The writer Henry David Thoreau penned the statement, “Things do not change; we change.” Well, I may not be a poet, but I’d say that COVID-19 has proved that verse tenfold. Overnight, our banks were called upon to enhance and expand our digital offerings not because they perhaps needed a technology upgrade, but because our customers needed to be able to transact in new, remote ways.
In fact, the movement toward digital payments has never been more centered on behavioral shifts. On the consumer front, forecasts predict that online holiday season spending will reach $189 billion, a 33 percent increase over 2019.
If this year’s Prime Day is any indication, we may see that number climb even higher: Amazon reported a 45 percent increase over 2019, raking in an estimated $10.4 billion. What’s more, payment trends continue to evolve with pandemic-related needs: contactless card use has soared and is projected to grow by 90 percent , passing $1 trillion by 2022.
These shifts hold true when looking at small and midsized business customers as well. For example, 72 percent of small and midsized businesses have improved or added their own digital capabilities since the crisis began. Those digital investments explain why 81 percent now consider robust digital banking capabilities to be important or very important when working with a bank.
As a small business- and agricultural-focused community bank, my bank can attest to this rapid shift. We have served five generations of farmers and seasoned small businesses that historically have looked to us for that high-touch personal relationship indicative of community banking. While we’ve always had digital solutions, in some cases, they were “nice-to-have” options for our clients—not necessities.
But COVID has changed that. We have seen a significant increase in the use of digital bill pay and online banking solutions since the start of the pandemic. Outside of the expected customer desire to transact remotely in their existing accounts, State Bank’s significant participation in the Treasury and Small Business Administration’s Paycheck Protection Program (PPP) extended the use of our digital offerings to existing clients and new relationships.
Our bank originated PPP loans in excess of three times our capital, and for each loan, we required our borrower to open a separate deposit account with the loan proceeds to provide detailed tracking of eligible expenses and assist in the PPP forgiveness process. As a consequence, our clients deepened their relationship with the bank by the corresponding adoption and usage of our technology solutions, resulting in digital usage skyrocketing to rates higher than we’ve ever seen.
And while the pandemic has fueled this rapid progression to digital payments, these developments are here to stay. Nationwide, customers will expect their community banks to continue to evolve and offer new digital solutions to meet their emerging needs.
Community bank executives must respond to this shift by relying on the people with the skill and industry insight to ensure our offerings will change with them. I encourage you to reach out to the ICBA Bancard team, lean on their knowledge and expertise, and allow them to help you map out a digital payments strategy to stay ahead of the “change” Thoreau wrote about.
Greg Deckard is ICBA Bancard’s chairman and is the president, CEO, and chairman of State Bank Northwest, a $145-million asset institution headquartered in Spokane, Wash.