Retail banks face growing challenges during the pandemic as online banking has become the only way to operate.

The past 12 months have been challenging for the banking sector, as banks were required to develop new solutions and adapt to the changes caused by Covid-19. Some of the challenges that banks had to deal with included maintaining their activities while employees were working from home and tackling increased fraud activities.

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Covid-19 severely affected the retail banking sector. In the UK, the imposition of the lockdown forced banks to temporarily close their 8,500 branches as well as migrate all their operations to online banking to maintain business and customer service continuity.

GlobalData conducted a poll through four Verdict sites between April and June 2020 to discover the biggest operational challenge for FS providers during the pandemic. Over half (52%) of the 381 responses collected claimed that the biggest challenge was switching to large-scale homeworking.

Retail banks historically relied on their branches to provide services to their customers, especially to older customers, who tend to prefer in-branch services.

Working from home

For employees to work from home, banks had to improve their online platforms to ensure that the services usually provided in-branch could be completed online.

In addition to expanding online services to customers, banks also had to invest in their IT departments to maintain online systems and ensure that they could operate without glitching, particularly amid the increase in consumers’ online transactions and queries.

With the migration to online banking, banks had to find new approaches to guarantee that their customers were still offered the services that they need. In the UK, Barclays temporarily suspended interest fees on overdrafts due to the financial stress caused by the pandemic on its customers.

Older customers often find it difficult to use online banking due to their limited technical knowledge. In order to make their transition to online banking easier, some banks introduced online tutorials. To help promote its online programme, HSBC is contacting customers who are likely to struggle with the online system and providing assistance.

Consumer behaviours were forced to change due to the pandemic, and some of those changes led to the sudden surge in global e-commerce transactions. According to a Worldpay report, global e-commerce increased by 19% in 2020 and is expected to keep growing in the coming years.

Increasing fraud 

With the increase in online transactions and non-cash payments, banks are also facing an increase in fraud and cybersecurity. UK Finance reported that losses due to authorised push payments fraud reached £479m in 2020, a 5% increase from 2019.

Criminals pretend to be banks by sending deceptive emails and text messages in order to convince consumers to send them money or give up their personal information. Online fraud and cybersecurity are areas that banks are actively investing in to protect their customers.

Banks are leveraging machine learning and behavioural analysis to identify fraud activities and prevent them before they harm customers. In addition, the Financial Conduct Authority has introduced the Strong Customer Authentication (SCA), which aims to make online payments more secure. Under SCA, banks are required to implement two-factor authentication.

The pandemic has accelerated the adoption of online banking by retail banks. To meet customer demands, banks need to improve their platforms to guarantee that employees can fulfil their tasks remotely.

With the rise of online banking, criminals are also adapting to these new means of payments and taking advantage of customers’ vulnerability to defraud them.

As the transition to online banking is expected to continue long after the pandemic is over, banks will need to develop solutions that protect their customers’ transactions and personal information.