YOUNGSTOWN, Ohio – With no other way to conduct their business, customers made a great leap to the digital offerings of their banks during the pandemic. In some cases, the jump in use was the equivalent to a few years’ growth in just a couple of months. And for the institutions that have invested heavily in technology, it could mark a turning point in how they interact with customers.
“For years, customer preferences have been shifting more and more to the digital space. The pandemic may have accelerated trends that were already in motion because the shutdowns forced the issue across the board,” says Frank Krieder, First National Bank’s vice president of commercial banking and president of its northwest region.
At Premier Bank, the pandemic was “almost like a two-year accelerant” for the adoption of technology, says President Gary Small. After the bank’s branches reopened to walk-in service in May, it was only about a third of earlier levels.
“We saw branch traffic drop double digits, as you’d expect, even though we had the drive-thrus available and other ways to connect with branches,” he says. “In a normal year, we’d see 3% or 4% fewer transactions at branches than the year before. At the same time, we did see mobile use increase. I wouldn’t say we saw it to the same extent as lost traffic in branches. But it was an uptick. It was accelerated on an already established trend.”
It’s been said that technology changes fastest in wartime, although Kevin Helmick, president of Farmers National Bank, says a better phrasing is likely “life-or-death situations.” The bank, based in Canfield, usually sees a year-over-year gain of around 20% for its mobile and online platforms, both for the number of transactions and new users. Like the rest of the industry, in-branch traffic cratered because of the pandemic, but largely moved to online platforms.
“We saw a tremendous drop in in-branch transactions in March and April. Those recovered. But they haven’t recovered to a complete level,” he says. “That’s where we see behavioral change. We’re not sure it’ll ever get back to 100%. We’re forecasting like it won’t. We think it’ll stay around 80% of pre-pandemic norms.”
In its “What’s Going on in Banking 2020: Outlook for a New Decade” report using data from surveys collected in December 2019, Cornerstone Advisors found that most banks, 56% of respondents, planned on “somewhat higher” spending on technology – between 1% and 10% higher than the year before – while 19% reported no change and 16% replied they’d increase spending on technology by more than 10%.
For consumers, the two most common areas of increased spending among both banks and credit unions were mobile and online banking – 56% and 50% of respondents, respectively, said they planned to modify to improve their systems – while for commercial clients, the largest areas of focus were online banking (35% said they’d modify or improve services) and treasury management (34%).
Industrywide, 33% said they’d add digital account opening to their suite of services this year, followed by peer-to-peer payments at 29%.
One of the biggest barriers to the digital revolution in the banking industry is customer behaviors. Older customers can be reluctant to begin to use smartphone apps when branches are open for the same walk-in services they’ve always used and for younger customers who already use apps, there are myriad options for financial services, from peer-to-peer payment systems like Venmo or Paypal to lending through apps like QuickenLoans’ Rocket Mortgage.
But with the pandemic forcing the closing of branches, many customers who hadn’t used digital services before had no other option.
“A lot of it is going to stick,” says 717 Credit Union President Gary Soukenik. “When they had to, when they felt it wasn’t safe to come into a branch, they tried the digital way and found out it wasn’t as difficult as they feared and stuck with it. After we get past the pandemic, I think they’ll continue to stick with it.”
At the credit union, remote deposits – taking a picture of a check through a mobile app – have increased 42% over last year, while the number of online banking users has risen 9% and mobile banking users 14%.
As their institutions invest more in technology, the banking leaders say that doesn’t necessarily come at the expense of physical locations. Rather, the adoption of technology can alter the purpose of branches and give them more focus.
“There are still complex financial needs that can’t be done online. It may be a first-time mortgage buyer or someone trying to buy a car or someone looking for assistance with an investment,” says the president of its Youngstown region, PNC’s Ted Schmidt. “I think what we’ll be doing with our branch system is redesigning and reconfiguring what they look like and the level of service and the expertise of staff in the branch.”
At 717 and Farmers, the installation of teller machines with video capabilities – dubbed “personal teller machines” at 717 and “interactive teller machines” at Farmers – allow the institutions to offer much of the same transactional services and information with a small footprint.“What we’re looking at is, maybe in a market we’re leaving, we can leave a presence,” Farmers’ Helmick says. “Maybe it doesn’t justify a full branch. But we can leave two ITMs and clients can still talk to an employee of Farmers National Bank to help them navigate their financial needs.”