Shana. Richardson, Monday, March 16
Perception is reality. Regardless of how bad the coronavirus itself impacts the U.S., the fear of contracting corona means a huge hit to many service industries and particularly hourly wage earners who can least afford it.
While the economy is strong, the impact of corona has meant fewer flights, less hotel usage and restricting dinners out. Employees in these industries will be the hardest hit, and they’re your financial institution’s customers, members and borrowers. When the avian flu pandemic occurred in 2005, an estimated 80% decrease in spending occurred in these areas. Experts are estimating a 28% drop of visitors to the U.S. from China alone; major airlines have suspended flights in or out of China to the U.S. And, instead of eating out, more people may be getting delivery. Lenders could see an uptick in used car loans as former servers and others seek new employment as drivers.
Manufacturing and construction, however, may take longer before making any decisions about layoffs or reductions in hours because it’s difficult and expensive to hire and retain good people. Because the economy is strong right now, these sectors will have a little time to wait things out. On the other hand, their supply chains may experience disruptions and increases costs.
Tech companies will hold on well, because consumers will be demanding more mobile, self-service delivery systems, but costs of smartphones could rise as they source many supplies from China where corona originated. Amazon will likely do well, so make sure your credit card is the one at the top of their digital wallets. Beef up rewards programs and promotions; of course, while maintaining an eye on risk.
Health care workers already enjoyed job security, but in hard hit areas, like Italy, retired doctors are being asked to return to work. If that scenario should happen in the U.S., financial institutions must be prepared to talk with them about their retirement spending and savings in the new reality – at least temporarily – to provide that calm in the storm. But these great people, in serving the health of our nation, may get sick and need time off, replacements and more. Consider dusting off skip-a-pay, low- and no-interest loans, increased credit lines and more to help them through.
And, if we learned anything related to banking from 9/11, it was the importance of digital services. The shipping industry still relies on paper documents and because of air delivery interruptions due to corona, bills of lading are not arriving, and ship owners are refusing the unload without the cargo lists. The same is true in banking: Digital transformation must be a top priority. Not only for the customer service aspect, which is always convenient, but also for operational functions, like ensuring employees have secure access to data and platforms they need to continue serving consumers through video, chat or over the phone from their homes. Customers and members will remember who helped them through crisis. Many Americans live paycheck-to-paycheck, so they can’t afford a cutback in hours or a complete layoff. These are the times when the small-but-mighty credit unions and community banks can shine a light on their continued relevance for consumers.