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A Look Ahead to U.S. Retail Banking in 2016

Top retail banking executives, at institutions both large and small, are expressing a mix of optimism and uncertainty as they look ahead to 2016.

Self-Service Revolution

Customers are migrating to electronic channels, making payroll reduction a necessity, but they still desire the same, or an improved, level of service.

Innovative Banking Trends for 2014
2014 will be a year in which technological advances and new operational models increasingly dominate the banking landscape. by RAJASHEKARA V. MAIYA
Jan 21, 2014  |  2 Comments

2014 may be the year that banks pick up the pace in their walk-crawl-run to new operational models. The reason for urgency is threefold: to find ways to improve profitability and return on equity; to meet customer expectations of personalization and better service; and to digitize to stay alive. Expect to see reconfigured business models and renewed focus on innovation and customer experience. Emerging technologies will play a vital role.

Mobility changes the game. Forget statistics highlighting smartphone shipments, mobile subscriptions and the rising popularity of mobile banking. These are given. Mobile/online shopping shows it has the power to play upon the psyche of a changing society. On China’s Single’s Day – similar to Valentine’s Day – e-commerce giant Alibaba raked in the largest-ever sales on a single day at $5.75 billion. In 2014, mobility will continue to disrupt the status quo in banking.

Research from IBM says banks can improve profits by up to 20% by reducing complexity. Customers, regulators and bankers are demanding simplification in banking. In 2014, let’s hope that banks are able to separate good complexity from bad – the type that adds no value – and simplify their operations to become more cost-competitive, customer-centric and agilely innovative.

Banking couture shows off courtesy of Google Glass. What next? Wearable Windows? New tech, such as wearable, will disrupt consumer banking and customer engagement. Some day, not too far away, banking may be as simple as ordering (Google) Glass to tell you your bank balance.

The regulatory machinery rolls on. Although banks have always been tightly regulated, they are facing unprecedented levels of supervision today. JPMorgan Chase CEO Jamie Dimon estimates that his bank could spend between $400 million and $600 million annually just to comply with the Dodd Frank Act. Amid all the upheaval, banks in many countries are also facing the prospect of having to deal with a super regulator or an existing regulator with superpowers, like the European Central Bank. This will most certainly inflate the cost, effort and complexity of compliance.

Banks will get serious about social. Gartner says that nearly one in three customers will purchase social integrated products or services by the end of 2016. Most progressive banks realize the opportunity and are continuously expanding their offerings on social channels such as Personal Financial Management (PFM) tools and spend comparisons, P2P payments and innovative savings products. Here’s some good news for such banks: research by Gallup shows that those who explore information about banking products in social media make the best customer prospects.

The forecast says cloud. At least six out of 10 banks globally will process most of their transactions on the cloud in another three years, according to Gartner. Having built their private clouds, banks will increase their presence in the public one next year, largely owing to improvement in public cloud security and reliability. The expectation is that that half of all enterprises will operate in a hybrid cloud environment by 2017.

Banking through app stores. API platforms will usher in an era of the custom-built apps. France-based Credit Agricole has created such a platform for third party developers to create specific apps requested by the bank’s customers through its CA App Store. Examples include an app to analyze expenses and another that incorporates gamification. Expect more and more banks and solution vendors to join the party.

Banks get a better grip on big data. Next year, banks will focus less on the hype-tech of big data and more on the business outcomes it can deliver. The focus will be on improving the customer experience, managing risk and optimizing operations. However, the complexity of data won’t make this an easy journey.

Banks progress from keeping lights on to switching (legacy) lights off. In this new era of reduced profitability, banks can no longer carry the burden of expensive and inefficient legacy systems in their IT environment. In fact, most banks spend a lion’s share of their annual IT budgets on simply supporting existing business operations and enabling organic growth, leaving very little for new innovations to power future growth.  In the coming year, many banks around the world will replace legacy systems and embrace progressive modernization to drive profitability and stay competitive.

Mr. Maiya is associate vice president and head-Finacle Product Strategy for Bangalore, India-based Infosys Finacle. He can be reached at rajamaiya@infosys.com.

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michael gilbert
2/5/2014 10:10 AM

Neil, I completely agree with your comments. I have a decent understanding of your system and I think it's a leap in the right direction. A lot of the time we think of technology as a way to cut costs. While that is valuable and a necessity in today's market, I think we also need to focus on using systems make the business more profitable. It's the difference of defense or offense and on today's balance sheet, if you are flat you are actually backing up.

neil stanley
1/22/2014 6:58 AM

Great thoughts. Don’t neglect to harness the improvements that will be delivered through using technology to better empower bankers’ professionalism. Technology is too often viewed as an adversary of the staff. Banks can improve profitability and return on equity; meet customer expectations of personalization and better service; and digitize by significantly better arming their front line bankers to be the financial professionals people should expect to find in a bank. When you observe the benefits that accrue from using technology to enhance employee professionalism and morale and positively impressing customers in the sale of the utilitarian time deposit via the Stanley Retail Deposit System, it seems obvious that technology could be used to enhance the expertise and potential of the bank’s front line to design and deliver customized solutions in virtually any aspect of banking.