History shows us that the financial services sector has been tested time and time again. How has this industry stepped up in the face of our newest challenge, COVID-19? Learn how banks are adapting in this new reality of 2020.
2020 Spotlight: Financial Services
Today, we shine a spotlight on the financial services industry and how they have navigated their business and marketing through this anomaly of a year.
No one could have truly predicted how the coronavirus would impact the U.S. economy in the early days of the new year. But, when the country faced a shutdown of non-essential businesses in March, anyone could have guessed that our economy would slow down. Rumors of a 2008-like crash were swirling as consumers began holding their purse strings a little closer in fear of another recession and a looming threat of record unemployment.
Along with many retailers, consumer banks closed a significant number of branches because of the pandemic. Some temporarily, some permanently. Similar to the move seen in the retail industry from bricks to clicks, consumers began shifting their banking needs online. According to an April 2020 survey from marketing firm William Mills Agency conducted by The Harris Poll, 73% of US adults said they were more likely to use digital banking or digital payments during the coronavirus pandemic.
With the pandemic triggering consumers to reassess their personal finances and change how they bank, how has the financial industry adapted? Let us take a look at the banking and mortgage sectors in the financial services industry and see how they have been impacted by our current business landscape.
Investing in Marketing: Banking Sector
COVID-19 may lead to a crisis in the real economy with an impact on the banking system and on the bank. However, banks are seeing an opportunity to optimize the customer relationship along the way. With banks being forced to transform digitally, what a great time to focus on offering an excellent customer experience online.
In fact, Deloitte surveyed U.S. financial services executives in April 2020 about their top strategic initiatives post-pandemic. More than half of respondents said they would rethink and digitize client interactions, followed closely by prioritizing technology upgrades.
Part of this transformation into the digital world, is the continuous innovation of marketing technologies in the financial services sector.
One survey reports that while the demand for digital banking was identified and universally agreed upon, putting the marketing resources and personnel behind the experience is still slow to occur as the report found that…
- 38% of institutions said they applied a marketing mindset to digital banking by giving their marketers a full seat at the table in determining their institution-wide transformation.
- Additionally, 43% of the institutions that applied a marketing mindset said their marketing-led digital transformation initiatives exceeded ROI, compared to only 23% of other institutions;
- And 60% of marketing mindset financial institutions reported having superior digital experiences compared to their competition, as only 35% of other financial institutions stated that claim.
The results from this survey clearly show that those financial institutions that are investing in marketing technologies, are seeing the most return. The demand for an omni-channel digital banking experience is here. Perhaps COVID-19 has assisted the banking sector into acting as a forcing function to push their omni-channel program and marketing technology testing over the finish line.
There’s No Place Like Home: Mortgage Sector
Unlike the financial crisis of 2008 where the mortgage sector was in the eye of the storm from the start, COVID-19 has impacted this sector in financial services in a slightly different way. Rather than triggering the economic downturn, the mortgage industry has seen some changes based on the growing number of homeowners that are not able to make their mortgage payments, requiring loan providers to roll out loss mitigation tools to reduce hardships.
Keeping Americans in their homes during weak economies must be a priority for financial institutions. Lenders aren’t just in the business of providing loans, but helping consumers pay them off as quickly as possible.
Following the onset of COVID-19 in the U.S., mortgage rates dipped to a record low below 3% in July of 2020. This represents the lowest level since Freddie Mac began tracking this data starting in 1971. A year ago, the 30-year fixed-rate mortgage averaged 4.14%. However, not everyone will qualify for these record low rates as tighter standards are being put into place in terms of who mortgage lenders will lend to because of the risk posed by the current economic environment.
These historically low interest rates have caused a surge in consumer interest. This surge combined with the spike in concern for personal finance due to economic uncertainty has made for a great opportunity for the mortgage industry to get in front of customers and make an impression on both products and customer experience.
As for home sales, realtors are raising their forecasts following growth this summer. According to the National Association of Realtors, pending home sales continued to climb in June, rising 16.6% monthly since May, and rising 6.3% since June 2019. For 2020, existing home sales are expecting to be down 3% while new home sales are projected to rise by 3%. The previous forecast for existing home sales in 2020 was down 7.7%, with new home sales up 1%.
Think about that. Our housing market is heading toward a positive trajectory, in a year of a global pandemic. Like with every industry, even when times are projected to be positive for business, the need for innovation is in high demand. After all, people are doing things differently this year, including buying and selling a home.
Similar to the impact it has played on the banking sector, COVID-19 has acted as a forcing function for mortgage lenders to operate in a multi-channel way. This includes online digitization and automated underwriting processes for borrowers.
Some other examples of the innovation that has accompanied the digitization shift in mortgage lending and real estate include virtual home tours, and drive through closings. One popular home listing website saw its online traffic for virtual tours increase in March, compared to February. Another real estate brokerage experienced almost a in requests for home video tours. Innovative realtors are even providing “drive through closings” in which customers and realtors exchange paperwork and keys while sitting in their own cars.
To quote one of advertising’s greats, Bruce Barton, “In good times people want to advertise. In bad times they have to.” Now is the time to market new products and services and reassure customers in this uncertain time.
With the massive transformation into digital services and marketing technology in 2020, it is no wonder that according to eMarketer, despite the decline in total ad spending in the U.S. this year, the financial services industry will increase its digital ad outlays. eMarketer expects digital ad spending in the US financial services industry to increase 9.7% in 2020, reaching $19.62 billion.
This is one industry that has been tested time after time…crisis after crisis. Perhaps the financial services industry will be able to look back on this COVID-19 era and consider it the catapult for launching financial services into a new generation of multi-channel marketing and customer experience. With so many customers banking and doing business online, it is the right move to understand those visitors and customers and personalize engagement with them across all channels – both online and offline.