Meaghan Johnson, founder of customer experience and strategy consultancy, Digital Magss examines how incumbent banks are responding to the current global pandemic.
I’ve been glued to all sorts of new outlets over the past month. As I write this, I am currently in Nicaragua waiting for our rescue flight provided by the German government. We have been here for almost a month, and with only four confirmed cases, no official social distancing, and confining ourselves to remote places, it’s surreal for us to hear from friends and family how things are unfolding in Europe and the US.
With the Covid-19 outbreak and our current situation, my daily intake of FinTech news has taken a backseat. Over the past few weeks I have dealt, almost daily, with both KLM and American Airlines, with the former proving an absolute god-send in terms of customer centricity and the latter truly failing. The disruption to the airline industry has been on my mind, and I see it as two fold:
- The airline industry is facing disruption to its product offering (e.g. cancelled flights, closed borders, visa restrictions)
- It must also tackle the disruption experienced by nearly their entire customer base
Naturally I also think about disruption to the banking industry during these times, It is clear that banking is and will continue to be confronted with the massive disruption its customer base will experience. People who work as artists, taxi-drivers, waitstaff, freelance consultants, part-time developers, nannies, own small businesses and many others have had their livelihoods put on hold as their income has suddenly ceased. Thinking about the elderly population, those who are unfamiliar with digital banking are likely concerned about going to the branch to do their day to day or weekly banking. Old and young, workers and business owners of all kinds, people stuck abroad or those stuck in isolation, we all feel helpless, stressed, and overwhelmed by a high level of uncertainty.
But, with the FinTech news I am consuming, I am seeing some incredible customer centric initiatives from incumbent banks that help alleviate not only the disruption customers are faced with, and aim to disrupt the spread of Covid-19. These include:
- Banks in Norway, Ireland, Saudi Arabia, Poland, Egypt, and Turkey, raising contactless limits to encourage users to use cards instead of cash to mitigate the spread of Covid-19
- m-Pesa waiving fees to discourage case usage. There has been a lot of concern over the extent to which cash exacerbates the spread of the Corona Virus. Safaricom, which operates m-Pesa announced all P2P transactions of less than Ksh1000 (about $10) will be free for the next 90 days, with daily transaction limits for SMEs raised from Ksh70,000 to Ksh150,000, with Kenyans able to transact and hold in their wallets up to Ksh300,000
- Nationwide offering a special hour at branches for vulnerable and elderly customers. Under the initiative, 100 branches will open at 8am, instead of 9am, and will be available only for elderly and vulnerable customers. These customers will be first in after a deep clean of the branch has been completed the night before
- Santander opening a dedicated customer phone line for Covid-19-related financial queries, updating its chatbot capabilities to address customer questions, and increasing the number of staff available to assist customers financially impacted by Coronavirus
- Irish Bank, AIB, suspending its recently announced plan to introduce transaction charges for contactless payments, citing the Covid-19 outbreak.
- American Express waiving late fees and lowering interest rates for cardholders impacted by the Coronavirus. Through its Financial Hardship program, customers can digitally speak to representative to find out how they can qualify for relief.
- Barclays waiving interest charges on overdrafts until the end of April.
- Barclays also launching an online application to help customers get mortgage relief quickly. Customers with a mortgage can pause payments for up to 90 days due to the Covid-19 outbreak. Customers submit their application online and receive a text message confirm the request has been approved.
- DBS digitising 11 common trade financing processes to reduce reliance on physical over-the-counter exchanges and is offering clients 50 free FAST transactions a month to cut the need for physical cheque handling.
- Western Union introducing ‘Digital Location, a service which enables users to send and receive money from the comfort of their own home. The money transfer operator is running a pilot of the combined telephone and video service, which connects customers to an agent to assist with the transfer, in Austria, Belgium, Italy, Portugal and Oman.
Don’t get me wrong, some neo-banks are also stepping up, such as NorthOne Business Bank waiving monthly account fees. However, the incumbent banks are dominating both in terms of speed in launching new services and the level of targeted customer centricity to support disruption. Here are a few reasons why I think incumbents have and will continue to outshine small FinTechs and neo-banks:
- Incumbents offer a wider breadth of products and services, namely lending products such as credit cards, overdrafts and mortgages. These are the products where customer centricity will become essential in times of crisis as the disruption to customers will be greatest here
- Incumbents have been through 2008. They lost trust of everyday customers, which helped spearhead the FinTech revolution. They won’t make the same mistake twice. This is very much exemplified via the financial relief on lending products.
- Neo-banks and FinTechs do not have large customer support centres. In normal times, their customer support is poor, and is largely only available via digital channels. In times of crisis, I can guarantee you customers will prefer to speak to a real-human, rather than a bot, or digital agent. Tide, the SME challenger bank, informed users that “they may face a delay in response times in the early days of the Coronavirus crisis, as it deals with a significant uptick in queries from worried business owners.” I was once a Tide customer, and it took a few days to get a response from their agents. A few times the response was that I needed to write via e-mail, prolonging the time to receive a proper answer.
I am happy to see incumbents shining in terms of customer centricity in these times of crisis. Over the past five years, banks have gradually enhanced their ability to launch (mostly digital) customer centric products, but to date, these were not entirely launched with urgency. For the better half of the last decade, those of us in the industry have been quick to critique banks for their lack of customer centricity and transparency, unfair costs, and poor digital transformation programmes. But today, in these high times of fear and uncertainty, these factors matter more than ever. Incumbent banks are finally, and thankfully proving us wrong.