For Banks, There Is No 'Going Back To Normal'

Even before Covid-19, banking had been undergoing a gradual shift away from in-person banking.

The number of full-service bank branches in the U.S. has been on the decline for a decade, falling from almost 95,000 in 2010 to just over 83,000 last year, data from the FDIC shows. This shift has come as more and more banking activity moved away from branches to mobile and online.

Now, the spread of Covid-19 has kicked that shift into overdrive. According to data from Novantas cited by the Wall Street Journal, foot traffic at bank branches in April and the first three weeks of May fell more than 30% on a year-over-year basis. And between March and April, teller transactions fell 32%.
For some in the industry, it’s not a question of when things will “return to normal.” This is the new normal.

“People think we’re going back to normal in 12-18 months. I don’t think that’s going to happen,” said Sajil Koroth, CEO of Kapitalwise, a data platform used by banks to get more insight about their clients. “There is no going back to normal. That’s something the banks need to understand.”

A Gradual Shift, All At Once

In the early days of the pandemic in March, Koroth observed that banks were primarily focused on providing PPP loans to as many clients as they could. But once that demand died down, they were forced to rethink everything about how they operated in this new normal.

“Being digital was an option before Covid, but it’s not just an option anymore. It is the new normal in banking. One day in March the banks were thrown into a world in which they had to rethink their policies around everything—IT, security, compliance—there was a lot of things happening overnight.”

Koroth said that before Covid-19, he frequently had to convince banks why they needed a data analytics platform to understand their clients. But post-Covid he hasn’t had to do that, in part because banks are realizing they can no longer rely on traditional in-branch activity to engage with their clients.

“People used to go to their bank’s branch and have a conversation with their banker. But post-Covid, we’ve seen that digital consumer engagement is one of the top priorities.”

New Needs For Banks And Consumers

And just as the coronavirus has reshaped how banks think about their services, it’s also changed the needs of the very consumers who use them.

“What we’ve seen there are more people who are financially stressed now, people who expect more service from the bank,” said Koroth. “And the banks need tools to meet those expectations from those customers.

“Last week I tried to call my business bank and was put on hold for almost 45 minutes. Consumers don’t want to do that. Banks need to scale up their IT and support to meet the expectations from these financially stressed customers.”

Koroth’s hope is that platforms like his can help banks learn more about their clients. For example, things like someone switching their job, traveling, or having a newborn can all change a person’s financial needs but are often overlooked by their bank. Koroth said Kapitalwise, which is in the midst of a crowdfunding campaign, specifically targets mid-market banks that can’t afford to build a bespoke solution or other high-end data solutions from the likes of IBM IBM or Microsoft Corporation MSFT. 

“We look at those specific triggers to help banks re-engage their customers back to the bank at the right moment they may need a bank’s service the most,” he said.

The bottom line, he said, is that banks need to accept the fact that things are never going the way things were, and they need to adapt to this reality.

“People are comfortable banking at home from their phone. Why would we think that in 12 months they will come out of their home and walk into a bank? The normal that we had seen before Covid is never going to come back. If you think back to major historical events, it’s not about going back to normal. It’s about learning a new normal.”

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