5 minute read 15 Jul 2020
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How COVID-19 could change the way we bank in Europe

By Nigel Moden

EY EMEIA Financial Services Banking and Capital Markets Leader

Passionate believer in the banking industry as a force for good. Leading advocate for the talent agenda in EY. Builder of diverse teams. Avid cricketer.

5 minute read 15 Jul 2020

COVID-19 has had a massive impact on European banks. Between February and May, the STOXX 600 European banks index fell by more than 35%.

The first quarter’s earnings releases have seen banks take huge provisions, even if the underlying performance of many has been stable.

While the immediate impact of COVID-19 crisis is clear, the longer-term impacts are opaquer. This is particularly true of the way consumers will interact with their banks.

The EY Future Consumer Index is intended to help make sense of the way behaviors have changed and whether customers will revert to old habits once current restrictions are lifted. This survey raises several questions for European banks:

1. Can banks sustain the shift to digital channels?

Lockdowns across markets may be the single greatest catalyst to digital adoption ever. Over 40% of consumers across France, Germany and the UK say that the way they bank has changed due to COVID-19 crisis. Banks may see this as an opportunity to press ahead with branch reduction programmes. If it has been shown that people can operate without branches, why re-open them all?

This might be premature. Just 22% of customers expect to bank more online in the next 1-2 years, and a mere 16% expect the way they bank will change over the longer term because of COVID-19 crisis (26% in France but just 12% in Germany). There is a generational gap too. The over 55s are the least likely group to have changed the way they bank, with only 17% expecting to bank more online in the next 1-2 years, while 28% of under 35s do. 


The longer lockdowns persist, the more widespread and embedded customer behaviors may become, but the data suggests banks need to do more to encourage digital adoption and to make the change permanent.

This means banks must ensure customers using remote channels have a positive experience both during, and beyond the crisis. Many banks have been challenged by a surge in customer queries, which has led to delays in customers being able to contact their bank. There are creative ways to improve this experience, for example using chatbots or redeploying branch staff to boost contact centre capacity. It is also particularly important to ensure staff are empathetic in dealing with customers in potentially stressful situations. In addition, banks should use the crisis to identify where the current customer journey can be improved to enhance the experience post crisis.

For changes in customer behavior to remain beyond the crisis, banks must reinforce the benefits of remote channels not just restrict branch access.

2. Are we witnessing the end of cash?

Use of cash has been in decline for some time, but with many physical shops closed due to COVID-19 pandemic, this has accelerated. Fifty-nine percent of European consumers say they are using less cash today than before the crisis. Contactless payments are up around 30% (net), online payment tools by more than 20% and card payments up 10%. Almost 30% of consumers expect to be using less cash and more contactless payments over the next couple of years.

While banks may be tempted to rejoice at the fall in cash usage, there is a need for caution. The latest estimates suggest around 40 million adults in the EU don’t have a bank account and there is typically a correlation between cash dependence and poverty. Such concerns in Sweden, possibly the most cash-light society in the world led to its parliament voting in favour of a bill requiring banks to ensure people had access to nearby ATMs and businesses could still make deposits. The European payments council has also been explicit, saying it’s “a societal objective to minimize the cost of cash whilst ensuring its availability… for those to whom cash remains a means of payment of choice (pdf).” 

While cash usage may decline, banks will continue have a clear role to play in its circulation. This means organizations will need to work collaboratively to focus on improving the efficiency of cash handling across the financial system.

3. Can banks rebuild customer trust?

Today, only 19% of consumers say they completely trust financial services firms. Yet, banks are on the front line supporting customers through the crisis, by transmitting government stimulus measures, offering forbearance and emergency funding to clients and donating to relief efforts.

The EY Future Consumer Index suggests that firms that behave responsibly and ethically will be rewarded. Nearly half of European consumers say that their future purchasing decisions will be positively impacted by firms that are actively supporting the community, ensuring they are doing good for society and being transparent in all they do. On the other hand, 40% say they will be less likely to purchase from firms that are focused on maximizing profits.

This presents real opportunity for banks to highlight the work they are doing in their communities and improve the trust deficit in the sector.

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Over the past two months, the banking sector has worked hard to overcome operational challenges and help customers in exceptionally difficult circumstances. The hard work is not over yet. More will be required to change perceptions of the banking sector, and to permanently change the behaviors of banking customers.

About this article

By Nigel Moden

EY EMEIA Financial Services Banking and Capital Markets Leader

Passionate believer in the banking industry as a force for good. Leading advocate for the talent agenda in EY. Builder of diverse teams. Avid cricketer.