Three ways the coronavirus could affect banking globally

As fallout from the coronavirus outbreak continues, we see the possibility of three trends developing in the global banking industry in response:

• Falling central bank interest rates are likely to hurt savings account interest rates that some banks rely on to acquire customers and drive deposits. Central banks across the globe have been making emergency rate cuts to cushion their economies as coronavirus threatens growth, The New York Times reports. This will encourage more loan activity from banks and discourage them from offering high interest rates on savings accounts for the sake of profit margins. Therefore, these rate cuts are likely to put pressure on banks that wield high-yield savings accounts in order to pull in new business. Goldman Sachs' Marcus digital bank is an example: Its interest rate on savings accounts stood at 2.15% in July, but it has eroded to 1.7% since then. On the other hand, Australian neobank Xinja has taken a drastically contrasting approach, choosing to hold its 2.25% interest rate steady despite a central bank rate cut, but suspending new account opening to limit costs.
• Consumers who can't go to work could drive short-term loan activity. Only half of the US workforce works in a job that is compatible with at least partial telework, per data from the American Community Survey analyzed by Global Workplace Analytics. This could pose a problem for the other 50% of workers who must be physically present in the workplace to earn a paycheck, as forced or voluntary shutdowns of businesses due to the coronavirus could effectively prevent them from earning an income. The consumers in this group who live paycheck-to-paycheck will need temporary solutions to tide them over in this event, which could yield a spike in business for banks and credit unions that offer small- to medium-sized loans. Marcus is a good example here as well, offering loans between $3,500 and $40,000, with terms ranging from 36 to 72 months.
• Banks can generate goodwill with businesses that need assistance due to coronavirus-related disruptions. There are several ways that companies could struggle with coronavirus, including reduced staff, lower demand for products and services as consumers go out and shop less, or supply chain disruptions due to factory suspensions in China. Affected businesses may need financial assistance to weather the storm, opening an opportunity for banks to create relationships with new customers that are likely to remain after the crisis is over. Several UK incumbent banks — including Barclays, Santander UK, and RBS — have already caught on to this opportunity, offering emergency loans and overdrafts to at-risk business customers, per The Guardian.