The global pandemic has brought drastic changes to the retail banking sector. Most people never physically visit paywall or bank branches, as they prefer online banking and mobile transactions. Now, the remains: will these preferences stay the same once COVID-19 subsides? Retail banks must be ready for any situation.
Retail banking is the go-to recovery response to maintain the economy. It drives a massive volume of PPP loan apps, offers emergency funds for communities, relief programs, provides forbearance, waives fees, and much more. The long-term influence of the global pandemic comes with different expectations. That is why all case-scenario planning becomes the central focus of bank leaders. It is the best way to deal with any future uncertainties in the retail banking sector.
This pre-planned process refers to the preparation and prediction of the unknown that can result from the global pandemic of 2020. In this way, companies are encouraged to plan for comprehensive and plausible outcomes. There are four possible global pandemic scenarios according to the recognized forecasters at Deloitte and Salesforce. This blog will highlight the initial scenario’s refinements that pertain to the retail banking sector.
We will know more about this sector’s developmental shift in the next 1 to 3 years in relation to two critical uncertainties: the pandemic’s severity and the level of collaboration between states. The other, less critical, variants include the efficiency of healthcare’s response and the level of social cohesion.
Let’s have a look at the American banking sector’s possible scenarios pertaining to the global pandemic.
Scenario#1 – The Passing Storm!
World states are coming together to deal with the effects of the global pandemic under healthcare systems and organizations’ guidance. However, there are no lasting repercussions. In such scenarios, robust state policies allow banks to avoid structural loss. Also, there is a quick recovery of growth within two years relating to the nation’s economy. Lack of capital and liquidity negatively influences banks and financial institutions. As a result, the maintenance of a positive economic position becomes the responsibility of community banks and lenders. There is an acceleration of pre-crisis standards due to the market’s consolidation. This also speeds up the variation process of banking rules with the collaboration of the state’s leads, in reference to data sharing, open banking, and the influence of customers’ control.
Scenario#2 – Good Company!
The global pandemic’s prolonged state is the focus of this scenario as world nations strive to control the COVID-19 crisis independently through large industry collaboration. There is a slow recovery process due to unpaid banking services. There are relaxed proceedings as credit flow support from regulators facilitates community growth and health.
The banks that are facing challenges have supporters in the form of regulators. They are tech-savvy entrants who have low-cost structures. The speed of increasing the trust-building process in retail banking leverages other niche competitors. As a result, there is direct access to information, which acts as a portal to more opportunities for innovation that prioritizes clients’ interests and requirements.
Scenario#3 – Sunrise in the East!
This is a dubbing scenario that indicates the Chinese and Asian nations’ efficiency for global pandemic management compared to the United States. East Asian countries are taking a global leadership role. This is illustrated through their response to healthcare collaborations that effectively handle the severe impact of the worldwide pandemic. In the case of the American state, there has been no quick result or timeless interest rate. As a result, there are muted balance sheets, contracted profits, and robust integration between small and mid-sized banks.
Along with the entire nation, the retail banking sector faces a drastic decline in domestic capital investment. This results from banking policy variations related to the low-security system and dramatic conversion of comprehensive economic conditions. There is significant penetration in the United States market from payment corporates of the bigger East Asian banks. However, modern technology introduces all products with price tags. This allows for retail banking and its associated products to become leaders in the market.
Scenario#4 – Lone Wolves
This also refers to the prolonged state of the global pandemic as it eradicates the ignorance of isolationist policies and disrupts the supply chain industry. This scenario focuses on international coordination while riffing with low retail banking policies.
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