The pandemic has led to significant changes across all aspects of life, notably creating new consumer habits and reshaping existing ones. What should financial institutions pay attention to in the post-Covid-19 landscape? What emerging trends will define the financial industry as it responds to evolving customer behaviors during this period?
Context and Changes in Consumer Behavior Post-Pandemic
The Covid-19 pandemic has brought profound changes globally, affecting individuals, organizations, and nations alike. In the context of social distancing and various restrictions, the pandemic has become a turning point, forcing people to re-evaluate their priorities and essential needs. As a result, a new consumer segment has emerged, characterized by new habits and behaviors developed during the past two years of the pandemic, including increased online shopping, digitally supported entertainment, heightened health awareness, and a shift towards value-driven purchases.
Online shopping
Social distancing measures have inevitably accelerated the adoption of online shopping. Alibaba’s leading retail chain, Hema, doubled its orders compared to the same period last year. In the US, Instacart witnessed a 10-20 fold increase in new user registrations(1). These surges are driven by first-time users who had never previously engaged with online shopping. According to statistics, in Southeast Asia, one-third of consumers shopped online for clothing for the first time in 2020, and 94% of these new users intend to continue online shopping even after restrictions end(2).
Digital entertainment
The human need for connection, relaxation, entertainment, and education remains constant, becoming even stronger amid pandemic restrictions, supported by digital technologies. Evidently, app downloads for remote work, communication, and entertainment surged dramatically. All top ten most-downloaded apps on the Apple App Store in 2020 facilitated remote working, virtual communication, and online entertainment. The e-learning platform Coursera also recorded a twofold increase in new enrollments, rising from 76 million in 2019 to 143 million in 2020(3).
Businesses leveraged this trend to generate new revenue streams; Airbnb, for example, introduced virtual experiences such as online cooking classes with local chefs, historical lessons with tour guides, and art sessions with artists.
Heightened health awareness
An Accenture survey indicated that 64% of respondents became concerned about their own health, while 82% expressed concern for others(1). Thus, it is not surprising that a clear trend of heightened health awareness and self-care has emerged. Many consumers now rely on digital solutions for physical and mental wellness. Globally, downloads of the top 10 health and fitness apps increased by 60% between December 2019 and March 2020. Fitness app revenue also rose 84% compared to pre-pandemic levels(1). In the final week of March 2020, meditation app Headspace saw users completing meditation exercises increase by 19 times, with anxiety-relief exercises rising by 14 times(1).
Value-driven purchasing
About 40% of surveyed consumers faced financial difficulties(4). Job instability, financial constraints, and pandemic-related stress have made consumers more focused on purchasing essential, high-value products. Those most affected economically and psychologically are less willing to pay premium prices for branded or non-essential products. Consumers are increasingly conscious of their purchases, actively reducing food waste, becoming more cost-sensitive, and opting for more sustainable options.
How the Financial Sector Must Adapt to New Trends
Despite undeniable challenges, Covid-19 has also created new opportunities and served as a catalyst for many businesses to redesign and innovate their products, services, and business models sustainably. Digital-savvy leaders in banking, financial services, and insurance will capitalize on these changes through the following emerging trends:
Maximizing the effectiveness of Digital Transformation
As financial expert Brett King stated in his book, “Bank 4.0: Banking Everywhere, Never at a Bank”, the future of banking is not merely about efficiency in payments, credit, or other traditional services. Instead, the Bank 4.0 era will integrate banking seamlessly into customers’ lives via technology or risk becoming obsolete.
We know digital banking is inevitable, but Covid-19 has accelerated its adoption faster than anticipated. Health concerns have reduced cash usage significantly, and online shopping habits make branch visits increasingly inconvenient. A McKinsey & Company study found that approximately 15%-45% of customers expect to minimize branch visits even after the pandemic(5).
Thus, digital financial services are rapidly becoming the standard operating model, significantly reducing the need for physical branches. Financial institutions must ensure seamless, fast, and convenient 24/7 service. Essential features for banking or financial apps will include:
- Simple and secure login
- Comprehensive account management
- Intelligent customer support chatbots
- Real-time alerts and notifications
- Spending/service usage analytics
- Personalized offers
- Integration with wearable devices
To guarantee a smooth digital customer experience, financial institutions must rapidly upgrade and expand digital infrastructures. Given the complexity of traditional banking systems, institutions are increasingly partnering with fintech firms and startups. Examples include Commerzbank partnering with IDnow for video-based customer verification, Fidor Bank’s collaboration with CurrencyCloud, and Bankia partnering with Eurobits for invoicing services targeting SMEs.
Furthermore, banks are also connecting with non-financial institutions (educational institutions, utilities, small and micro businesses such as salons, restaurants, retail stores) to bring these entities online. These partnerships benefit all involved: banks retain customers by providing essential services, non-financial businesses acquire new customers without advertising costs, and consumers gain discounted services. This model is becoming increasingly popular in Vietnam, led by banks like VPBank and Vietcombank, and will likely expand due to ongoing consumer shifts.
Creative cost and operational models
During the pandemic’s peak, financial institutions prioritized supporting customers, managing loans, complying with government support measures, and safeguarding employment—cost optimization was not a priority. Simultaneously, financial constraints experienced by customers created barriers to delivering high-quality, affordable customer experiences. Transitioning from physical to remote working models has also significantly increased operational costs while fixed asset expenses remained unchanged despite branch closures.
The challenge now is rethinking operational models for profitability in difficult future environments. Digitizing back-office processes is critical for enhancing customer experiences. By digitizing, banks can reduce manual tasks, paperwork, and operational errors. However, simply digitizing old processes often creates redundancy or delays. Hence, institutions should rebuild back-office processes from the ground up, leveraging automation technologies like RPA, AI, and IoT. McKinsey estimates that about 75% of routine tasks and 40% of strategic operations could be automated through these technologies(5).
For instance, Deutsche Bank’s intelligent process automation increased workforce productivity, reducing errors through 30-70% automation rates depending on processes. HSBC UK uses robo-advisors to efficiently serve clients with savings under £15,000. Goldman Sachs applied machine learning extensively, requiring only two equity traders today compared to 600 in 2000(6).
Strengthening customer trust through meaningful relationships
Despite substantial investments in digital services, excellent banking apps alone cannot retain customers. From 2018 to 2020, the percentage of consumers who trust banks “a lot” to protect their long-term financial health dropped from 43% to 29%(7). Around 10% of customers plan to switch banks due to Covid-19 impacts(4). Financial institutions now realize empathy-driven customer relationships are key.
For example, Monzo—a UK digital-only bank—acquired over five million users within six years due to convenience and radical transparency. Monzo openly shares internal information, test results, roadmaps, and product updates through its Transparency Dashboard and community forums.
The lesson from Monzo is clear: continuous, meaningful communication builds trust. To scale personalized customer interactions, banks are increasingly using AI technologies. Morgan Stanley, for example, deploys AI to support over 16,000 financial advisors, allowing them to deliver better-tailored advice and deepen client relationships(6).
Recent research from CSIweb revealed over half of customers would abandon their bank after privacy breaches(10). Thus, financial institutions must build strong cybersecurity capabilities using AI, machine learning, and big data for real-time detection of suspicious transactions and threats. Alongside technology, hiring skilled data scientists and cybersecurity experts is vital.
Historically, financial institutions leveraged their scale as a competitive advantage. However, today’s environment shows that large scale might become a disadvantage against agile fintech and technology companies offering financial services. Given evolving consumer behaviors driven by Covid-19, we believe the financial sector will increasingly become agile and digital-first. The three trends described above will soon become standard within the financial industry.
References:
(1) Accenture. How COVID-19 will permanently change consumer behavior
(2) Think with Google. The psychology of consumer behavior: Habits that are set to stick post-pandemic
(3) Coursera. 2021 Impact report
(4) KPMG. Consumers and the new reality
(5) McKinsey. AI-bank of the future: Can banks meet the AI challenge?
(6) Publicis Sapient. Can Banks Get Smarter? Rethinking AI in Financial Services
(7) Forbes. The 10 Trends That Will Shape Banking In 2022 – Beyond The Watershed
(8) Statista. What is most important to you when you think of your bank?
(9) Statista. Key figures for Monzo Bank in the United Kingdom (UK) for the financial years from 2019 to 2021
(10) Geniusee. TOP 10 Digital Banking Trends For 2022 – Reshaping The Banking Landscape
