CCP Virus’ Impact on Banking Industries

Author: Opal

It goes without saying that 2020 has been a year like none other. The CCP virus came along spreading all over the countries and the whole world seemed to change overnight. Since WHO declared Covi-19 outbreak global pandemic on March 11, 2020 and Both U.S. and UK announced strict lockdown across the country, the pandemic has induced a deep global economic crisis, with more than a third of the global population at the time being placed on lockdown. Both supply and demand in an interconnected world economy have been disrupted and all the industries have been hit hard, especially travel and trade industry and retail business.

The financial services industries are no exception. Borrowers and businesses face job losses, slowed sales and declining profits which directly attributes to an explosion of new loan applications and a difficult loan receivables environment. With the CARES Act, the $2.2 trillion economic stimulus bill passed by the U.S. Congress and signed into law by President Donald Trump on March 27, 2020 in response to the economic fallout of the Covid-19 pandemic, mortgage servicers are encouraged to work with struggling home owners affected by Covid-19. The percentage of U.S. mortgages in forbearance spiked from 0.25% in March to 8.5% in June, and has since fallen to 6% below, but still well above pre-pandemic levels, according to the most recent available data from the Mortgage Bankers Association.

In addition to managing the direct economic impact of the Covid-19, banks are putting a top priority on the health and safety of employees and customers. Many banks encourage remote working of some employees. For those employees who have to work in the banks’ facilities, such as branches, banks mandate the social distance and face-coverings and also have plexiglass shields installed for those work in an open work area. During Phase I, most banks’ branches were either closed or operated on limited hours with lobbies open to appointments only. Internally banks implement a strong protocol to assess any employee that has been exposed to Covi-19 or who tested positive for Covid-19 before they are allowed to return to the workplace.

Covid-19 challenges traditional banking habits and changes business and individual banking model. The alternatives to in-person banking and physical exchanges are looking more and more attractive. To avoid the stress-inducing visit to a physical branch and for their own health concern as well, people of age 50 above are forced to adapt to the online banking and mobile banking which already gained popularity with younger generations. The shift towards digital banking is anticipated and accelerating thanks to CCP virus. 

The 2020 global economic crisis induced by the pandemic is different from the one of 2008.   Jerry Silva, research vice president, IDC Financial Insights said, “…… the pandemic has created wholly new circumstances that are challenging the banks that have resisted transformation efforts to date. Banks in the best place to survive and thrive during this crisis are those that have adopted technologies like AI, mobility, and cloud to improve scalability and resiliency.” The small-sized and medium-sized regional banks which cannot manage the cost efficiencies and IT infrastructure will suffer. Merger could be an escape route for stressed banks. 

With purchases and transactions increasingly moving away from cash and towards digital channels during the pandemic, central banks, private banks and private institutions around the world are continuing to explore the potential of digital currencies, which include cryptocurrencies, virtual currencies, central bank currencies and e-Cash.

Monetary authorities around the world are looking at Central Bank Digital Currencies (CBDCs) as an alternative way to make transactions in an increasingly digitalized world to reduce the risk of spreading the virus. CBDCs are not a new type of currency, but rather a digital form of hard currency that is backed and issued by the central bank. In October, China issued RMB10m ($1.5m) worth of digital currency to 50,000 people in the country’s Shenzhen region via a lottery. Bank of International Settlements (BIS), Switzerland-based organization of central banks, along with the central banks of Canada, England, the EU, Japan, Sweden, Switzerland and the US, released their first report on CBDCs.

During the pandemic, we’ve seen once-hot cryptocurrencies, such as Bitcoin, Litecoin, climbing up again which are becoming a key tool for people in emerging markets to mitigate foreign exchange risk where the local currency has lost significant value against the US dollar.

However G-Coin which will be soon launched by the Chinese billionaire, the founder of “Whistleblower Movement”, Miles Guo is shining and garnering so much attention due to its gold standard and the combination of the encrypted blockchain virtual currency and physical currency. It will be the safest and most trustworthy digital currency. Merry Christmas! There are only 6 days left in 2020. While the outlook for 2021 and beyond is positive, a lot has changed – some of it for the better. There is still a lot of uncertainty ahead, but it is certain that the number of physical bank branches will keep declining and the traditional bank jobs lost to machines and artificial intelligence will never ever come back.   

Cover Images:

https://www.ft.com/content/70dd05ac-54d8-11ea-8841-482eed0038b1

https://www.corporatecomplianceinsights.com/compliance-customer-demands-post-pandemic-banking/

Resources:

https://www.idc.com/getdoc.jsp?containerId=US46204020

https://www.lightico.com/blog/coronavirus-covid-19-and-the-banking-industry-impact-and-solutions/

https://www.santander.com/en/press-room/insights/challenges-of-the-banking-sector-after-the-covid-19-crisis

https://oxfordbusinessgroup.com/news/covid-19-driving-growth-digital-currencies

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