(IBJ illustration/Brad Turner)
Hoosier banks state the COVID-19 pandemic is quickening two longstanding business trends—clients’ migration towards mobile and online banking and the associated change in the way they use brick-and-mortar branches.
Throughout shutdowns this spring, banks mostly closed their division lobbies to clients, running the majority of their company through drive-thru, telephone and online. But as divisions have banks state electronic banking action stays higher than it had been only a couple of months ago.
“I think people have created some new habits through this pandemic that they will continue to use going forward,” stated Sherri Reagin, chief financial officer of North Salem State Bank. The organization relies at the Hendricks County town of North Salem and has five places in Hendricks County and two in Boone County.
Ahead of the pandemic, Reagin stated, roughly 52% of clients used the bank’s cellular program and almost 60% banked utilizing North Salem’s web site. Throughout the COVID-19 shutdown, the bank saw a 5% gain in the amount of consumers utilizing the program, and also an 18% growth in online banking.
The bank reopened its branches June 1, Reagin stated, however “we continue to see heavy use of both mobile and online banking.”
Other banks, big and small, state they’re seeing similar changes.
“For the most recent of adopters, [COVID-19] began to sensitize them to the simple fact , ‘Maybe it’s time to find out everything the bank provides so I can distance myself by a live individual and lessen my risk through the ordeal,’” said Mike Baker, CEO of Brownsburg-based Condition Bank of Lizton. The bank contains nine branch locations in Boone and Hendricks counties.
Mike Stewart, chief banking officer in Muncie-based First Merchants Bank, stated his bank saw a nearly 20% boost in electronic banking activity. A number of the increase, he explained, came from clients who hadn’t previously utilized the bank’s digital offerings. The remainder was increased utilization from existing digital clients.
First sailors also saw a major bump in fresh online account openings, Stewart explained. Ahead of the pandemic, just 4%-5% of consumer accounts were opened on the web. Throughout the initial 3 months of this outbreak, that jumped to 12%.
Fifth Third Bank has observed that a 20% boost in cellular logins since the start of the pandemic, regional President Kevin Hipskind said through email. About two-thirds of those bank’s customer trades are electronic.
Clients are managing a vast array of trades digitally, Hipskind stated, such as receiving and sending money and establishing alarms. “We’ve seen customers using all of their options because of the stay-at-home orders, as well as general caution about going out.”
The great majority of banks utilize digital platforms developed by third party sellers, and those sellers are seeing a major increase in need.
Carmel-based fiscal technology firm Baker Hill Solutions LLC claims its earnings during the next quarter climbed 20% compared with the identical period a year before.
Baker Hill specializes in cloud-based lending applications for banks and credit unions. Its clients range from small community creditors with assets of $500 million or less to “super-regional” banks with operations in multiple states and assets of $500 billion or more.
Mike Horrocks, the company’s vice president of product management, said the rollout of the Paycheck Protection Program spurred many banks upgrade their digital offerings. “I think it really forced everyone’s hand in terms of digital.”
The PPP, which launched in early April, offers forgivable loans to help small businesses weather the pandemic. The Small Business Administration is overseeing the program, but banks and other lenders are the ones submitting applications. Applications must be submitted using an online portal, and early interest in the program was high. In the first few weeks, the portal was clogged with lenders scrambling to submit applications before funding ran out. (Congress appropriated a second round of funding after the initial round was depleted.)
“I think when you have that combination of fear of COVID-19, volume and user experience and you have all three of those coming together, that created the perfect storm to realize, ‘Wow. We have to digitize and we have to digitize fast,’” Horrocks said.
He said health concerns are an especially big driver of the trend in areas hardest hit by COVID-19.
“We have customers in major metropolitan areas and they’re trying to go as digital as they can in their loan applications,” he said.
Reagin, the chief financial officer at North Salem State Bank, said her bank isn’t able to move as quickly as it would like on some digital upgrades because its vendors are so swamped.
“All of the products and services that go along with remote access are just really backlogged right now,” she said.
One of North Salem’s plans is for a “virtual” bank branch staffed by local employees who could help customers complete digital transactions. A customer having trouble accessing an online account, for instance, or even who needed help completing an online money transfer, could contact this virtual branch for assistance.
Sticking with branches
Even before the pandemic, the number of bank branches was in steady decline. According to a Quartz analysis of Federal Deposit Insurance Corp. data, between 2010 and 2019, the number of full-service bank branches in the U.S. fell from almost 95,000 to just more than 83,000.
But bankers say they won’t disappear entirely any time soon.
True, they say, the rise in digital banking has reduced branch traffic in recent years. But those physical offices are still important for a variety of reasons.
“The banking centers will serve the more complicated, the more value-added transactions,” said Todd Clark, community banking CEO at Evansville-based Old National Bank.
Customers might not visit a branch to cash a check or make a deposit, Clark said, but when it’s time to take out a mortgage or discuss financial plans, they still want to meet a banker face to face.
Fifth Third’s Hipskind said the bank’s branch network is “critical to our franchise, as convenience and nearby ATMs are still the No. 1 factor for why people choose a bank.”
And for smaller banks, branches can play an even more integral role.
Robb Blume, president and CEO of Kokomo-based Community First Bank of Indiana, said his bank has seen a bump in digital activity since the beginning of the pandemic, and the bank is continuing to update its electronic offerings.
At the same time, Blume explained, this bank has built its brand around the relationships it has with its customers.
He also believes branch traffic will largely rebound once the pandemic ends. Community First has six locations, including two branches in Westfield and one in Noblesville.
“We think that’s our strong point, that face-to-face contact,” Blume explained. “we want to meet the people we’re doing business with.”•