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Navigating the Post-COVID Landscape

Effective Engagement and Loyalty Approaches can help you survive and thrive in the New Normal

COVID-19 has touched every aspect of American lives. The United States economy is in near-shutdown, unemployment is at its highest since the Great Depression, and the much-desired results of mitigation efforts to “flatten the curve” won’t be known for some time.

Municipal and statewide shutdowns vary in scope, but even re-opening economies are subject to regulation by sector and capacity. The full impact from the shutdown will likely be felt through at least 2021, with extraordinary measures in place until a vaccine is developed.

Community financial institutions (CFIs) have taken rapid action to help alleviate pressure on account holders, offering emergency loans, flexible payments relief, and administration around the Payroll Protection Program. Bold, customer-first action provides immediate relief, but the hardships are far from over.

Both a Crisis and a New Normal

A V-shaped recovery is the best-case scenario, but the likely case is a U-shaped recovery or the dreaded L, impacting businesses, workers, and their families. This longer tail will put even more pressure on community financial institutions. What does this pressure look like?

Think of the crisis as the direct impact to the 2020’s bottom line. With the damaged economy comes a commensurate drop in interest income from lower rates, and non-interest income from decreased spending. Think of the New Normal as the longer-term, and likely permanent, impact related to more challenging and competitive modes of customer relationship management during and post-COVID-19. The world will look much different when the virus is culled.

In reality, most banks and credit unions have assumed ongoing digitalization of the industry. Fintech, disruptive banking models, and consolidation were always driving a “new normal”, however this crisis has compressed that 10-year time horizon overnight.

Make Utilizing Incentives Core to your Crisis Response

Facing the immediate financial pressure – what can a CFI do to sustain and even bolster their financials, particularly non-interest income? Smart institutions will utilize powerful incentives to drive and reward win-win behavior in good times and bad. Whether that incentive is an interest rate, points, or cash back, the potential of the incentive to engage your customers is at its highest right now. It will be appreciated now more than ever, translating into increased loyalty.

Any strategies to boost debit and credit card interchange are now top of the priority list. It can be a tenuous balancing act: keeping the tone of your messaging appropriate to the climate, while also encouraging spend. Look for opportunities to promote essential local businesses, gamify the transaction experience, or tailor rewards to the times (Netflix gift cards, anyone?)

Where income cannot be increased, costs must be decreased. Boosting activities that lower cost is paramount to short-term stabilization and long-term efficiency. The time of social distancing is a perfect opportunity to communicate with consumers where they are. Take the initiative to drive adoption of mobile and online banking. Reinforce these behaviors with powerful incentives. After this crisis, people may stop using branches and this is not a bad thing. Branches are very expensive to staff and maintain. Remember – the world is going to look a lot different when we emerge from this crisis, the time to plan for that is now.

Regarding longer-term impact around consumer engagement, how do you build relationships in a world of social distancing? The new reality is that the opportunities for face-to-face interactions that community financial institutions are used to are temporarily shuttered, with a longer-term effect of behaviors being permanently modified. In other words, institutions that are already tooled to engage and connect with consumers during this tumult are already in the best position for the new world. Those whose strategy lay solely with their branch network will likely suffer.

Thrive in the New Normal

Through whatever medical, scientific, or natural mechanism, the COVID-19 lockdowns will end and the recovery will begin. Businesses will open, unemployment numbers will drop, and America will be back on its feet. This period will be a feeding frenzy for institutions. Competition for every new customer, loan, and deposit dollar will be fierce. Other institutions will be coming for your account holders.

With a once-in-a-decade opportunity to acquire your competition’s customers and books of business, now is the time to belly up. Retool your digital offerings to compete in a world with less physical interaction and fewer branches. Provide more value in every consumer interaction. Invest in innovative ways to build and maintain customer loyalty, through word and deed. Be flexible, omnichannel, and customer focused.

Now is the time to use every tool at your disposal to drive non-interest income and lower costs in the short-term and strengthen relationships for the long-term. In the decade since the Great Recession, over 35% of community banks and financial institutions have disappeared. Not every institution has to meet a similar fate. With the right investments and moves today, your financial institution can come out of the Age of COVID-19 stronger and healthier than ever.

Dwayne currently serves as CEO of Buzz Points, which drives revenue and retention through localized rewards programs and data-driven marketing solutions for community banks and credit unions. As the former CEO of the Health Data Consortium, a nonprofit in Washington DC, the former CEO of InnoCentive Inc. and President of Hoovers (a Dun & Bradstreet Company), Dwayne has a strong history of driving innovation, growth and revenue for technology companies. He holds an MBA from the University of Chicago as well as a BA in Applied Mathematics.