COVID-19 changing the way we bank

More than two-thirds of Australians were negatively impacted by COVID-19, leading most of them to reconsider how they use financial services, and how financial services should service them, says a new report from strategic insights consultancy, Nature.

The Way We Bank report reveals the uncertain state of the financial services sector in Australia and how the global pandemic has resulted in Australians becoming more engaged with their financial affairs.

More than six in 10 Australians think now is a good time to “shake things up” in the banking industry and around the same number now believe traditional banks should be doing more to support them during times like these.

Saving money has become much more important than ever before, say 63 per cent of Australians. While, for 43 per cent, the pandemic was the ideal time to review or create a budget and savings plan for the first time and for 38 per cent of Australians, constantly tracking every dollar they spend has become a money habit.

Australians are also turning away from the big banks and looking for alternative financial products, such as neobanks, and money management apps and services.

“With consumers being forced online, traditional banks have had to prioritise digital transformation and online customer service initiatives to ensure they can continue to support their customers,” said Nature managing director Justin Connally.

“However, with restrictions now easing across the nation and ‘traditional’ ways of banking – i.e. in-branch – becoming safe once again, will consumers fall back into these traditional ways or are their new behaviours here to stay?

“The latter seems to be the most likely outcome. Australians’ lifestyles have inherently changed, so it’s safe to assume that the way in which they bank will not fall back into ‘traditional’ ways. Also, given that more Australians are working from home and will continue to do so, the demand for online banking services accessible from anywhere has increased and will stay that way.”

For some, neobanks, with their online only presence, ease of use and higher interest returns, have become a desirable alternative to traditional banks. However, 67 per cent of those surveyed have never head of neobanks, prompting report authors to suggest they now have a golden opportunity to grow.

Eighty-two per cent of older Australians are open to the idea of using a digital-only bank for at least one product, but this doesn’t mean it will be their main financial service, says the report.

“The heightened sense of uncertainty in the wake of the pandemic allows the traditional banks to retain a level of trust that neobanks are yet to build,” said Mr Connally.

“Switching to a neobank as their primary financial institution could be too risky and complicated a change for people to undertake, which begs the question: are Australians looking for short-term fixes to ride the pandemic out before implementing any major changes to how they manage their financial affairs?”

Six in 10 of those negatively affected by COVID-19 expect the next few years to be very challenging, so they’re seeking help from digital tools to help them budget and plan for the future.

To help some of them get through the next 12 months, they’ll turn to buy now pay later services (BNPL) to pay for a wide range of products and services for Christmas and beyond.

More than four in 10 Australians are ‘considering’ using a BNPL service for their upcoming Christmas purchases, while 24 per cent are ‘very likely’ to use BNPL.

“Looking back at the tumultuous year, it’s not surprising that BNPL services are the favourite short-term fix for those negatively financially affected by COVID-19,” said Mr Connally.

“This allows people to put their bills ‘on hold’ and retain a sense of financial normalcy. It also provides extra time and disposable income during a time when it feels most warranted.

“People who suffered most during the year feel the most deserving of a break. A strong bounce back in the travel/dining industry is expected, with 42 per cent of Australians predicting they will spend more on such experiences in the future. Most of us agree it is time to have fun.”

Will you use a BNPL service to fund your festive season? Have you considered using a digital only bank for your primary account? How has the pandemic changed your banking habits?

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Written by Leon Della Bosca

Publisher of YourLifeChoices – Australia's most-trusted and longest-running retirement website. A trusted voice on Australia's retirement landscape, including retirement income and planning, government entitlements, lifestyle and news and information relevant to Australians over 50. Leon has worked in publishing for more than 25 years and is also a travel writer and editor, graphic designer and photographer.

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