The COVID-19 pandemic upended life across every industry, and banking was no exception. As customers and institutions adapted to rapid change, a new set of trends emerged — some anticipated, others accelerated by necessity. From the shrinking role of the traditional bank branch to the rise of fintech and mobile payments, the financial services landscape entered a new chapter shaped by technology, convenience and shifting expectations. 

Five years after the start of the pandemic, this article will examine how banking compliance and the industry have shifted.

1. Swan Song for the Bank Branch?

When lockdowns made in-person banking nearly impossible, customers had little or no ability to access bank branches. That forced many customers to reconsider their prior resistance to the use of technology in banking transactions.

As a result, many customers who had typically gone to a branch to perform transactions had no choice but to become familiar with and utilize home and mobile banking applications. The increase in the use of digital tools accelerated changes in the way bank branches now look and feel, a trend that began prior to the pandemic.

The changes presented more focus on access to technology such as ATMs and interactive teller machines in the branch and less focus on personnel behind a counter.

This is not to say that bank branches are going the way of the chariot. Many customers continue to value the human touch for transactions that may be complex or require some personal advice to complete. Transactions that typically required a customer to go to a branch in order to execute a document can now be completed via digital signing technology.

Branches also tend to provide an additional level of security for ATM transactions as opposed to an ATM located in a convenience store or other location. Some institutions also view bank branches as a marketing opportunity because they serve as a constant reminder of the bank's presence in the community.

2. Contactless Payments Go Mainstream

The period following the start of the pandemic also saw a surge in the use of mobile payment apps such as PayPal, Apple Pay, Venmo, Zelle and others.

The use of contactless point-of-sale machines was adopted by restaurants and other merchants throughout the world, including here in the U.S. Even though no longer necessary in the post-pandemic economy, the convenience this technology provides to both consumers and merchants made it desirable and caused a proliferation in its use.

The numbers tell the story. In 2020, only 49% of remote purchases occurred via mobile phone. By October 2023, 72% of consumers had adopted online or mobile payment accounts, and 45% of all payments to another person were made via a mobile device, according to 2024 data from the Federal Reserve Bank of Atlanta.[1]

3. Fintech: Competition and Collaboration

Fintech startups have been focused on competing and partnering with the traditional banking sector for several years, and their numbers are expanding exponentially.

In 2024 alone, approximately 30,000 new fintech startups launched, according to data from Inoxoft Blog.[2] Because they do not operate under the same regulatory constraints as traditional banks, fintechs are viewed as more innovative and agile, while traditional banks, with their regulatory constraints and infrastructure, are generally viewed as being more stable but possibly outdated.

The proliferation of fintechs and other nontraditional providers of banking services has driven traditional banks to innovate their products and services, or partner with fintechs to provide new services to stay competitive.

Post pandemic, demand for quicker, more user-friendly services and products could pave the way for these partnerships to enhance the efforts of traditional banks to remain relevant and competitive as technology and related services continue to evolve.

4. Privacy and Data Security

Remote working, combined with the rapid expansion of fintechs and related technology in the financial services industry, has raised myriad privacy and data security issues in the banking sector.

The lack of regulation applicable to fintechs, while viewed as an advantage, frequently presents privacy and data security concerns. Traditional financial institutions, governed by the Gramm-Leach-Bliley Act since 1999, are obligated to disclose to consumers their intended use of any nonpublic personal information provided in the course of obtaining services and to protect such information.

They have therefore been collecting and protecting that information for more than 25 years under regulatory scrutiny. In a 2024 report from UpGuard of the 26 biggest data breaches in U.S. history, only one occurred at a traditional financial institution.[3]

Many fintechs have access to and resources for industry-standard technology and are, to some extent, subject to state and federal regulations applicable to the disclosure, use and protection of this information. But the lack of a well-defined regulatory structure applicable to these entities raises concerns from a privacy and data security perspective.

The expanded use of technology in a post-pandemic economy has also led to additional data security risk.

Each new application adopted by consumers presents its own data security concerns. This is evident from an increase in fraud related to payment apps and credit cards. App fraud losses through real-time payments (as a percentage of overall app fraud losses) are predicted to rise from 63% in 2023 to 80% in 2028, an increase of more than $3.3 billion in value, per ACI Worldwide's 2024 Scamscope.[4]

In addition to these external risks, which have increased since the pandemic began, internal risks have grown as a result of the higher number of financial institution employees who transitioned to remote working environments. The ability of employees to work off-premises reduces the control the institution has over the environment in which sensitive information is utilized and stored.

Many institutions were forced to adopt and revise policies for such arrangements and to invest in additional technology to ensure that such information was protected to the same extent as data used and stored on-premises. Challenges presented by remote working continue to evolve as both employees and employers analyze the benefits and downsides of such arrangements.

5. Liquidity and Lending Challenges

From an operational perspective, some financial institutions wrestled with a new trend in a post-pandemic world — liquidity.

During the early years of the pandemic, the combination of government assistance programs such as the Paycheck Protection Program and the inability of individuals to go out and spend led to a significant increase in cash deposits at many financial institutions. Since interest rates were still at an all-time low, banks were able to continue to fuel lending at levels that equaled or exceeded the pre-pandemic period.

Following the wind down of the pandemic, consumer spending spiked, decreasing cash on deposit at many institutions.

This phenomenon, combined with the surge in lending that had occurred through the pandemic, created a liquidity crunch for some institutions that was slow to correct.

Interest rates were at an all-time low, and earnings challenges were compounded by the Federal Reserve's increase in interest rates in March 2022 for the first time since 2018. While designed to curb inflation, this increase caused a marked decrease in lending and a resulting downturn in earnings for many financial institutions.

Looking Ahead

The banking industry continues to navigate a landscape transformed by the pandemic and defined by technology, customer expectations and economic pressure. The key for traditional institutions will be adaptability — balancing innovation with trust, and digital convenience with personal connection.

Christopher J. Pippett is a Partner, Chair of the Financial Services Industry Practice and Practice Managing Partner of the Corporate Department at Fox Rothschild.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Take On Payments, Federal Reserve Bank of Atlanta June 3, 2024.

[2] Inoxoft Blog, May 27, 2024.

[3] UpGuard/Kyle Chin December 30, 2024.

[4] ACI Worldwide 2024 Scamscope.

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