In The Finance Sector Cash Used to Be King - Now It's Cost Cutting & Digital.

Apparently credit card providers are having a torrid time because significantly fewer of us are using their products. We can't fly so business and vacations are down which is one of the key drivers for using our credit cards - who knew?

Many people are paying down credit card debt whilst other have used it as a financial lifeline during this crisis.

The COVID-19 pandemic has affected just about everything in 2020, and credit cards were no exception. From account balances to rewards offered and customer satisfaction among credit card issuers, the pandemic has altered the way consumers utilise credit.

Consumers paid down credit card debt in the early months of the pandemic. Credit card balances for open accounts decreased by an average of 10% from March 2020 to June 2020, according to a Consumer Financial Protection Bureau report, “The Early Effects of the COVID-19 Pandemic on Consumer Credit.”

Let's start by saying I'm no economist, but like anyone reading this article who has had to find creative ways to survive during this crisis I have had to deal with some pretty complicated financial plate spinning for my businesses along with trying to keep up with the usual home finances like no time before - including the global financial meltdown of 2007.

At times it's been scary as hell with the omnipresent fear around how I look after my immediate and extended family to not only put food on the table, but also to be able to literally keep the lights, water, gas, and Wifi on.

Without a doubt my credit score is a war torn battlefield and my personal credit card is nothing other than a placeholder in my wallet.

Around 3 years ago one of my businesses was impacted by a couple of significant events that I thought I would never recover from;

1. My former business partner (long time friend) emptied the company bank account and colluded with a client to steal my business.
2. The above happened whilst I was going through treatment for a rare form of cancer.

My sanity and survival was helped by the fact that I have been helped out and supported on several occasions by some wonderful friends. All of whom have proven to be an amazing belief and support system.

So as you can imagine at that time I thought I had already gone through quite a lot of trauma - but then came this global pandemic.

As we all got used to the WFH message and business adapted to online video meetings things and cash flow slowly started to improve.

It's still extremely volatile and at times tough, but as a result of my 'social footprint' I seem to have created several business opportunities that have surfaced due in the main to my presence on LinkedIn and my cathartic use of blogging about something I know a lot about which is 'strategies for growth'.

What I mean by this is that as a result of writing and posting every single day for the last 3 years about my business experience and the sharing of my expertise within the multi-channel retail sector I have had many people contact me to simply talk things through - my tribe has grown, in turn I have joined theirs and collectively we join in on each others conversations.

Some of these conversations have led to mutual business opportunities along with new network connections - all because I am willing to share my thoughts and knowledge to a group of people with shared interest in all retail channels who are looking for growth strategies.

And for those people not interested in the subject matter there is always the scroll button, or as we say in Manchester 'jog on'.

'Social Proof' is one of the biggest key drivers in forming buying (or not) opinions with decision makers because they are looking to evidence that what your shiny 'corporate' brochure and website is saying about you is being endorsed by real customers.

They want to know what other people that have engaged with, or bought from, or been a client of, are saying and guess what?

They are doing all of this whilst checking out you and your team - all on Social Media.

From what I can evidence there doesn't seem to be that many who truly understand how to unlock the 'Superpower' of selling your brand message in a social way?

One of the most challenging sectors for 'social proof' (or lack of it) is the financial services sector, but even they are now recognising that the old way of doing things is no more, and the 90's way of relationship marketing is no longer fit for purpose.

Over the years I've been involved in the periphery of financial services, you can see several endorsements on my LinkedIn profile if you care to look.

It's a highly regulated sector and most meetings I've ever attended have been 90% about compliance, and 10% around actually getting stuff done, and that's just the internal way of going about things - I'm not sure if anythings changed?.

Because of all that regulation they also have an awful lot of jargon to deal with.

Unfortunately a lot of that jargon get's spilled over when trying to gain our attention, which inevitably ends up turning us off, which clearly wasn't the intention in the first place.

A few years ago I produced a video campaign for a number of financial services companies, the biggest being Co-Operative Financial Services (link to a few video's here) which sadly didn't get aired due to an internal crisis associated with them selling out to another firm.  

As disruptions continue to occur at a faster pace, no one can afford to be fixed into one way of thinking. Leaders who have the ability to evaluate situations from multiple perspectives can help influence future success of their company. 

In fact, exceptional leaders understand that these “risks,” if identified early, can be used as levers for competitive advantage.

"Financial services will be engaged in conversation beyond the products and services they’re selling. Instead, they will be focused on educating consumers on financial literacy and building a community of loyal followers. Posts like infographics and shareable content like tweets and memes are definitely going to take over the conversation this year.” source 'Tearsheet'

Financial institutions are renowned for having a language of their own. They tell us it's down to the strict 'compliance and regulations' imposed on them by government bodies so we can all be protected from bad practice's and avoid a lot of the chaos we all experienced (still do) during the last crash - we get that!.

We have all seen the rise of 'people power' when it comes to raising investment via numerous 'crowdfunding' companies. A substantial number of these are continuing to nibble away at a lot of what the big banks used to do. 

Add into the mix the constant rise of 'challenger banks' and the erosion into the traditional banking sector continues unabated, I've no doubt it will continue into other financial products like loans, insurances etc.

What we find is that what these young financial upstarts have done to gain traction (and our attention) is to utilise the power of Social Media, yes they advertise, yes its an intrusive and annoying pain, but they are also benefiting from the 'social sharing' of their latest small business App, or personal banking App. 

All of these shiny new disruptive Apps come with many functions and features that make lots of things we do, or don't do with our finances so much easier, and it seems we are more than happy to tell family and friends about them unlike the traditional banking sectors.

Many of the big banks are hurriedly trying to play catch up, but investing in that catch up game isn't easy or quick with legacy systems and legacy marketing thinking, which is probably why we keep seeing (and experiencing) huge technical glitches that hit the headlines.

And when those stories do hit the headlines, it seems that social media is only used as a crisis broadcasting tool, once said crisis has died down so does the social activity.

As we hopefully emerge out of this crisis this is a sector that has had 'transformation' imposed on it just like many other retail sectors yet still think it's all about cost cutting, branch closures, and the old chestnut of digital.

Here's a couple of things to ponder assuming you still operate in this sector;

Forced savings seem to be the main driver of the recent spike in household savings. Many financial institutions are saying they now have a glut of cash held in savings accounts.

First, the lockdown measures imposed to contain the virus prohibited households from consuming a large share of their normal expenditure basket, leading to forced, or in other words involuntary, savings. Second, the sudden outbreak of the pandemic caused uncertainty regarding future income, and in particular the risk of future unemployment, to shoot up, leading to precautionary savings.

The recent rise in expected unemployment has led to a significant contribution of precautionary savings to the rise in the saving rate in the second quarter. Most of this unexplained residual seems to be attributable to constraints on the consumption of many goods and services during periods of lockdown and therefore constitutes an estimate of forced savings. source ECB Europa

They say that 'cash is king' but how will the sector handle this juxtaposition with consumers who want to celebrate and spend but also remain cautious whilst banks need to manage a debt crisis?

How bad could it get for banks?

The Deloitte Center for Financial Services estimates that the US banking industry may have to provision for a total of US$318 billion in net loan losses from 2020 to 2022, representing 3.2% of loans. While losses can be expected in every loan category, they may be most acute within credit cards, commercial real estate, and small business loans. Generally, these losses are smaller than during the GFC, when US banks recorded a loss ratio of 6.6% from 2008 to 2010.

One of the most notable effects of the pandemic is the scale and acceleration of several megatrends, and deceleration of others (figure 3). Until the pandemic hit, almost everyone believed certain societal forces were here to stay, such as the sharing economy, urbanization, and globalization. But remarkably, the pandemic seems to have slowed these global megatrends.

On the other hand, it is now abundantly clear that COVID-19 has acted as a catalyst for digitization. In addition to accelerating digital adoption, the crisis has also served as a litmus test for banks’ digital infrastructure. While institutions that made strategic investments in technology came out stronger, laggards may still be able to leapfrog competitors if they take swift action to accelerate tech modernization. source Deloitte

So, how can the financial sector that thinks 'transformation' is all about cost savings, technology, and has to consider compliance and regulation become, well, more human whilst reducing the costly physical interactions to service our needs?

Companies that are looking to build a more authentic and engaging social media presence, as a key part of transformation must include the training , empowerment, and development an of internal 'employee advocacy' content strategy.

One of the best ways financial advisers today can bolster their credibility and reach potential clients is available for free.

It's called social media.

However, merely joining Linkedin, Twitter and Facebook won't cut it.

"Outside of opening the account, you need to join the conversation," "Engagement is key; finding your voice is the second thing."

Used correctly, social media can provide financial advisers with an outlet to showcase their expertise, network with their peers and meet potential clients and customers.