Digital-First Banking

Deep Dive: How Banks Use Digital Technologies To Outlast The Coronavirus

The coronavirus outbreak is still ravaging countries worldwide, but it has not eliminated consumers’ and businesses’ need to transact, finalize complex arrangements like trusts, or speak with their bankers about financial products.

Financial institutions (FIs) are thus confronted with having to serve customers who can rarely venture outside amid stay-at-home and quarantine directives but may need to visit physical branches to complete certain actions.

Some banks have shuttered their branches during the pandemic and are relying on digital or mobile channels to fulfill customer needs, but others do not have that option. Twenty-five percent of all U.S. households fall into the unbanked or underbanked category, meaning not every consumer who needs financial services has access to such channels. Their only option is to make branch visits, even under stay-at-home orders, meaning FIs around the globe must keep some open to make sure these individuals have the access they need.

Business is not continuing as normal, however. Banks are altering their customer interaction approaches to take precautions against further spreading COVID-19 while maintaining sound customer service practices. Some have added support for in-branch digital technologies such as video banking screens and upgraded ATMs to minimize in-person contact while making sure customers’ needs are met, for example. Exploring why banks need to implement these tools is critical as these technologies could them keep their customers satisfied and able to financially weather the pandemic.

Shifting In-Branch Operations

FIs are responding to COVID-19 in different ways, although all appear to be taking minimizing exposure to heart. Some are closing physical branches or changing the customer channels they leave open, for example.

British FI Nationwide U.K. noted on its social media accounts that it would be shuttering many of its branches and changing its hours of operation, and American bank JPMorgan Chase announced plans to close about 20 percent of its locations. Idaho Credit Union is among the FIs that are implementing newer technologies like video banking, while others turn to traditional digital methods like emailed queries and educational tools on their websites to ease consumers’ stresses. Several U.K. banks have set up email addresses, additional call centers and mobile chat support to keep interactions seamless while temporarily shuttering their brick-and-mortar locations.

Some FIs are taking approaches that include more significant changes to in-house operations, with Britain’s TSB Bank closing its branches on Sundays and sending out emails to customers detailing how they can access financial services. HSBC UK has also adjusted its operating hours and is limiting the number of customers that can enter its locations at one time. Lloyds Bank has closed 200 of its 1,600 locations for the foreseeable future and reduced hours at another 100 branches, but it hopes to keep as many physical locations open as staffing can allow.

These in-branch shifts have led to more banks reevaluating the digital tools they are using or may be looking to adopt to keep customers satisfied. Many FIs are familiar with drive-thru ATMs and remote tellers, which can help maintain social distancing while enabling customers to complete their financial activities. These technologies could also reduce banks’ operational costs as they would not need to fully open branches, giving them even more incentive to consider additional tools that may help lighten the load.

Digital Technologies Under COVID-19

FIs have been advising customers to use online tools to fulfill their banking needs where possible, which will likely lead to a surge in future implementations of video-equipped banking ATMs and automated phone or mobile services. Drive-thru ATMs attached to bank branches have been in use for decades, but FIs are now relying on them as sole points of customer contact. Fifth Third Bank, KeyBank and PNC Bank are among those in the U.S. only allowing users to collect cash at drive-thru ATMs, for example. Others, including credit unions (CUs), are only accepting in-branch customers by appointment to minimize human interactions.

Other digital methods — like remote tellers or video banking services that allow customers to virtually speak with bank employees — are less established and have thus seen slower adoption rates. This may evolve as the COVID-19 outbreak keeps customers at home, though: 67 percent of them still rely on tellers, one 2019 study claimed, and 54 percent were classified as “dependent” on in-branch banking in some way, meaning they will likely still want access to human guidance during stay-at-home and quarantine protocols despite digital and mobile banking tools’ rising availability. These solutions are ideal for bridging this gap, ensuring adherence to social distancing while still giving users access to the personalized human support they need to feel safe and secure in their banking transactions.

Such tools may see more uptake as stay-at-home orders remain in place, but they do not provide much relief for unbanked and underbanked customers or those without home computers or laptops for video conferencing. Interactive teller machines (ITMs) could solve this problem by allowing customers to visit bank branches while eliminating their need to speak face to face with human tellers. These machines enable users to deposit funds, withdraw money or check their balances, but include screens that they can use to speak with human tellers should they need assistance.

Some FIs already have ITMs installed at their branches and have seen increased adoption in recent weeks. Michigan-based Consumers Credit Union reported its banking operations have clustered around these machines during the pandemic as tellers are available to virtually meet consumers during typical banking hours. The CU is only allowing customers into its branches by appointment, making ITMs ideal for those who need to visit these branches but want to avoid contact with other customers. Comerica Bank is using its Banker Connect ITMs to this end and is encouraging users to finalize their banking needs through digital channels or traditional ATMs.

Some banks have yet to implement any new technologies, although the pandemic’s continued impact may prompt them to make changes. Their short-term strategies may affect how they use these solutions in the long term, too, with some predicting that COVID-19 will lead to massive shifts in how consumers think about banking and how they interact with these institutions. Some are anticipating an increase in digital customers and the number of digital technologies banks integrate at their physical locations. The number of customers opening new accounts online was already growing and is expected to hit 19 percent in 2020 compared to 16 percent in 2019. Stay-at-home orders and social distancing protocols may increase that growth, however.

Banks may also implement more stand-alone ATMs — which cost about 5 percent of the total expense of maintaining full branches — as customers look for the easiest ways to make in-person transactions. Sixty-eight percent of consumers still believe proximity to branches or ATMs is important to how satisfied they are with their banks, and providing stand-alone ATMs will help banks provide branch-like experiences to customers that still need them while also offering innovative technologies for more effective service at a fraction of the cost.

Such technologies will not change the virus’s financial impact on many consumers, however, with 43 percent in an April 2020 survey noting they had been at least “somewhat” financially hurt by COVID-19 — 19 percent had been “severely” impacted. It is also important to remember that the 25 percent of underbanked customers in the U.S. will likely still be underbanked in the pandemic’s aftermath, and that branch banking will likely remain popular even for those who use online and mobile banking tools. A 2019 study found that 77 percent of consumers still prefer to visit physical branches for more complex financial questions, rather than dialing into call centers.

Banks will thus need to find ways to keep the in-branch relationship alive during and after the COVID-19 outbreak. In-branch banking will exist long after the pandemic has abated, but it may shift from what consumers were used to seeing. Automated technologies such as ITMs that allow users to receive answers to challenging questions without waiting in lines at branches could become more available once daily life has returned to normal, for example. Banks will need to carefully watch how consumers respond to these technologies during the COVID-19 pandemic to develop their strategies for how best to serve them in the virus’s aftermath.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.