Here’s how COVID-19 impacted consumer banking behaviour

retail banking

The advent of the COVID-19 pandemic has had a major influence on consumer banking behaviour, both negative and positive, as a result of pressure on incomes.  To this end, Nedbank hosted a Live Webinar this week where leading executives and industry thought leaders analysed the economic impact of this shift in consumer banking behaviour.

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Mutsa Chironga, Managing Executive at Nedbank stated that as early as April, Nedbank noted a significant decline in spending based on card swipes, compared to the same period last year. This is on the back of the fact that card swipes had actually increased year-on-year from the beginning of the year to March 2020.

In April, it was noted that the number of card swipes at Nedbank point-of-sale terminals fell to 51% of March volumes as the initial impact of COVID-19 hit the economy. However, by June the numbers had risen again to 92% of March volumes.

A notable trend that the financial services institution sees is consumers gravitating to short-term savings instruments. With current account balances being substantially increased, 32-day notice and 12-moth fixed deposit options are enjoying more attention and consumers are shying away from unsecured lending.

A pleasant surprise has been the interest in home loans applications since June following the reopening of the Deeds Office – these are new applications and not a backlog created by the disruption in services at the Deeds office.

The market has seen a remarkable shift towards digital ways of banking, with consumers preferring to use mobile/digital platforms for banking as opposed to making branch visits. Branch visits halved in April 2020 to 53% of footfall traffic experienced in March 2020.

“Nedbank was quick in the provision of debt relief assistance following the COVID-19 outbreak, coupled with the introduction of digital banking solutions, such as tap-on-phone and scan-to-park, as well as a super app in the form of the Avo digital mall,” says Chironga.

According to Amy Underwood, Senior Behavioural Psychologist at Nedbank Group, the sudden dramatic change has also impacted the way in which people operate on a day-to-day basis .

“Even people who were set in the same routine for many years have been compelled to form new habits, especially money habits,” Underwood says. “The COVID-19 outbreak has also given them the opportunity to realign some of the less fruitful habits in the direction of their goals.”

She noted, however, that habits are developed by the body to help people cope with their everyday lives, and that if circumstances change back to what they were before, this might trigger some people to go back to their old ways.

Director at research firm Kantar Tshego Tshukutswane observed that consumers are embracing the digital experience across their entire consumer experience journey, not just in their banking.

“Consumers have shown that they prefer to transact digitally, with 80% of them saying they will continue to use these channels even past the pandemic, and three quarters stating that they prefer contactless payment methods in particular,” she says.

Banking Association South Africa (BASA) Managing Director Bongiwe Kunene found that the bottom end of the market experienced an unexpected transition and learning curve. For example, recipients of social grants had to adapt to the fact that their phones would become one of their primary transaction channels.

The solution according to Kunene lies in balancing the rate of digital transformation and the needs of the consumers – when developing these solutions, customer-centricity is key rather than a focus on the tools themselves.

She noted that encouraging consumers to automate processes, such as making savings deposits, is advisable for the current circumstances, especially for those with busy schedules or struggle with sticking to routines. The banking sectors has rapidly grown the capacity to help SMMEs and individuals manage financial pressure during this trying time.

“Even with the opening of the economy gaining momentum, financial stress will be with us for a long time to come and people still need to continue saving,” Kunene says. “Most consumers will need solutions like Avo, a place where they can easily access goods and services, especially repetitive items they consume on a regular basis.”

As financial services institutions strive to foster financial inclusion, Tshukutswane said, they must bear in mind that true inclusion is the extent to which solutions address the pain points of the consumer as possible. Chironga agreed that making solutions with end-users’ needs in mind is and will continue to be fundamental to Nedbank’s strategy.

Edited By: Darryl Linington
Contact: Darryl@techitout.co.za
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Follow @DarrylLinington on Twitter

Editor of Tech IT Out. Former radio host of Cliffcentral.com. Former Editor of IT News Africa and ITF Gaming. All round techie, gamer and entrepreneur. For Editorial Enquiries Contact: Darryl@techitout.co.za or via +27788021400.