COVID-19 Is Accelerating The Digital Divide

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We have all watched in horror as the COVID-19 pandemic has devastated communities around the world, resulting in profound human loss and the economic carnage of job losses and bankruptcies. Beyond the immediate human and economic toll, however, lurks another lasting effect: the acceleration of the digitization.

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Prior to this pandemic, we were already witnessing a dramatic shift in modern society, as many aspects of our lives are rapidly becoming digitized. The efficiencies delivered by online shopping, the gig economy, and on-demand services enabled by the mobile internet have created a widening gulf between those with digital skills and access and those without. Imagine navigating life without a mobile phone, internet access, or access to a credit or ATM card. You will quickly appreciate how much we take for granted and how those who lack access to these utilities will be left behind.

COVID-19 Is Accelerating Digitization

COVID-19 will inevitably accelerate the digitization of our society.

The pandemic has also accelerated the adoption of various financial technologies—from mobile payments and banking to automated investment advice. Paying for purchases with your wristwatch or mobile phone has gone from a novelty to a matter of public health.

Some restaurants have migrated fully to contactless payment.  Some bank branches closed, making mobile banking a necessity, even for customers who had resisted such adoption previously.  And Fidelity and Schwab — which both offer a hybrid of do-it-yourself digital investment platforms coupled with human advice by phone — have both reported a significant uptick in new accounts as economic volatility has driven more Americans to seek remote advice amidst uncertain times. Arguably, the ability to deliver goods and services digitally is what separates those businesses that will thrive from those that will be devastated.

Online banking is an interesting case study.  The foundations for the delivery of remote banking services date back to the 1990s when banks began experimenting with telephone banking.  The idea was simple: many functions traditionally delivered by bank tellers, such as fetching balances, transferring funds, and quoting rates on new products, could be handled by computers and accessed by a simple telephone call.  As the internet became more widely available through dial-up, and then broadband lines in the early 21st century, telephone banking migrated to become online banking, enabling bank customers to authenticate through a secure internet connection to obtain balance information and transfer funds on their own.

There are many parallels between the growth of online banking and the emergence of e-commerce. When launched 25 years ago, Jeff Bezos had a simple idea. That idea was that a textbook was a commodity and if it could be sold online without the overhead costs of operating physical stores, it could be sold at a lower price. Over time, his fledgling company would gain market share and eventually become a major retailer. As Amazon grew, it enabled the development of not only a more efficient business model for the sale of commodity goods, but also a more efficient marketplace where many buyers and sellers could come together and determine market-clearing prices for all sorts of goods.

The same dynamic turns out to be applicable to banking.  While traditional brick-and-mortar banks still address the last-mile problem of how to get physical currency in the hands of customers, many financial transactions can occur entirely online, transferring funds from one party to another via a digital book-entry system, rather than the physical exchange of currency.  The vast majority of financial transactions can be conducted entirely online, enabling banks and customers to benefit from the efficiencies of engaging digitally.  For banks, this means lower overhead costs.  For customers, this in turn can mean lower-cost loans or higher-yielding deposits.

Online-Only Offerings

As more banks launch online-only offerings, there has also emerged a need for a marketplace to coordinate these offerings so that customers can shop for the best rates on their loans and deposits.  Listing services like and share static rate information, while online account management platforms like can help you automatically earn the highest yield on your deposits each month, even as rates change.

Pre-pandemic, many might have bristled at the idea of interacting with their bank accounts online, but this crisis has proven that in the absence of bank branches, bank accounts can be managed and accessed safely and securely from the comfort of your own home. With this new realization comes the opportunity for more customers to benefit from online efficiencies, just as they have become comfortable shopping online over the past two decades.

The COVID-19 pandemic will cause untold damage to our society and it’s too early to tally the total cost, but with crisis also comes opportunity. For many, the need to transact digitally will open up new ways of doing things and leaders will soon understand that internet access is such a vital utility that it must be provided to all citizens, so that access to education, communication, social engagement, and financial services are available to all. In doing so, we can build a more inclusive society that prevents the digitization of our society from becoming a digital chasm and instead enables all to benefit from the efficiencies of our rapidly digitizing world.

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