The covid-19 pandemic has affected many industries like travel, hospitality, agriculture and the banking sector is not left out too. Financial institutions and bank regulators are facing many challenges. Banks are required to explore support measures by the government, to leverage the opportunities that come on the way cautiously. The pandemic has generally led to high volatility and instability in the global capital markets.
Several employees have faced job losses, low sales and profits have been incurred as the virus continues to be rampant. Banks are therefore encouraged to strategize plans to ensure that both employees and customers are protected from the deadly virus. Remote operations and digitized transactions need to be implemented as a way of minimizing the spread of the virus. The article primarily focuses on the general banking sector and the areas that have a high probability of being affected. Additionally, we are going to talk about some of the regulations laid down to minimize these impacts.
Banking areas that have high possibilities of being affected
Some of these areas include ;
Customer relationships and commercial models
Despite the pandemic leading to an unstable economy, the impact on customer relationship can typically be described as a ‘positive discontinuity’ to provide you with extraordinary customer experience. Bank operators are more conversant in the provision of services which are more substantial than before the outbreak of the Covid-19 pandemic.
Profitability and credit management
The effects of the pandemic and the low-interest situation have led to minimal profits. Many financial institutions are now moving towards commission-based income from technology businesses. Retail clients of bank and credit risk of companies are faced with sudden effects of health emergency on the economy. In an attempt to support its recovery, banks are called upon to identify temporary events and durable impacts which usually requires either reclassification or actions of management.
Covid-19 is triggering movements towards digital banking.
Banking sectors and numerous government agencies are expecting movement towards digital banking, and regulatory measures are taken to spearhead these operations. Recently, the Federal Financial Institutions Examination Council gave US banks directives on how to determine whether their online system capacity is large enough to handle massive transactions. In addition to virtual working, the agency also adopted call centre services, over-the-phone banking and online banking. The DBS bank in Singapore tries to portray to us what online banking looks like during this pandemic. After a worker tested positive for covid-19, the bank was instantly forced to relieve the staff from their duties, and a more digital approach in handling transactions was introduced.
Interestingly, 11 financing methods have already been made digital hence minimizing person to person exchanges, providing business accounts with immediate fund transfers. Additionally, DBS bank offers webinar training services to its team of qualified staffs on how they can integrate digital tools in their operations. Digitization is not a new concept among customers and with the coronavirus making its way across nations, they have embraced the technique as the new normal.
With the rise in refined digital platforms like Netflix and Amazon, customers are anticipated to engage in numerous online interactions in various aspects of their lives. The growing need for digital services among customers is treated as an urgent matter during the covid-19 pandemic.
Mitigating customer’s fears with digital transactions
For most banks which are conscious of their profit margins, the business continues as usual only that customers are adopting digital platforms. These platforms have streamlined various processes, allowing you to fill forms, upload ID and submit documents through your mobile phones. Bank agents, on the other hand, guide customers throughout the whole process and assuring them during these unprecedented times. Thanks to these platforms, customers can now comfortably open an account or perhaps borrow loans at the comfort of their homes.
The Covid-19 crisis challenges past banking habits
The proliferation in the coronavirus outbreak has led to the adoption of remote working techniques. The World Health Organization (WHO) provides directives to banks to avoid physically handling bank notes and instead incorporate contactless payment to minimize the spread of the virus. As seen with the Bank of Korea, any bill that comes from local banks should be quarantined for at least fourteen days. Besides, the Chinese government urged lending institutions to disinfect notes since the virus can live there for days. It does not mean that banknotes are the only potential career of the virus because even through interactions with infected people, one can still get the virus—the more reason why the use of digital platforms is more secure.
The centers for disease control and prevention advise people to maintain a social distance of approximately six feet away from the next person. Most people who test positive are asymptomatic; hence it is difficult to tell whether they are sick or not. The virus poses a significant danger to older people who suffer from other health conditions like diabetes, high blood pressure, pneumonia, among others. The only solution is to avoid this is by avoiding bank branches and operate online.
How retail banks continue to survive during the covid-19 crisis
As we mentioned earlier, Covid-19 has adversely affected the banking sectors to a large extent. As the economies fallout, retail banks are trying hard to manage sophisticated operations that require some tangible steps to handle. Despite the regulatory measures given by the WHO, retail banks are working to ensure that their distribution remains open and their customers are provided with excellent services. In any given organization, customers are a significant asset and how to treat them matters a lot to your business. With the covid-19 pandemic here with us, retail banks are more focused on empathizing with customers and at the same time making informed decisions.
Another way in which retail banks keep the lights on during this crisis is by looking for ways to reduce costs. Retail banks reduce their spending on operations that are not essential. One way to achieve this is by laying off workers who are liabilities to the organization. Eventually, it is vital to come up with post-covid-19 policies and strategies that will ensure the success of the business even after the pandemic comes to an end.