48.65% saw increases across debit usage.
- Confirming many early speculations, 64.86% of responding financial institutions stated increases in Card Not Present transactions, and 75.68% reported the same for mobile payments, SRM reported. No respondents saw declines in either of these areas. 48.65% of respondents also noted a decrease in cash withdrawals. Increased consumer participation in the "delivery economy,” as well as a concern about the cleanliness of cash due to the ongoing pandemic, impacted both trends.
- More than one-quarter of respondents noted an increase in transaction values across all payment types, while 21.62% noted a decrease in transaction values. “Understanding these dynamics will be critical over the next 12 months when negotiating high-stakes agreements with payments vendors,” SRM said.
- Asked to rank their forward focus in five areas, survey participants saw "Expand/Improve Digital Channels" as their most critical initiative going forward, with nearly two-thirds of respondents rating it their top priority, confirming the results of the earlier survey's findings in this area. “Even if a portion of consumers revert to old habits and abandon some degree of their newfound digital behavior, the digital channel has gotten a permanent and exponential jolt forward,” the analysis notes.
- "Use Automation to Replace Manual Processes" finished a clear (but distant) second, as an essential area of focus. “This indicates that financial institutions are still in a due diligence stage when it comes to automation for operational improvements,” SRM said. “The expectation is that this area will gain increasing focus as bankers move from the information gathering stage to trials in areas where the ROI is demonstrable in the new term.”
- “Interestingly,” according to SRM, the last among these proposed initiatives is "Decrease Branch Footprint." The company’s analysis suggests the “same dynamics at play regarding a focus on automation may be at work concerning this view on the branch. From conversations with SRM clients, it is becoming clear that physical locations – office space and branch operations – are being reviewed. However, more time will be required since the branch footprint is only part of a much larger set of questions being asked.”
- As with the first survey, SRM said respondents were asked to estimate the length and type (respectively) of the impact on their institutions as well as local communities. The March survey had opinions on this point widely spread from "less than six months" through "18-24 months." By late June, nearly half of respondents fell firmly in the 18-24 months range, with most of the remainder expecting a 12-18 month recovery. As for the communities they serve, 21.62% of the respondents believe the economic recovery will take years, the company reported.