How Banks Can Ride the Wave of the Coronavirus Vaccine Rollout

Leor Melamedov

With multiple promising coronavirus vaccines expected to be available in the not-so-distant future, there is a concurrent expectation for economic activity to pick up. With the anticipation of a positive change, it’s likely that banks will soon enjoy more lending activity from the private sector as people will be eager to open new businesses, build new buildings, and generally invest.

As a result of this predicted bump in demand for loans, banks will be able to increase their interest rates — resulting in a state of reflation and a long-awaited boost in profits.

But now is not the time for banks to lean back and wait for the loan applications to start pouring in. As banks get ready for a wave of economic activity, they should also get ready to serve people who have come to expect to do business digitally.

This is going to be the case in the short-term transition period when in-person transactions are still dangerous.

And it is going to stay the case even after a vaccine becomes widely available, given that customers have gotten used to digital banking — and don’t want to go back.

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Recent Coronavirus Vaccine News is Good News For Banks

Investment banking group, Jeffries, is optimistic that bank stocks and profits will be up in 2021. It recently rated the financial sector as “modestly bullish,” and has hopes that the coming year will bring effective vaccinations, better lending conditions, reflation, and a rotation to value stocks.

Goldman Sachs is similarly optimistic. “The market might be poised for a temporary rotation out of growth stocks into stocks more sensitive to upcoming macroeconomic changes,” the investment bank writes. “Rising bond yields and improving economic growth can trigger these rotations, and Goldman expects both of these to occur in the next few months, especially if a vaccine for COVID-19 is announced.”

When it rains it pours, and within a week the world saw that the Pfizer and Moderna vaccines are safe for use — with multiple other possibilities on the way.

Soon after the announcements of good vaccine news, the 10-year Treasury sold its highest level since the outbreak of the coronavirus in March. And higher interest rates mean greater profits for banks. And the anticipation of increased economic activity comes with reduced fear of loan losses.

In other words, many banks are gearing up for better times ahead — and with that means more business loan activity for investors and additional expansionary activities.

Banks will surely want to give their reawakened customers the white-glove treatment as they come back. And a large part of that will mean maintaining or increasing investments in digital banking technology — while simultaneously amping up the human touch.

Maintaining Digital Momentum is Key…

…Because Most Americans Are Still Concerned About Covid-19

The coronavirus meant that banks needed to quickly accommodate consumers’ fears of in-branch virus transmission. And most banks did a spectacular job of switching to safe, remote transactions — at least for many services.

But despite the light at the end of the tunnel in the form of widespread vaccine availability, the reality remains that the U.S. is deeply entrenched in a pandemic. The Centers for Disease Control warned that this winter may be the “most difficult time” in U.S. public health industry. Coronavirus hospitalizations are skyrocketing. According to the Covid Tracking Project, the number of Covid-19 patients in U.S. hospitals is nearly double the number from the first wave in the spring.

While despite a minority of Americans flouting coronavirus safety recommendations, the majority remain cautious. A McKinsey report conducted in November 2020 reveals that four out of five Americans have yet to return to pre-coronavirus levels of comfort with “normal” out-of-home activities.

So while it’s up to banks to decide whether in-branch banking should resume, and if so, to what extent, fully digital options should get priority. The virus isn’t over, and banks need to keep their employees and customer safe.

…Because Most Americans Want Digital Banking to Stay

\Even if tomorrow a coronavirus vaccine becomes available to everyone, that doesn’t mean consumers will be flocking back to the bank branch. Even prior to the coronavirus, consumers were eager for digital banking, with 77% of bank customers saying they would choose a new bank at least in part based on how digital-friendly it was.

By the time the pandemic ends, it will be at least a year since it began. During that year, even digital holdouts got comfortable with online banking. With digital banking more accessible and intuitive than ever, and consumers more accustomed to it, few want to return to the old ways of interacting with banks.

According to a recent Lightico study, 76% of consumers plan to avoid or reduce visiting a bank branch in the future (more specifically, 42% will go less often, and 25% will avoid face-to-face banking altogether). Given the tremendous convenience advantage of digital banking, this comes as little surprise. And the more banks expand and improve their digital offerings, the more consumers will choose them over branch visits.

A substantial number of today’s digital-first consumers would even avoid critical banking activities it it required an in-person visit. 33% would not take a loan if it required a branch visit — meaning that banks looking forward to an uptick in new investment loan activity could lose out on opportunities.

A Vaccine is Around the Corner: Keep Investing in Digital Technology

A coronavirus vaccine may be just around the corner, but there will still be a transition period when banks will need to keep their employees and customers safe from the virus. Expanded digital banking services has proven to be the most reliable way to do that.

Even once the pandemic is over, banks should continue investing in digital banking technology. It’s been proven to bring high ROI thanks to added efficiency, better CX, reduced manual effort, and eliminated paperwork overhead.

Enabling end-to-end digital customer journeys with tools like eSignatures, eForms, digital document collection, remote ID verification, and more can allow banks to capitalize on the increased demand for high-value loans and services that is likely to accompany the market rebound.

But just having digital banking options isn’t enough. To meet these consumers’ expectations, digital banking tasks must be:

  • As easy (if not more) to accomplish online than at a branch
  • Available from the digital channel of the customer’s choice, from mobile to desktop to tablet
  • Completely digital, without requiring physical paperwork or a branch visit at any stage of the process
  • Part of a greater automated digital workflow (rather than reliant on standalone tools cobbled together)
  • Intuitive for non-digital natives (i.e., senior citizens) to use

Banks can make the most of the coming economic boom — as long as they recognize that today’s choosy consumer is not the same consumer of 2019.

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