Homebuyers Dissatisfied With Banks During Covid

By Alpa Bhakta, CEO of Butterfield Mortgages Limited

COVID-19 has put significant financial stress on consumers in the UK. At the beginning of lockdown, entire sectors of the economy were brought to sudden standstill, putting millions of jobs at risk. The government responded with the introduction of certain relief measures, including a furlough scheme and a temporary mortgage payment holiday.

At the same time, banks were also forced to adapt to social distancing measures. When lockdown measures were first introduced in late March, face-to-face interactions with customers was no longer possible. High-street bank branches were temporarily closed, and people were forced to rely on online banking and digital communication avenues to manage their finances.

Now, banks are transitioning to the “new normal”. Physical branches are once again open, albeit operating at a limited capacity. However, it is wrong to assume we will eventually return back to the way things were pre-lockdown. Society has been permanently affected by COVID-19, and this has resulted in changing market demands.

But, as research recently commissioned by Butterfield Mortgages Limited (BML) shows, the transition to the new normal has not been smooth. In fact, some customers are generally dissatisfied by their banks’ handling of the pandemic.

Some banks are failing the COVID test

BML surveyed 1,262 homeowners and homebuyers to see what their experience with banks has been like since the lockdown announced. Perhaps most confronting was the fact that 50% of people who have bought property this year have lost faith in their bank as a result.

Why is the level of dissatisfaction so high amongst homebuyers? Part of this could have to do with banks’ decision to retreat from the lending market by only offering a limited number of mortgage products and services. At the same time, the government has been attempting to spur sales through the introduction of a Stamp Duty Land Tax holiday. As a result, some buyers are no doubt missing out on property opportunities due to the struggles they are facing acquiring the financing needed from their banks.

Alpa Bhakta

BML’s research also uncovered that a fifth (19%) of homeowners generally have lost faith in their bank due to the poor support offered during the pandemic, with an additional 25% feeling that their banks have not been sufficiently proactive in providing financial advice.

This is understandable, though the fault does not entirely lay with the banks themselves. COVID-19 is a difficult situation to address simply because there is so much uncertainty at present. This means any attempt to forecast future trends will always be open to sudden change. Nonetheless, there is a need for businesses in general to maintain regular communication with their clients so that they can provide the same high level of service.

On this point of communication, BML’s research also revealed that a significant proportion of customers feel that their banks rely too heavily on automated services to field enquiries. According to the survey, three in ten (31%) are frustrated by their bank’s reliance on chatbots and automated services.

While no-one expected the entire banking industry’s switch to virtual to be seamless, it remains true that a more proactive adoption of fintech products can allow customers easier access to vital services without having to converse with chatbots.

A confidence crisis?    

The BML research shows that some banks have neglected the needs of their clients. While some customers might be forgiving given the circumstances, others are already looking to competitors. Of the homeowners we surveyed, 23% said they were planning on switching banking provider in the coming 12 months.

In times of uncertainty, people clearly want banks to be actively engaging with their clients and providing them with the tools needed to effectively manage their finances and make investment decisions.

Ultimately, banks must adapt to the changing needs of their clients, while at the same time appreciating the new market conditions brought on by COVID-19. Of course, there is no one-size-fits-all right answer when it comes to adapting to the “new normal”, but a shift in mindset, at least, is absolutely needed. Banks must be willing to embrace change and dynamism, rather than remaining complacent, if they wish to properly serve the needs of their clients during the COVID-19 pandemic.

With Prime Minister Boris Johnson tightening social distancing restrictions and talk of a second lockdown circulating, it is imperative that financial service providers act now. Failing this, banks could risk seeing a mass exodus of their customers to their competitors.