COVID-19 Puts Banks & Financial Services under the spotlight
COVID-19 has cast an immediate spotlight on millions of businesses. In the short-term, banks and financial institutions have largely remained undamaged, but the resilience of the financial services sector remains to be seen. As we approach month three of what many economists anticipate what will be a long recovery, which expectations are realistic, and which are merely wishful thinking?
FTI’s recent quantitative survey of attitudes and behaviors found that the vast majority of U.S. retail investors believe the financial services sector will recover from the crisis within six months. Perceptions among retail investors in our survey reveal some of the pain points for the financial services industry moving forward. As focus shifts from healthcare to the economy, leaders should be planning for the potential operational and reputational risk to their business.
- People are paying ‘a great deal of attention’ to the actions that banks and financial services take to reduce the impact of Coronavirus. By and large, our survey found that 85% of retail investors are keeping a close eye on how companies treat their customers, with nearly as many watching how they treat their employees. This type of reputational risk will impact firms of all sizes and particularly large corporates, who are perceived as some of the weakest performers in meeting the needs of individuals during a pandemic.
- Americans’ concerns over personal finances are only intensifying. Our survey found that for 73% of retail investors, financial pressure is a key concern. Late payment trends could offer another perspective on the timeline for recovery, as credit card analysts have estimated that more than 100 million US credit card holders were struggling with lagging credit card debt as the pandemic took off.
- Companies, with a focus on retail banks and payments firms, will need to carefully protect their public image. Banks and credit unions have been waiving fees and penalties, offering grace periods, and retooling agreements all in a bid to help customers – and bolster their reputation. The financial services sector will need to strike a delicate balance, distinguishing between COVID 19-related payment delays, or a significant deterioration of credit quality.
What’s at stake for this sector?
Against the backdrop of the November Presidential Election, elected officials could point the finger at key industries and back more oversight and stringent regulations, which could unsettle capital markets and discourage investment in companies.
Could the election, coupled with the lasting memories of the 2008 financial crisis, turn the sector into a political piñata? Much remains to be seen, but banks and financial institutions should prepare now to avoid blowback. The sector must be prepared to communicate frequently, honestly and collaboratively with business and industry groups, regulators, employees, investors and the general public.