That’s the view from Wealthfront founder Dan Carroll.

Dan Carroll, founder and Chief Strategy Officer of legacy fintech Wealthfront is candid that the traditional banking industry stood exposed when the COVID-19 outbreak hit.

Banks had to shut down branches and call centers. But they faced the monumental question of how to service their customers. Their digitization efforts, clunky and low-priority, were suddenly put on full-speed-ahead. However, it’ll be a while before they achieve meaningful traction.

“The pandemic revealed just how unprepared banks are to meet the growing demand for digital service,” said Carroll in a recent blog. “Banks lag far behind fintech companies on automation and customer experience, and it’s been jarring to see it in action.”

Retail branches are a millstone in a low-interest-rate environment

Low interest rates are robbing banks of the interest margins that paid for retail branches. With social distancing becoming the norm, branches are no longer a competitive advantage. Besides, the annual cost of a branch is anywhere between $ 200,000 – $ 400,000 annually.

As interest margins crash, banks are stuck with overhead-heavy physical branches. This, at a time when revenues are declining.

This puts a heavy emphasis on serving customers digitally. According to Carroll, it may be too little too late, because “legacy Banks have let a gap between themselves and fintechs grow wider than the Grand Canyon.”

“Banks found it nearly impossible to operate their massive call centers completely remotely and struggled to staff enough representatives to replace in-person branch service,” observes Carroll on the impact of the virus crisis.

Banks will now scramble to catch up on digital solutions. “We believe we’ll see the next five years of digital transformation in the banking industry get compressed into the next 12 months,” says Carroll.

The stark contrast during Covid-19

While banks had to shut down physical branches and call centers during the virus outbreak, it was quite a different story at WealthFront.

The management’s emphasis on automation of client services paid off in a big way.

Commented Carroll: “Automation has been a key product principle at Wealthfront from day one. If we can’t automate a service, we won’t build it. When a client needs to email or call us, we consider that a failure in our product and work to build an automated solution.”

Carroll reveals that, using automation, Wealthfront services 400,000 clients with a team of only 12 Product Specialists. That is a breathtaking statistic.

How did the company tackle the virus?

“At Wealthfront, we adapted much more nimbly,” writes Carroll. “We were able to rapidly move our 12 Product Specialists to remote work setups and didn’t miss a beat.”

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