How COVID-19 is Shaping the Future of Retail Banking - Conference Call Series

Milken Institute Context & Initiatives

• The Center for Financial Markets has developed 25 specific policy proposals across six areas to aid economic recovery and resilience.
• Proposals include providing capital access for small businesses in distressed communities and building infrastructure via public-private partnerships.
• The Institute aims to refine its thinking and guide work based on insights from financial sector thought leaders like the panelists.

Wells Fargo Operational Response (Mary)

• Closed over 25% of its 5,300+ branches, altering operations for the remaining 75% with drive-thrus, appointments, and plexiglass shields in 3,700 locations.
• Shifted 200,000 of 270,000 employees to remote work, creating new roles not previously contemplated for home-based operations.
• Mobilized thousands of staff to process Paycheck Protection Program (PPP) applications and provided immediate relief via temporary negative balance set-asides for stimulus funds.
• Mobile deposit activity increased by over 80% year-over-year, with dollar volume up 87% between February and April.
• Secured over 150,000 SBA guarantees, with more than 50% of loans under $25,000 and 80% of beneficiaries having 10 or fewer employees.
• Facilitated relief for 1.7 million customers involving $4–5 billion in principal and interest deferments or fee waivers.
• Implemented virtual closings and appraisals in mortgage lending to accommodate customer safety concerns regarding home visits.

Professional Bank Operational Response (Dan)

• Repurposed one-third of its organizational chart to create overnight PPP specialists, managing a significant volume increase while maintaining high-touch service.
• Achieved 90% remote work adoption, leveraging pre-existing digital infrastructure including Microsoft Teams and cloud security tested 1.5 years prior.
• Reduced loan processing assembly line times from 25 minutes to 30–60 seconds through automation and workflow optimization.
• Acquired new clients from competing institutions via PPP, converting them into checking and money market account holders.
• Developed a proprietary free and immediate P2P payment feature using debit card rails, bypassing the need for third-party apps like Zelle.
• Prioritizes a "win-win" stakeholder capitalism approach to balance shareholder obligations with borrower support.
• Credits regulatory flexibility from the Fed and FASB (e.g., not classifying deferred loans as troubled debt) for enabling a common-sense approach to forbearance.

Finastra Technology & Fintech Solutions (Chris)

• Moved 11,000 global employees to remote work within four days, leveraging pre-existing global business continuity and disaster recovery plans.
• Developed an end-to-end SBA-PPP processing solution in under two weeks, enabling a 15x increase in loan throughput for client banks.
• Offered PPP processing tools at no cost to existing customers prior to the first $349 billion tranche, with 800 lenders processing 75,000 loans via the platform.
• Onboarded 30 Community Development Financial Institutions (CDFIs) and 22 National Bankers Association members to the second $310 billion tranche within 1.5 days.
• Partnered with Citi and Bank of America to provide low-cost, FDIC-insured deposits to underserved institutions to solve liquidity constraints.
• Facilitated virtual loan execution for 94% of a client institution's local customers who were previously ineligible due to lack of technology or partnerships.

Customer Behavior & Digital Adoption Trends

• Despite branch closures, daily foot traffic remains at 850,000 to 1 million across Wells Fargo, primarily utilizing drive-thru and appointment-only formats.
• Customer demand for cash has declined significantly, with a shift toward digital channels for deposits and payments.
• Small businesses and consumers are utilizing digital tools for P2P payments to avoid cash handling, accelerating adoption of features that would otherwise take years to普及.
• Consumer spending patterns during the crisis reflect essentials (groceries, takeout, bill catching) rather than the larger asset purchases seen in prior recessions.
• Banks are acting as "economic first responders," preventing bankruptcies and layoffs by maintaining payroll funding for small businesses.

Cybersecurity & Risk Management

• Increased reliance on cloud-based technologies for banking operations, challenging perceptions of security risks compared to legacy on-premise systems.
• Wells Fargo is actively educating customers on fraud attempts related to stimulus checks, which serve as a primary vector for cybercriminals.
• Cybercrime risks are viewed as "price-insensitive" line items due to the unquantifiable nature of reputational and financial downside.
• New phishing tactics target pandemic-related topics, including N95 mask offers and virtual happy hour invitations.
• Banks are enhancing equipment and network protocols for remote workers to mitigate insider and external threats.

Future Outlook (3–5 Year Projections)

• Branch footprints will likely decrease in size and number, but physical locations will not disappear due to the enduring human need for social interaction and complex transactions.
• The "new normal" will involve a persistent hybrid model where digital tools complement rather than replace human banking relationships.
• Virtual work guidelines and digital supply chain exchanges are expected to remain standard industry practices.
• Banks that successfully integrate both digital efficiency and physical branch capabilities are projected to capture increased market share.
• Future branch strategies will likely involve adaptive safety measures, such as non-invasive temperature screening, to accommodate health concerns.