It’s no surprise that COVID-19 has changed our relationship with money. What is surprising, however, is the extent of the emotional divide. Exacerbated by a rapid uptake in digital banking, what we’re seeing is a market polarised by fear and optimism.

For brands, it’s a timely reminder that technology needs to go beyond convenience. In the finance sector, in particular, it’s a sign to invest in technology that nurtures financial wellbeing – that is, our ability to meet expenses, control our finances and feel financially secure; now and in the future.

Remembering people in the digital banking revolution

COVID-19 has had an extraordinary impact on the Australian financial sector, leading to a rapid up-take in digital payments and what is expected to be permanent shifts in behaviour. Specifically, we’ve seen:

Traditional touchpoints declining

• ATM usage is down 40% in volume when compared with last year (ANZ)
• Branch traffic fell about 50% from February to April (ANZ)
• The big four closed one in 10 branches in recent months

Digital touchpoints growing

• Contactless payments are up about 65% in value (ANZ)
• 800% increase in merchant facilities used by e-commerce businesses opened up in April compared with last year (NAB)
• Internet banking registrations jumped 30% between March and April (NAB)
  
  ➞ Source

While digital transformation carries many benefits – not least allowing for contactless interactions amid a health pandemic – there are downsides to consider.

Like when brands favour efficiency over creativity and lose sight of what consumers need and want. This well-worn path of data worship is a common stumbling block for industries finding their feet online, which can lead to missed opportunities at best and lost customers at worst.

This is especially risky during COVID-19 as switching banks becomes more salient and accessible. In fact, our research initiative, Course Corrector – which aggregates first-party survey, search and social sentiment data – shows 60.4% of Australians are now open to or considering switching financial products during coronavirus.

As digital takes further flight, brands in this space must not lose sight of what can’t be easily measured: the latent emotional and future needs of their customers.

The emotional divide

Our Course Corrector initiative has revealed a split market, divided by feelings of fear and optimism toward their finances. The highest levels of stress are seen in both the lower end of the market and from middle-aged Australians.

For some, it’s anxiety-inducing headwinds brought on from financial instability. For example, we know that:

• Coronavirus has financially impacted two thirds of Australians
• 48% are now spending less and will continue to do so
• 16% are worried about their super

For others, the coronavirus has brought an opportunity to ride into the tailwinds of a recession. This is evidenced in search behaviour data, which showed interest in buying a house and investing both peaked during March to June.

Given we’re still living with the effects of coronavirus, economists agree we’re yet to see the full impact of such an emotional divide. It’s expected, however, that the gap will only widen. For banks, understanding the mind of the market and the emotional state of customers will be critical.

For example, the cognitive and psychological impacts of the coronavirus could include:

Cognitive overload
The sheer pace of information will make it hard for our brains to keep up, causing our working memory to be overwhelmed and making it difficult to process new information. This can lead to more risk-averse impulsive behaviours.

Uncertainty for the future
Uncertainty impacts our brain in myriad ways, but often results in heightened vigilance, anxiety and reduced appeal of rewards. This can be incredibly limiting, causing people to stick to what they’ve always done (known as the Status Quo bias or avoid new information if they think it will be disappointing (known as the Ostrich Effect).

Financial stress
Financial stress typically causes us to feel out of control, leading to cognitive decline and less capacity to define goals or manage tasks, among other more serious effects on mental and physical health.

Fear of missing out
Even for those who are more financially stable, extreme emotions or emotional strains such as anxiety, anger, fear, or excitement could impact our rational decision making. This could result in excessive trading or trigger risk aversion even in the face of sure gains.  

Financial wellbeing as a strategy

‍It’s clear coronavirus is heightening emotional states and impacting financial decisions – not to mention affecting our ability to meet expenses and feel financially secure. So how should brands respond?

Given recent studies suggest our behaviour with our finances has a stronger effect on our financial wellbeing than how much we earn, and the idea that low financial literacy translates to poor financial health, brands should take a behavioural approach to improve financial wellbeing.

If you were to think of it as an equation, financial wellbeing might look this:

Financial Wellbeing
=
Financial Stress × Financial Habits × Financial Literacy

If you were to seek to improve financial wellbeing, you would aim to:

1. Financial stress: Alleviate stress by increasing the consumer’s ability to pay expenses, absorb financial shock, and feel in control and financially secure.
2. Financial habits: Facilitate repeated, positive financial behaviours with minimal conscious control.
3. Financial literacy: Enhance individual capability to understand and apply knowledge in order to make good financial decisions.

With most financial services organisations already acting on short-term support to alleviate financial stress – whether through deferred mortgage repayments or other support measures – the opportunity for brands to create meaningful change is in financial habits and financial literacy. Using content, data and technology in novel ways to improve financial wellbeing is the financial revolution we really need.