Financial wellbeing can boost confidence and drive recovery
The key ingredient to driving economic recovery and “getting back to normal” will be confidence. People will need to feel confident that they can spend, save and invest in a way that lets them fully engage with their day-to-day lives, jobs, and society at large.
Banks have an opportunity to help build this confidence through adapting products and services to meet the needs of more uncertain customers. Central to this will be developing more holistic and personalized value propositions that consider differing circumstances. For example, financial services is one of the last industries to adopt subscription-based pricing models but it’s a concept whose time may have finally arrived. Subscriptions are attractive because of their convenience, affordability and flexibility – customers can access the products and services they need now and easily adjust these as life changes.
We found that, in the US, it’s younger people –aged 25-34 years – that are most interested in financial subscription models. With this same age group most at risk from COVID-19 related job losses, the subscription model may be an opportunity for banks to better support this customer segment during hardship.
As banks launch these new initiatives or offer support for those in economic distress, they will need to ensure awareness among customers. Educating customers about the right financial choices, and enabling them to make these choices, will become increasingly important. Banks that aren’t seen to act ethically and communicate with transparency during this crisis risk reputational damage.
Banks will also have to reconsider how they connect with customers. Lockdowns and stay-at-home orders have seen most of us turning to online channels more than ever. And according to EY’s Future Consumer Index, the switch to digital may become permanent for some – almost 40% of respondents expect to bank online more over the next 24 months. However, for others, COVID-19-related changes to banking behavior will be more temporary – only 16% of respondents said they expect the way they bank will change over the long-term.
Banks will need to ensure that digital channels continue to accommodate the needs of all customers, including those that find it more difficult to bank online. Deploying automation and virtual assistants may help. The EY Future Consumer Index revealed that people are now more willing to ask questions of voice-activated assistants, and even buy products through these bots.
Meeting people’s needs through different products and services and different methods of engaging can help banks better support customers in these challenging times. Those that embrace this core principle of financial well-being – the ability to make confident, well-informed money-related decisions that result in short- and long-term financial security for both the short and long term – can play their part in leading our economic recovery, while also building customer loyalty and a differentiated position in the market.
Supporting businesses running on empty
It’s clear that coming out of the lockdown, a different world awaits. Individuals face challenges and so do businesses. Economic activity is resuming, but with big changes in the level of demand for products and services as well as in how they are structured and delivered. Our EY Future Consumer Index indicates it may take significant time for the economy to recover, with some sectors particularly hard hit:
- Bars, sporting events, theaters and gyms: More than a quarter of respondents say it will be years before they feel comfortable visiting these venues.
- Travel and tourism: More than half of consumers expect to take fewer flights over the next couple of years and say they are less likely to take international vacations. Forty percent of respondents say they are less likely to stay in a hotel in the next couple of years, while more than a third are less likely to use vacation rental services.
In these challenging times, many businesses have had to dip into savings to sustain themselves. The ability to re-open doors after lockdowns may depend on the ability to access new funding, both to resume trading, and to finance future growth. While banks may be wary of lending to these businesses in uncertain times, those that look beyond the now can help build more resilient businesses while strengthening their own position too.