Consumer and business lending during COVID-19

By Fabrice Gouttebrouze, Managing Director, Sirma UK
COVID-19 has had an unprecedented impact on our lives and it has caused significant economic hardship...

COVID-19 has had an unprecedented impact on our lives and it has caused significant economic hardship.

Banks in several countries are offering deferred payments on credit cards, loans and mortgages for consumers and businesses facing hardship due to COVID-19. UK Finance reported that financial providers granted 1.6 million payment holidays as of 24 April 2020.

COVID-19 has increased the financial industry’s focus on digital offerings and increased demand from consumers to use them. With bank branches shut and long waiting times for phone support, even previously nervous digital users have turned to these channels. 

According to PYMENTS.com, the number of accounts opened through digital channels was up 200% in April 2020, and mobile traffic had increased by 85%. These are trends which could last, as only 40% of bank customers are intending to return to branch banking post-COVID-19. 

Banks have to respond by putting increased efforts and resources into developing their digital channels. One of the key pain points for customers is the onboarding process where only part of the process has been digitalised. Many customers still need to go to a branch for ID and verification.

A recent study of financial institutions (FIs) in North America by ISMG and OneSpan highlighted that improving the customer experience is their top business objective for digital account opening in 2020. For 49% of respondents, the biggest obstacle for to digital account opening for FIs was legacy, manual ID verification and 35% found that knowledge-based authentication tools had become a point of friction to onboarding.

Banks are realising that partnerships with technology providers are critical to making progress with digital onboarding. Most lack the digital expertise and agility to achieve this in-house. 41% of respondents in ISMG’s survey planned to invest in new or existing partnerships to deliver a better digital onboarding experience.

The time to act is now and two Canadian banks have already announced they will be introducing biometric tools into their mobile onboarding processes.

The economic outlook is uncertain

Data from The World Bank has predicted a 5.2% reduction in GDP in 2020, making it "the deepest global recession for decades, despite the extraordinary efforts of governments." The OECD’s data suggests that the economies likely to be worst hit in 2020 are France, Italy and the UK.

At this stage, no one can accurately predict how soon the economy will recover from the effects of COVID-19. It seems more likely that we’ll see a new normal as lockdowns ease and finish, but some of the practices, such as working from home and reduced consumer spending, may continue. 

It will take time for consumers to feel confident doing all the activities that they used to, such as eating out, going to concerts and travelling abroad. Businesses and financial providers must adapt to changing customer habits and ensure that their online offerings are robust and customer-centric.

This article was contributed by Fabrice Gouttebrouze, Managing Director, Sirma UK

Share

Featured Articles

Why Web3 payment services will overcome legacy limitations

Mark Smargon, founder and CEO of Fuse, discusses how Web3 will transform the payments space and overcome financial legacy limitations

Interview: We asked a chatbot what it thinks about chatbots

We interviewed ChatGPT, the text-based chatbot taking the internet by storm, about the future of artificial intelligence (AI) in banking and finance

The challenges of address data in cross-border payments

A truly global solution is critical to meeting cross-border needs at scale, writes Loqate, a leading developer of global address verification solutions

Top 10 fintech disruptions to watch out for in 2023

Financial Services (FinServ)

PBF CEO, Morgan McKenney on blockchain, DeFi & tokenization

Crypto

UAE-based BNPL fintech Tabby secures $58mn in Series C round

Digital Payments