Retail banking in the age of COVID-19

Address retail banking challenges with resilience

With the COVID-19 pandemic the banking industry is in uncharted waters and leaders need to take decisive actions to ensure their organizations remain resilient. In this report, we provide global banking leaders with potential medium-term implications of COVID-19 for the retail banking sector.

This report from Deloitte Canada—Retail banking in the age of COVID-19: Scenarios for resilient leaders, introduces four scenarios for how COVID-19 pandemic could accelerate or redirect the global retail banking industry over the next one to three years. Building on several trends already in motion, the scenarios are built on important macro and banking sector uncertainties—those already evident, and others that are potentially plausible based on the severity of the pandemic and government actions.

Four distinct scenarios emerge based on current trends and critical uncertainties. These scenarios target retail banks, which in many cases serve consumers, small-business owners, and entrepreneurs.

Retail banking in the age of COVID-19

The passing storm

The pandemic is managed due to effective responses from governments to contain the virus, but is not without lasting repercussions, which disproportionately affect SMEs¹ and lower- and middle-income individuals and communities.

  • Relatively constrained disease dynamic
  • Effective health system and policy response
  • The banking system emerges in a position of strength; banks attempt to navigate a new normal and support disproportionately affected consumers
  • Institutions steadily recover, but with a much stronger focus on rationalization and efficiency
  • Barriers to digitization fall as programs piloted during the pandemic prove highly effective

¹Small and Medium Enterprises

Good company

Governments around the world struggle to handle the crisis alone, with large companies stepping up as a key part of the solution and an acceleration of trends toward “stakeholder capitalism.”

  • More prolonged pandemic 
  • Collaboration to control the pandemic led by large companies
  • Large incumbent banks and the government steward economic recovery and adopt heightened responsibilities post-crisis
  • Banks grow digital channels using new technologies, capturing share from weaker players
  • Regulators allow institutions flexibility to adapt and more fully digitize operations
Lone wolves

Prolonged pandemic period, spurring governments to adopt isolationist policies, shorten supply chains, and increase surveillance.

  • Severe, rolling pandemics
  • Insufficient global coordination and weak policy response
  • Western recovery is influenced by lessons learned from earlier recovery observed in the East
  • Big tech plays a large role in the global economic and epidemiological recovery, driving innovation through partnerships
  • Trust in tech firms grows and consumers accelerate switching to digital-only offerings
Sunrise in the East

China and other East Asian nations are more effective in managing the virus and take the reins as primary powers on the worldstage.

  • Severe pandemic 
  • Collaborative health response led by East Asian countries
  • Smaller banks struggle, provoking a wave of consolidation and consumers switching to the perceived safety of larger institutions
  • Large banks' ability to expand abroad is heavily constrained
  • Mounting credit losses and capital pressures permanently shrink credit availability and risk appetite, though governments try to combat this

The study also explores how these four scenarios can vary across the following seven dimensions and produce different realities for retail banking:

  • Macroeconomic and financial market shifts: How quickly does the global economy recover?
  • Technology adaptation: How does support for tech adoption evolve?
  • Shifting customer attitudes and behaviors: How do customer preferences and trust evolve?
  • Operating model evolution: How are work, workforce, and processes configured?
  • Regulatory responsiveness: What is the regulatory burden on players
  • Risk management focus: How does the industry respond to risk exposure?
  • Shifting competitive dynamics: How are players’ ability to grow impacted?

Read the report to learn how to move beyond responding to the crisis towards recovering in the next one to three years.

In the wake of COVID-19, Deloitte and Salesforce hosted a dialogue among renowned scenario thinkers to consider the potential societal and business impact of the pandemic. The results of this collaboration can be found in The World Remade: Scenarios for Resilient Leaders.

Deloitte United States also released a related paper about their market: Consumer banking remade by COVID-19: Scenarios for resilient leaders

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