Regardless of what news source you follow, the cliché created from the COVID-19 outbreak is “the new normal.” Was a society that was freely offering virtually unrestricted cultural opportunities (travel, dining, shopping, investing, etc.) the “old normal”?
When Uber and Lyft created new forms of transportation, was that the “new normal” of getting from Point A to Point B? It was not, as car sales were at an all-time high over the past three years. When Apple created the iPad, did it become the “new normal” and kill the desktop computer as predicted? It did not, as desktop computers are still the preferred method to complete complex work tasks. When Bitcoin (cryptocurrency) arrived as a payment method, did it become the “new normal” to exchange funds for businesses and consumers? It did not, as the use of credit cards, P2P, A2A, and cash are still the predominant forms of payment. The point here is that a prediction of the “new normal” is something straight out of a dystopian novel. Let’s look at a few of the arguments around the “new normal”:
Retail storefronts will disappear, and online models will replace them. Is that a post-COVID-19 element of the “new normal”? No. Large companies that were anchors in shopping malls ten years ago had canceled those lease agreements long ago. The fact is that the eCommerce model transition from physical storefront to virtual storefront has been a growing process over the past decade. That movement was not a “social distancing” requirement; it was a business shift to reach more potential customers and reduce operating overhead.
Electronic forms of payment, especially contactless cards, will be a necessity to avoid the physical transmission of the virus. Really? The payments space has been on fire ever since the advent of the eCommerce business model. And contactless cards? Let’s back up a step and talk about virtual wallets (Apple and Samsung Pay). Don’t those payment methods enable a consumer to process a “contactless” payment?
Social distancing will affect leisure activities such as dining out and watching a movie in a theater. Long before the arrival of COVID-19, dining out was declining, and in-home dining was increasing (Uber Eats, DoorDash, Takeout Taxi, etc.). Movie theater sales have been declining for a decade. The advent of home entertainment enhancements such as 5.1 (now 7.1) surround sound, large LCD TVs with stunning visual qualities, and Blu-ray high-resolution movies (now replaced by 4K and HDR formats) created a “personalized” movie experience at home.
The point of the above examples is that personalized experiences that create time and cost savings were already showing rampant growth. Consumers WANTED to create customized experiences that enabled them to participate in their chosen activities on their time, and not when the business offering that experience was available. For example, eCommerce shopping can is available at all hours of the day and night, any day of the year. There are no restrictive store hours or geographical constraints that prevent consumers from making a purchase. Electronic payments enable consumers to pay for any transaction without the restriction of store hours or driving time. Entertainment options were already becoming personalized, where virtually any content could be obtained and consumed on one’s own schedule.
The COVID-19 virus has heightened society’s context of the need for personal contact, but payment, purchasing, take out delivery, and entertainment options have not been an issue. These societal social distancing requirements have not been affected because they were already mainstream forms of consumerism.
The growth of these personalized experiences will create the next progression in financial services. The financial digital services transformation has been in play since 1997 (the advent of online banking) and since the early 80s if you factor in the beginning of the ATM deployments. As banking technology has evolved over the last four decades, financial institutions have strategized about how they can offer personalized banking products that provide consumers with products/services that save time and increase convenience. Over the past two decades, an additional benefit was added to the reasons for remote experiences... saving money.
But wait. What about the prediction regarding the demise of the branch network? When the CEO of Goldman Sachs publicly announces that their strategy moving forward from COVID-19 is to minimize the physical office space that the company needs due to remote work capabilities, we know that another societal shift is about to occur. There have been similar declarations by many financial institution leaders, but no-one has mentioned the complete elimination of their branch network.
What COVID-19 and social distancing have done is highlight the remote options that enable consumers to conduct ESSENTIAL everyday activities. Even generations that had been previously digital phobic have tried and embraced remote options. Just look at the surge in the usage of Zoom. There is undoubtedly a business case that companies need to conduct meetings, but there is a larger generation societal impact that video conferencing could replace the traditional extended family gatherings. This is not to say that there are no interpersonal reasons to meet physically with extended family. Still, virtual meeting spaces have enabled those multiple generations traditionally seated around the big dinner table once a year to meet more frequently (even weekly) from all parts of the globe without travel restrictions or the associated exorbitant costs.
Those same extended generations participating in virtual meetings have also begun to embrace digital banking. More than a cataclysmic event such as COVID-19, societal shifts evolve through new models of achieving personal activities. Digital banking is the financial gateway shift that enables more convenient personalized money management.
So, what does the branch offer that digital banking is still struggling to obtain? Personal interaction. Let’s rewind to the beginning of the article (since you may have downed two cups of coffee and needed a bathroom break). What COVID-19 and the social distancing restrictions have highlighted is not the ability to create and execute personalized experiences, but the loss of interpersonal interactions with other people that have created an enormous impact.
The question for digital banking strategists (not the consultants, but you) is how to move from a remote financial transaction to a digital interpersonal experience. What does the branch interpersonal experience offer that digital transactions cannot? Face to face contact is a significant component. Especially with large purchase financial transactions, consumers want to see or talk with a person.
Generations such as millennials and Gen Z want education to pick the best financial option to meet their needs, such as a loan, new account, or investment. And finally, the consumer wants a fast product close time by the branch employee.
Today digital banking is excellent a creating a time saving and convenient method to perform transactions, review account activity, and acquire new products such as loans, new accounts, and investments. The digital channel struggles to create an interpersonal environment where the digital user gets the same physical interaction as they would in a branch. The expectation of a borrower or new account holder/investor is that the digital channel will create and close the transaction faster than a physical branch.
“The New Normal” is the confluence of many factors that have been in growth for decades. While there are restrictions that COVID-19 has introduced through the social distancing containment strategy, the real pain point that has surfaced is restricted interpersonal interaction. Consumers already could conduct many of their daily activities in lockdown, such as entertainment, delivery of food, shopping, and the ability to pay for these activities without the need for cash or physically swiping a card.
We know that electronic channels, themselves, can present and fulfill product needs. However, fulfilling a product need is a limited experience when compared to an interpersonal and educational discussion, which many consumers still value. The future direction of artificial intelligence is to meet a consumer’s needs through an “interpersonal” conversation. The way to differentiate your digital channel is to provide interpersonal discussions that educate and enable consumers to make the most informed product decisions. That interpersonal interaction within the digital channel will enable your credit union to provide a personalized experience designed to meet the interpersonal and educational needs of members. Interpersonal discussions in the digital channel, then, will create the next “new normal” for financial services.