The COVID-19 pandemic and governments’ responses to it have had a fundamental effect on both the national and individual pockets. It is widely acknowledged that this is the greatest peacetime economic ‘shock’, since the Great Depression of the 1930s. And so, going into the second half of 2020, it’s fair to say the world’s economic outlook couldn’t look much more different than it did at the start of the year.
In the UK, when it comes to people’s personal finances, research that we conducted via our Lockdown Unlocked study, has highlighted how different groups of people have fared. Perhaps not surprisingly it is the over 55s who have seen least change with 61% confirming that ‘the COVID-19 crisis has not really affected my month-by-month personal income’, versus 49% for 18-34s.
Beyond this, it is those who have committed outgoings but who, for whatever reason, can no longer afford to meet these who are finding this period most challenging. Specifically, these difficulties were faced by 30-34s (most likely with young families) 67% of whom agree that ‘my financial situation has weighed heavily since lockdown’, versus 37% for the whole population.
As people look to the future, financial certainty and security remains elusive for many. Against this backdrop, we believe banks could genuinely connect with their customers and understand and empathise with what they are going through. But more than that, banks can create products and services that specifically reflect what they are experiencing now.
From our perspective, the start-point for a successful (personal) banking response to this upheaval is to get to know your customers by how they feel, not just what they buy. For example, how does the experience of being furloughed (for some, without a definite end) impact how people are feeling about their financial circumstances and futures in the short, medium and long term? What impact is it having on their plans for savings and expenditure?
This is also a state of affairs of which no-one in banking has any experience. Unlike many of the usual questions of consumer attitudes and behaviour we might usually confront, we have precious little to draw on. We have never known less…and it is changing quickly!
The key then must be to get up-close-and-personal to understand what’s going on in your customers’ lives and their evolving financial needs. Creating an online community of consumers is an excellent means to engage with them swiftly and unearth real insights about what is happening. Not only that, but by harvesting this information using images and videos, the insights aren’t just quick but vivid and ‘real’ too. Joining these insights up with the more typical account or market data would make them ever more potent. Monzo have had great success to date in this space, with hugely positive feedback from their customers and the wider industry.
These insights have the potential to genuinely transform banks’ fortunes as we come out of lockdown and a ‘new reality’ takes shape. In the immediate term, there is the need to be fully aware of the specific challenges people have been facing – both generally and specifically – and react accordingly.
One area that is now a huge focus for banks is the performance of their customer contact centres. Account holders have been getting in touch in ever greater numbers – often in distress - with new and at times very specific financial circumstances. How are customers’ expectations of contact centres changing? We have been helping clients to transform customer engagement and improve handling times by using machine learning and AI to automatically assess and process payment holidays, reducing the load on the phone lines, and freeing up contact centre staff to deal with the more complicated cases, increasing the processing of queries fivefold.
If banks could go beyond just listening to customer feedback and focus more closely to their customers’ concerns and needs by actively and continuously engaging them to help shape future products or services, the results could be immensely powerful.
For example, right now, for a large cohort of customers, there may be a real need for a medium-term bridging loan product to tide them over until they get back into employment. The results of this customer discussion and engagement may be in designing a new, longer-term ‘back to employment’ loan. Credit risk policies would need redefining, and new innovative terms may need to be created. But such a product could have a huge influence on the financial (and mental) wellbeing of many customers.
For banks, the basic cost of acquiring a single new customer can be over £200. So, the benefits of keeping your existing customers and providing them with innovative solutions to help them get back on their feet are huge. If we also consider the recent negative press we have seen as a direct result of many banks recently stopping credit cards or removing overdraft facilities it’s clear the indirect cost of this bad publicity can take its toll at a time when banks are fighting to steady their finances.
COVID-19 will cause society to re-evaluate its priorities and examine the role played by key institutions. Banks have an extraordinary opportunity to re-connect with their customers in new ways and be part of helping to rebuild society.
Too often, banks have not given views of the customer enough credence. But now that is changing – not just because the future is uncertain, but also because the possible prize for successfully meeting their new needs is so great. Banks can now find ingenious ways to shine a light on a set of customer experiences that are relevant for a safer future.