Social distancing and stay-at-home guidelines issued to stop the spread of COVID-19 are requiring us to move many aspects of our lives online, including our financial lives. The economic fallout of these orders has also led to millions of Americans becoming newly financially vulnerable and those that haven’t been financially impacted focused more on their financial preparedness.

Further, in March, Congress passed the CARES Act to help Americans facing financial hardship during the pandemic, including tools such as $1,200 in cash assistance. Upon announcement, Forbes reported a 200% jump in new mobile banking registrations, indicating an increased willingness among consumers to switch to online banking.

COVID has simply accelerated a trend that was already in play –  according to a report published by AppsFlyer, 82% of FinTech app installs in the second half of 2019 were financial services and digital banking apps. The expectation is that this move to online financial services may well become permanent post-COVID. According to a survey done by JD Power, 61% of respondents plan to change the way they interact with their bank, whether that means increased use of mobile/online banking, plans to visit the branch less, or switching to a digital or challenger bank (ie., newer, online-focused banks) that has more mobile capabilities.

Increasingly, trends like these have created an unexpected but urgent need for traditional banks to accelerate the deployment of innovative digital products to meet the specific needs of customers experiencing financial insecurity. This move to online banking has impacted priorities among customers who are now more willing to change financial institutions in order to meet their evolving needs, which increases the need to get online banking right to retain customers and cultivate loyalty.

Financial insecurity, whether long-standing or due to the COVID crisis, increases the complexity of customers’ financial lives. Commonwealth’s research found that many people who lead these complex financial lives believe that these needs are best met by personalized services at a physical branch. As a result of the pandemic, this is no longer possible; these needs for personalized products now have to be met online.

The promising news is that it’s possible for banks to meet such needs through the deployment of financial advice backed by AI and big data analytic tools. Banks will need to be cognizant, however, of the bias that is often unintentionally programmed into these tools which will impact their effectiveness.

The move to online digital financial services also offers the opportunity to better meet the critical need of financially insecure customers to easily build liquid savings. 41% of Americans don’t have $400 in emergency savings, caused in large part by the lack of low fee/low minimum savings accounts – Commonwealth research found that 43% of lower income workers did not have a savings account. An online environment should allow financial institutions to create lower-cost savings accounts to quickly and easily address this barrier and support their customers in building a cushion to weather the next financial shock.

Financial institutions that recognize the rapidly evolving needs of their customers in this crisis and deliver customized products to meet them can build trust and breed customer loyalty, a valuable asset at this moment of financial services industry disruptions. 

Research showed that public trust in financial institutions was severely eroded during the 2008 recession. New Commonwealth research has found that 69% of surveyed respondents trust traditional financial institutions only a moderate amount, a little, or not at all. Now more than ever, traditional financial institutions need to do everything they can to rebuild that trust as shifting trends, accelerated by COVID-19, make people rethink their banking relationship.

Financial institutions who take decisive actions now to add digital capabilities that meet the evolving complex needs of their customers will be much stronger after the crisis. They will set their existing customers most negatively impacted by the crisis on a path to financial resilience and recovery, and build customer trust and loyalty.

We invite financial institutions who want to capitalize on this unexpected opportunity to partner with Commonwealth to design, pilot, and bring to scale novel online financial products.