Coronavirus has sped up the decline of cash and the rise of digitizationNovember 2020
This year's coronavirus pandemic, accompanied by a number of government restrictions, has transformed many industries, and of course, banking is no exception. The three primary areas of change in the banking industry are the accelerating pace of the digitization of services, access to bank branches and, last but not least, the use of cash. These three areas intersect to a large extent, but it is digitization that is the driving force behind the other subsequent changes.
Let’s first look at the gradual change in the role of bank branches. Until recently, these were perceived as places for acquiring clients, establishing new products, or executing payment transactions. However, with the continuing increase and success of service digitization, the importance of branches is shifting significantly.
Fully digital banking is changing the daily routine of bankers
The transformation of the role of bank branches doesn’t mean that the importance of the branch network will decrease markedly. “Branches will continue to be with us, but rather as advisory centers. The role of bank branch employees is also changing accordingly,” explains Karel Beran, head of products and innovation at BSC, which has been involved in the digital transformation of banking for 30 years.
Our internet and mobile banking have developed over time to the extent that it is possible to carry out the most common banking operations from the comfort of your home, including opening an account or almost anything else you used to do at a brick and mortar bank. We’ve reached a point in time, when many bank clients have never even visited a branch, and it’s almost certain that this trend will continue to increase significantly after the current coronavirus crisis. Due to the fears surrounding the contraction of coronavirus, even older clients, who previously were most likely to rely on personal branch visits, have learned to use digital services.
Although the number of routine banking operations performed at branches is declining, there are areas in which bank branches will continue to be irreplaceable. These include the sale of more complex and, for clients, critically important banking products, such as mortgages or investments. The reason is not the technology, as most of these products can be set up and purchased digitally, but the need for clients to consult a banker for his expert advice and the effort of banks to provide personal care.
“When it comes to acquiring one’s own home and debt, often for decades, personal consultation with a banker is an essential part of the process for most people, regardless of their technical skills and willingness to use digital services,” explains Karel Beran.
Cash is disappearing due to expensive circulation and health risks.
But it’s not just routine banking transactions that are disappearing from branches, it’s cash. The coronavirus pandemic has substantially accelerated the shift to cashless payments for consumers. The Association for Bank Cards reports that despite the tourism freeze, the number of non-cash transactions in the first half of this year grew considerably. Czechs made 19% more non-cash payments than a year ago, and the volume of these payments grew at virtually the same rate – by 19.8 percent.
It’s no surprise that this trend is also contributing significantly to the changing role of branches. People are learning to live without cash, withdrawals from ATMs are declining and banks are steadily reducing the number of specialized cash tellers, replacing them with multiservice tellers while also increasing the number of deposit ATMs.
“It can be assumed that in the future a shared network of deposit ATMs will be created and eventually cash will disappear completely from the branches. There are, moreover, clear economic reasons for restricting cash transactions. The costs of processing and circulating cash are very high, in addition to the other negative impacts, such as the increased risk of spreading bacteria and viruses through currency, ”says Beran.
Interestingly, despite the costs and complications of cash flow, the coronavirus has accelerated its decline more than anything else. When paying with a contactless card, mobile phone or watch, for example, the risk of infection is significantly reduced, and because of this, cashless payments are preferred by both merchants and buyers.