While financial services companies large and small scramble to cope with the economic fallout of the coronavirus pandemic, there may be a silver lining to the gloom, according to Delos Advisors. The company, which provides guidance to senior management of financial institutions in the Americas, shed light on potential solutions to some of the business implications stemming from the COVID-19 outbreak in a white paper shared with Bank Innovation.

Delos aims to reshape its clients’ industries through innovation, and its financial service clients include retail and corporate banks, small business banks and venture capital firms.

Below are four challenges and corresponding solutions from the Delos Advisors report.

Channel migration and digital transformation will have a rare window of opportunity.  

“While it is uncomfortable to speak of opportunity in this time of great concern for public health and the overall economy, we must be pragmatic. Times like these offer opportunities to overcome human behavioral resistance.”

With regard to “public stress migration,” Delos Advisors suggests that customers resistant to the digital adoption of e-banking or mobile will likely continue using these digital channels after the coronavirus crisis has ended, just as they had during the euro crisis in Europe.

Suggested action: “Seize the opportunity. Reach out to the luddite segments and help them. They will be far more willing to be hand-held through channels they have so far avoided.” 

Also read: Pandemic could spark lasting shift to digital channels

Growth will be dampened. Competitive movements will be slowed. It’s a timeout for growth — high, low or negative. 

Overall, Delos Advisors predicts there will be less account mobility, lower attrition and lower customer acquisition. “Growth in the zero-sum game of regional banking will therefore be mostly ‘average’ for this period,” the company wrote.

Suggested action: “Time will be available for weaker players to up their competitiveness during the hiatus. Think of how often you said, ‘I wish the world could freeze for a few weeks so I could work on transforming my franchise.’   

Admittedly it is hard to focus on long-term strategy in the middle of a crisis, but if a bank’s management team can manage to compartmentalize the tactical day-to-day fight against COVID-19 from the long term strategic realignment, the bank will emerge competitively stronger once the crisis is over and the normal competitive game restarts.”  

Fee revenue will change profile.  

Revenue driven by interchange will likely increase as consumers reduce cash use and opt for contactless cards and online purchases, according to Delos Advisors. At the same time, ATM fees will decrease as cash becomes less attractive and in-person purchases give way to those online.

Suggested action: “Don’t panic. Do reinforce to customers that they can use their debit cards for online purchases and, if you offer contactless cards, do remind customers about that functionality. If only certain customers have contactless cards, communicate with them only, e.g., by alert on online/mobile banking platforms or other one-on-one notification channels.”   

Non-interest expenses will go down.  

Banks and credit unions have already begun temporarily shuttering branches and diverting in-person banking to online channels. “As physical channels become less favored, and as banks themselves reduce their reliance on them, staffing and other costs related to them will go down,” Delos Advisors said.

Suggested action: “In any crisis, when a revenue impact is expected and when credit quality — and therefore limited liability partnerships — might rise, the prudent thing to do is to try to reduce non-interest expenses to protect profitability.   

The current situation will provide some natural opportunities to reduce staff in face-to-face situations.  For example, if branches, at least for certain hours, only offer drive through service, minimum staffing requirements can be relaxed. Likewise branch support operations, including third party services could be managed down.”