11th May 2021

What changes will Covid bring to UK Financial Services?

Covid is changing everything, and Financial services is no different. 

I’d like to share with you some musings on some changes we may see over the next few months and years ahead.

Save more or hit the hight street?

Covid has knocked people’s confidence, they have seen unemployment rise and may have even experienced this themselves. How will this impact on savings? Bank of England Household Savings research in November of last year highlighted that twenty-eight per cent of those surveyed had accumulated additional savings as a result of the pandemic, while 20% had depleted their savings.

The accumulation of savings was greatest for high-income households. Forty-two per cent of high-income employed households saved more during the pandemic, compared with 22% of low-income employed households. Retirees also saved more, 36% of them had increased their savings.

Will people spend this accumulated wealth or continue saving?

The Bank of England research also suggests that only 10% of the households that increased their savings (less than 3% of the whole sample) planned to spend the money they had saved. About 70% said they planned to continue to hold the savings in their bank accounts. Others planned to use their savings to pay off debts, invest, or top up their pensions.

The mortgage market bounce back

Lockdown resulted in a near freezing of the UK house building sector and the housing market, however as we emerge into recovery more houses will be built. Also, mortgage sales are starting to pick up as social distancing eases and we are now seeing a rebound of pent-up demand.

Provisional data from HMRC shows that 190,980 sales went through in March, almost double the number recorded a year earlier and 32% more than in February. 

It’s likely that this spike was caused by buyers rushing to meet the original stamp duty holiday end date of 31 March.
While It could be argued that some house buyers may still adopt a cautious approach, it is likely we will see a sharp recovery in the mortgage market in 2021 and a return to growth over the next five years.

Insurance will recover but travel will take time

Two of the impacts of Covid for the insurance industry have been increased claims and the decline of international travel.  While the vaccine roll out may see a gradual return to holidays abroad and a reduction in deaths and business disruption, how will the sector react? 

Despite fears of a recessionary global environment the latest Life Insurance Global Market Report 2021: COVID 19 Impact and Recovery to 2030 predicts a positive recovery predicts  that the global life insurance market is expected to grow from $2475.85 billion in 2020 to $2880.18 billion in 2021 at a compound annual growth rate of 16.3%. 

This growth is mainly due to the companies rearranging their operations and recovering from the COVID-19 impact.

However, it is travel insurance that will be hardest hit long term, with travel not expected to reach 2019 levels until 2024, severely impacting linked insurance sales.

Customers want experience, education and guidance 

Consumers attitudes, behaviours and purchasing habits are changing and many of these new ways will remain post-pandemic. 

We have seen that  purchases are currently centred on the most basic needs and people are shopping more consciously, buying local and are embracing digital commerce.

To manage isolation, consumers are using digital to connect, learn and play and they will continue to do so.

As part of that digital experience, they have been searching out reassurance and education and again this trend will evolve. Any business that provides meaningful support and education during this time and produces powerful marketing messages will  encourage loyalty in the post-COVID environment.

A different approach for the self employed 

While many consumers will revert to type as the new normal takes hold, one segment may adapt their behaviours, the self-employed. These consumers are likely to think more carefully about saving and take a greater interest in protection as a result of their personal experience of the pandemic. This is a great opportunity for brands to highlight that they have the understanding and expertise to market solutions for this growing market segment.  

Digital offers great opportunity if you are prepared 

Many things in our world have changed because of Covid, one of the most dramatic has been the enforced changes in how we interact with each other. The pandemic has seen a massive growth in digital engagement and online business, which in turn has created a massive opportunity for the financial services sector.  Those that offer superior digital services have a real chance to stand out and promote a new way of operating for the future.

However, the sector cannot take clients digital business for granted. According to consumer credit reporting platform Experian’s latest “Global Insights Report,” 60% of surveyed consumers have higher expectations of their digital experience than before COVID-19. One in three respondents are only willing to wait 30 seconds or less before abandoning an online transaction. 

How prepared are you? while half of the businesses Experian surveyed have either mostly or completely resumed operations since COVID-19 began, only 24% are deliberately making changes to their digital customer journey. Are they ignoring the digital opportunity? 

There are undoubtably many other issues to consider that will change such as regulation, pensions savings and the consolidation of the advice market but I hope these have at least stimulated some thinking on your behalf.

Our world is changing, so what changes will you make in your business to adapt and meet them?

John Joe McGinley Glassagh Consulting May 2021

Business Development, John Joe McGinley, Glassagh Consulting