The financial services sector is currently facing challenges on multiple fronts: shelter-in-place and social distancing requirements mean that few customers are able to be served in a physical branch, putting additional strain on channels like telephone support, online and social media.

At the same time, record numbers of people are frantically trying to contact their financial services providers with questions, concerns or to request special measures as their finances have been impacted by the coronavirus pandemic – many have lost jobs, seen their incomes vanish, and are in fear of defaulting on loans or missing mortgage payments. Businesses, too, are in need of additional help as many have seen their revenue drop dramatically or dry up altogether.

Fintech companies, meanwhile, are well-placed to deal with digital demand and remote working requirements, although some are facing funding uncertainty in a volatile period. Many are offering their services to consumers and businesses for free, or innovating to create new products that meet a specific need, while the coronavirus crisis is ongoing.

The situation will require constant, careful handling from finance companies as they seek to reassure consumers, respond to their concerns, and earn their trust during this volatile period – and a lot may depend on just how well companies’ digital infrastructure and services can handle the increased demand.

Mobile and digital banking in the spotlight due to COVID-19

Online and mobile banking have taken on a new prominence during the coronavirus pandemic as banks urge customers to carry out their banking online or via an app rather than trying to visit a branch. Social media and online chat have also become the de facto modes of support and communication as phone lines are swamped with queries – although some banks, like NatWest, have set up dedicated help lines for vulnerable customers and NHS staff.

McKinsey recently published a dedicated report, ‘Remaking banking customer experience in response to coronavirus’, which positioned banks as “central to the solution” to the coronavirus crisis and highlighted how they could better serve customers by helping them to go digital and remote, introduce new experiences for distressed customers, and improve efficiency by changing their customer experience priorities.

While most banks have yet to make significant changes to their customer experience as far as can be observed, they have been taking steps to highlight the availability of their online services: encouraging customers to set up online banking, to download their app, and to check the website before calling a support helpline. Barclays Bank, for example, posted a short video to social media starring its staff, who assure customers that, “Even if you can’t get to a Barclays, you can still use Barclays.”

Capital One Financial Corp, JP Morgan Chase & Co and Citigroup are among the major banks that have written to customers appealing to them to make use of digital services, while the Governor of the Reserve Bank of India (RBI) told the public at a press conference that “RBI and the government together are giving emphasis on encouraging digital payments”. According to data from App Annie, the number of average weekly app downloads for finance apps jumped 20% in March alone when compared to Q4 2019. PayPal, Monzo and Barclays Mobile Banking were the most-downloaded finance apps in March 2020.

In Spain, financial services company CaixaBank has even rolled out a dedicated tool called Social Commerce that helps small businesses manage online purchases directly from their profiles in Facebook, WhatsApp, Instagram, Twitter, Telegram and other social networks in order to help them more easily transition to online selling.

The bank has also released a service called PayGold that allows firms to receive payments online, by email or via text message without the need for a website, has put together a finance package to help SMEs and the self-employed, and is offering discounts on Point of Sale terminal fees to firms impacted by the lockdown. And in Colombia, delivery start-up Rappi has set out to meet the sudden demand for digital banking services by partnering with fintech firm Arcus to launch RappiPay, a digital banking app.

Not all banks were completely prepared for the level of demand they would receive as the coronavirus pandemic escalated, however. In mid-March, the UK government announced that people could apply for three-month “mortgage holidays” if they would be unable to make payments on their mortgage due to the coronavirus crisis. Several banks, their phone lines inundated with queries and requests for special measures, were forced to quickly implement an online application form that customers could use instead.

The negative impact of online banking downtime has also been greatly magnified as a result of the crisis. In mid-March, just as the crisis was beginning to escalate, both Lloyds Bank and Halifax’s mobile banking apps suffered outages, with customers taking to social media to express their outrage. While a relatively small number of customers were affected (around 1,200 Halifax customers and 800 Lloyds customers), Business Insider noted that the outages “could disproportionately affect customer satisfaction because they happened at a time of heightened need for digital banking access”. On 1st April, an unconfirmed number of TSB customers also experienced issues with accessing internet and mobile banking.

Fintechs move to reassure customers

As you might imagine, fintech challenger banks like Monzo, Starling and Revolut have been more able to deal with the changes demanded of them by the pandemic – from shifting their workforces to remote working to the increase in demand for digital services.

In mid-March, as the UK prepared for the eventuality of a full lockdown, Monzo CEO Tom Blomfield told City A.M. that the bank had already run a full-scale shutdown rehearsal earlier in the year to ensure that it could continue to run smoothly in the event of an entire staff quarantine. Rival challenger banks Revolut and Starling were also reported to have trialled split systems, in which half of their staff were asked to work from home for between one and two weeks during alternate periods.

“We’re built on technology that allows us to offer a scalable and resilient service that’s not tied to a particular location and that can continue to be available to customers 24/7,” Starling Bank chief Anne Boding told the newspaper. “This means we are ideally suited to respond well to the current situation – we have been built for this.”

Blomfield agreed, noting that, “These kinds of situations are the ones that we as a bank have planned very significantly for.”

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This confidence did not prevent rumours from circulating about Monzo and Revolut falling into financial difficulty as a result of the crisis, which both companies were forced to refute. Revolut’s CEO, Nic Storonsky, pointed to a recent $500 million fundraising round as evidence of the company’s healthy finances, while Tom Blomfield took to Twitter to state, “Monzo is not going bust. Source: I am the CEO ;)”

The company has since taken some pre-emptive measures to protect its finances, however, which have included Blomfield announcing that he will forgo a salary for the next 12 months, while members of the company’s senior management team and board have volunteered to take a 25% pay cut. A limited number of Monzo employees are also being offered voluntary furloughing for two months; Tech Crunch has reported that up to 175 of these will come from customer support, while 120 will come from other parts of the business.

Starling Bank also initially reported that it would be furloughing 41 staff members who had yet to complete their training, making it difficult to employ them remotely; however, the fintech firm later reversed this decision and stated that it had found ways to train these staff members during lockdown. The bank is even hiring for additional staff in software engineering, and confirmed that it would continue to deliver on planned new features including Cheque Imaging and Connected Cards.

A number of other fintechs are also on a hiring push during the pandemic, including online money transfer service TransferWise, savings app Chip, and savings and investment app Moneybox – in a stark contrast to the majority of businesses and sectors who have frozen recruitment, and in many cases also let new hires go.

It seems, therefore, that although some fintechs have been affected by the investment uncertainty that commentators predicted as a result of the pandemic – with long-standing US challenger bank Moven announcing in late March that it would be shutting down due to planned funding having been withdrawn – most are ideally suited to thrive during the crisis. In a time when customers are increasingly looking for reassurance about their finances, fintechs have been leaning into their established images as brands that make money friendly, fun and less intimidating.

Money management chatbot Cleo has been doling out more positivity to users in the midst of the current crisis, and is also using its social media feed to explain the ins and outs of government stimulus packages or point to useful resources. The brand has also been hosting Q&A sessions on Instagram that allow users to write in with their questions and have them answered live by a finance expert.

Insurance app Lemonade has taken to publishing guides and advice about all kinds of things unrelated to finance – such as how to create a caring work culture, how to de-stress without changing your scenery, and how to get the most out of your Zoom meetings. It has also been promoting its Giveback partnership with Direct Relief, which allows customers to donate their unused premiums to a charity on the front line of the fight against coronavirus.

Starling and Monzo have both published resources explaining what the government’s financial stimulus measures mean for consumers, small businesses and the self-employed. Monzo has also published guides on how to ‘save at home’ during the coronavirus pandemic, and has aimed to alleviate the specific worries that people are likely to have about their finances at the moment, partnering with homeless charity Centrepoint to give advice to people who are struggling to pay rent, and with poverty charity Turn2us to explain the support that people are entitled to through Universal Credit.

Starling has focused its resources and support on small businesses, launching an interactive tool for SMEs that helps them to find out what support is available and relevant to their business. It also announced ‘A Flying Start’, a competition that small businesses could enter to potentially win a £5,000 grant.

Digital investment management company Nutmeg is working to shed light on the current situation with the stock market, using its Twitter feed to explain terms like “bear market” and “trading freeze”. It has also taken to broadcasting a live weekly market update and Q&A from the company’s Chief Investment Officer, James McManus, who explains the most recent stock market movements and answers customers’ questions during the webcast.

New partnerships and innovations

Many fintechs have even offered their services for free to customers and businesses during the crisis – Forbes contributor Ron Shevlin is keeping a continually-updated list of those fintechs that are providing free technology during the crisis.

The pandemic has also given rise to a number of new collaborations and innovations, from a lending platform launched by four fintech companies to rapidly deploy funds to SMEs in need of credit, to a secure money transfer service that lets people send payments without sharing bank details in order to more easily send money for groceries or other necessities.

In one unusual partnership, Microsoft teamed up with Plaid, the bank data sharing start-up recently acquired by Visa for $5.3 billion, to create a new fintech tool based on Microsoft Excel. The new personal finance tool, Money Excel, allows people to automatically import their bank and credit card account data, and works to help them improve their spending habits by providing tailored insights on monthly outgoings and proactive alerts about price changes for things like recurring payments and bank fees.

Coronavirus fears accelerate the shift towards contactless payments

In the payments industry, the coronavirus outbreak is helping to accelerate the adoption of certain types of payment technology, such as contactless payments, due to fears about germs being spread via cash and the use of PIN number pads.

Some of those shops that have remained open during the crisis are requiring that customers pay by contactless only as part of their measures to mitigate the spread of the virus. In Germany, according to the German Credit Agency, more than 50% of payments currently being made by card are contactless, compared with 35% before the coronavirus crisis hit. Link, the largest operator of ATMs in the UK, has also revealed that ATM and cash use in the UK fell by 50% in just “a few days” in the fourth week of March.

To facilitate this shift, countries across Europe have announced that they will be temporarily or permanently raising the limit on contactless payments, allowing customers to pay for larger purchases with contactless in one go. In the UK, the limit for contactless payments officially increased from £30 to £45 on the 1st April. Eurozone members including Greece, Ireland, Malta, Portugal and Spain have raised their limit (which was previously set at different amounts ranging from 20€ to 30€) to 50€, while other countries like Poland, Croatia and Bulgaria have raised the limit in their respective currencies. Altogether, 29 different European countries have increased their contactless limit – a move that Visa applauded on its blog, writing,

“Here at Visa one of the immediate areas we are working on is to support the rise in contactless payments limits. We know consumers are looking to use contactless as they shop for the things they need. Raising the contactless limit allows them to do that more easily and securely without having to enter their PIN.”

Mastercard similarly took partial credit for the move, announcing in a press release its commitment to “enabling the increase in contactless payments across Europe.” The press release noted that 75% of payments with Mastercard across Europe are now contactless, and quoted Mastercard’s Executive VP of Product Innovation, Europe as saying that: “Today’s announcement means that not only will those who are already using contactless benefit from even more freedom to pay, in a way they want, it will also provide additional support for people with the daily challenges they face.”

Meanwhile, in Singapore, Maybank Singapore has joined forces with mobile payment services group Liquid Group to launch an all-in-one QR payment terminal solution for merchants. The new terminal is compatible with a number of mobile banking and non-banking apps, including UnionPay QR, WeChat and GrabPay, and is aimed at minimising cash payments and preventing merchants from needing to go to a bank branch to deposit large amounts of cash.

In the United States, where signatures are still commonly required when making payments in-store, fears have also arisen around the potential hygiene implications of using a shared pen. Responding to this, Mastercard tweeted to remind shoppers that since 2018, it has been optional for merchants to require a signature when payments are made with Mastercard:

Demand rises for digital payments during ecommerce surge

Unsurprisingly, the coronavirus crisis has also triggered a surge in demand for online payments as many people look to ecommerce in lieu of physical shopping, hampered by lockdowns or fearing the crush of panic-buying shoppers.

According to analysis from ACI Worldwide of hundreds of millions of transactions from global online retailers, transaction volumes in most retail sectors have risen by 74% in March, with online gaming seeing a staggering 97% increase in transaction volume. In Saudia Arabia, the Saudi Press Agency reported that the volume of online payments in the country had jumped by more than 400% in the first quarter of 2020 compared to the same period last year, with more than 2.7 million Mada cards – the country’s local debit cards – being used for online payments in March, a 15% increase from February.

The Wall Street Journal also reported that many online payments providers are falling back on contingency plans designed to handle seasonal upswings in online shopping, such as Black Friday, in order to cope with the spikes in demand. Sri Shivananda, CTO at PayPal Holdings Inc., said, “Our mission has never been more critical,” and added that the company’s online platform was designed to handle sudden increases in demand.

However, the upswing in online payments has brought challenges as well. Many shoppers, turning to ecommerce for the first time due to the coronavirus crisis, have encountered blocked payments as the transaction triggers banking security protocols – which often results in the order being automatically cancelled. In the midst of the pandemic, this can be disastrous, as online delivery slots are extremely scarce and can result in long wait times for orders, especially for groceries and other essentials.

But banks may be right to be hyper-vigilant, as the pandemic has also given rise to an increase in fraudulent transactions. ACI Worldwide’s research found that merchants are starting to experience “dramatic increases” in COVID-19-related phishing activities, with stolen credentials released into the ecommerce payments chain. The average fraudulent attempted purchase value increased by $36 in March, driven by electronic and retail goods, corresponding to a fraudulent attempted transactional value increase of 13%.

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