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The Rise of Digital Banking in a Post-Pandemic World

By: Mark Moroz, EVP – Head of Product, Live Oak Bank

Mark Moroz, EVP – Head of Product, Live Oak Bank

Seemingly overnight, the COVID-19 pandemic has transformed the world of banking. The effects of the virus and the subsequent stay-at-home orders have ushered in a new era in financial services. While there was an increasing focus on digital transformation in banking before COVID-19, there’s a new sense of urgency for community banks, many of which are still dependent on in-person experiences and legacy technologies. By adopting next-generation tech and partnering with fintech leaders, community banks can shift away from outdated standards. This will be critical not only for their sustained success—but their survival.

Banking as we know it may never be the same. The disruption created by the pandemic caused a dramatic decrease in visits to bank branches, according to Novantas, a leading fintech provider of analytic advisory services. Many banks have had to close significant portions of their branches, a decision which may have long-term effects on customer behavior.  Live Oak Bank’s latest BusinessPulse reveals that businesses are pivoting too—46 percent of middle-market companies have become more open to branchless banking as a result of the pandemic. Another unforeseen impact of the crisis has been the shift away from using physical forms of payment, including cash and paper checks. Consumers are leery of using anything that potentially could spread the virus, and many retailers are discouraging these forms of payment for the same reasons. This is driving a decreased dependency on these types of payments, arguably archaic in today’s world.

"There’s a new sense of urgency for community banks, many of which are still dependent on in-person experiences and legacy technologies"

It’s safe to assume that in a post-pandemic world, digital banking channels will become more widespread. Mobile banking apps saw unprecedented use as a result of the pandemic. According to J.D. Power, nearly 84 percent of retail bank customers had at least one digital interaction with their bank between April and June 2020. The industry is poised to change with a forward push towards electronic payments, including traditional debit and credit cards, plus virtual cards, real-time payments such as ACH and peer-to-peer transaction channels like PayPal, Venmo, and Zelle. During the second quarter of 2020, PayPal added the most net new active accounts in the history of the company.

The time to act is now.Community banks must begin to increase efficiency in their banking platforms in order to keep up with the amplified attention on digital. By driving the adoption of API and cloud-based methodology, banks will be able to keep up with the pace of digital innovation that consumers experience in other areas of their lives. Banks can seek partners to deliver these services, not vendors. In order to deliver clean and simple user experiences, it’s imperative to provide tools that help train the customers—this will bolster the customer journey and overall satisfaction.

The pandemic of 2020 has been the catalyst for change across all ways of life, but especially how we interact with essential services like banking. Community banks can and should seize the moment of digital transformation. The role of online and mobile banking will only continue to grow in our daily lives. Sustainability equates to agility these days.Banks must be able to adjust to growing consumer adoption of digital channels, or else they’ll become irrelevant.

Weekly Brief

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