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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.

Top Ten Banking Trends for 2014
Digital banking, payments disruption and non-bank competition are top-of-mind for industry prognosticators looking ahead to 2014. by JIM MAROUS
Jan 14, 2014  |  2 Comments

To get a feel for the most important trends expected to impact the retail banking sector in 2014, I enlisted the support of more than 60 global financial services leaders including bankers, credit union executives, industry providers, financial publishers, editors, bloggers, advisors and analysts. This is the third year I have conducted such a trends survey for my Bank Marketing Strategy blog.

This year’s list runs the gamut from a continuation of past trends to the introduction of new trends in delivery, payments, competition, operations, customer experience and marketing. While the impact of any of these trends on a specific bank may differ based on market and strategic goals, none of these trends should be ignored. While the emphasis of this compilation is mostly from North America, many of the trends are global in nature, thanks to responders from the U.K. and the Asia Pacific region.

Two significant trends that are not listed, but impact virtually every trend discussed, are the omnipresence of previous and upcoming regulations as well as the continued investment in new technologies to make this year’s trends a reality. Two trends that may prove important, but got less than expected mentions were the underbanked sector and alternative currencies such as Bitcoin.

1. Drive-to-digital: No trend has impacted the financial services industry as much or as quickly as the drive-to-digital. In fact, according to two recent reports from Accenture, 35% of banks’ market share in North America could be in play by 2020 as traditional branch banking gives way to new digital players. Moven CEO and best-selling author Brett King says, “In 2014, we’ll see greater experimentation in new products and revenue around mobile, web and social channels.”

2. Payment disruption: It is virtually impossible to keep track of the new players hoping to disrupt the payments marketplace. With so many steps and interactions in a normal person-to-person (P2P) or retail payments process, there is no shortage of players trying to grab a piece of the payments pie. Of greater consequence than the loss of steps in the payments process to non-traditional players is the potential of losing the insight connected with payments transactions. This is the “crown jewel” of payments activity.

3. Increased non-bank competition: In 2014, the trusted role of banks and credit unions as the collector of funds, provider of loans, processor of payments and advisor of financial relationships will continue to come under fire from non-traditional players including new financial organizations (neobanks), hardware providers, third party payment processors, and mobile app developers that merchants and consumers are using to chip away at the traditional financial services model.

Finovate founder Jim Bruene predicts, “The alt-lending sector will begin to be viewed as a serious competitive threat to mainstream lenders with an outside threat that one or more financial institutions will begin to offer P2P lending services of their own.”

4. Branch optimization: Current branch-based distribution models are no longer sustainable and are unable to meet the rapidly evolving customer needs for real time access and simplicity in banking interactions. While branchless banking is definitely a ways off, less-branch banking will begin to emerge in 2014. “Banks will begin to figure out how to achieve ‘perceived convenience’ much less expensively than in the past,” says Novantas managing director Sherief Meleis.

5. Focus on customer 3.0: Customer 3.0 is digitally connected, highly informed and demands a highly personalized approach in his or her communications, products and service. Instead of walking into a local branch office and sitting down to open an account during banking hours, these customers purchase their banking services much like they purchase music, books or other products . . . online, 24/7.

The frame of reference for these customers is not other financial institutions, but the best digital retailers and social marketers. Those banks with a mobile-first strategy are the strongest competitors for these customers. “When implementing a mobile-first strategy for digital consumers, banks will need to be sure to include the same service fundamentals that were found in branches,” says Wade Arnold, founder and CEO of Banno.

6. Breaking down silos: In order to manage customer information more effectively, banks will begin to eliminate both human and data silos by integrating data, systems and processes across different product lines. Data will be shared and leveraged in real-time on all of the bank’s touchpoints, allowing banks to provide more personalized service based on a complete customer profile.

“In 2014, we’ll start seeing banking examples of cross-channel experiences, driven by insights and powered by channel analytics,” said Danny Tang, worldwide financial transformation leader at IBM. “The leaders in the industry will eliminate silos, starting the convergence of mobile and online banking and building a linkage between the digital and physical channels.”

7. Simplifying engagement: At a time when everything around us is becoming more complex, consumers are searching out those products and companies that can simplify our lives. But it’s important to recognize that simplifying an interaction with customers does not mean that the underlying product or service is simple. Instead, the key is to rethink as opposed to append and look for ways to eliminate steps, paperwork and processes that overly complicate.

In 2014, financial institutions will begin to realize that simplicity is mutually beneficial to both customers and the organizations. Not only will those firms that simplify see improved trust and loyalty, they will also realize savings from redundant and outdated processes, reduced customer inquiries and fewer refunds and reversals. As Jin Zwicky, vice president of experience design at Singapore’s OCBC Bank, told me, “Simplicity is the ‘forever black,’” meaning that simplicity is a standard that always works and is in fashion.

8. Improving contextual experiences: According to Aite Group senior analyst, Ron Shevlin, a new type of marketing will emerge in 2014 – activity-based marketing – or marketing within the context of an activity being performed by a customer or prospect. Activity-based marketing will change the point of interaction, moving that point closer to the point of customer need.

New merchant-funded reward platforms will emerge that improve the targeting of offers and social media channel insight will be used to improve service and delivery. Finally, banks will continue to improve real-time alerts and notifications that will strengthen loyalty and engagement.

“Digital channels will mature from being transactional to being engaging in the coming year,” says Nicole Sturgill, research director for retail banking at CEB TowerGroup. “Financial institutions will also focus more on developing the channels to improve customer service and to help customers better manage their finances.”

9. Differentiating brands: According to Simon Clough, partner and group board director at U.K.- based Clear, “Consumers view most banking brands as undesirable and wholly undifferentiated.” The digitalization of the industry is further commoditizing our brands, with fewer face-to-face interactions limiting our ability to set banks apart.

Banks and credit unions will begin to find ways to stand out in a crowded competitive marketplace in 2014, leveraging all channels to make their message heard.

10. Global innovation perspective: Unfortunately, some of the most exciting banking innovations over the past several years have occurred in the Asia Pacific region, Eastern Europe and not in the U.S. or U.K. In 2014, banks and credit unions will begin to look beyond our shores for innovative ideas, learning from overseas organizations that in some cases are far ahead of our domestic offerings.

According to J.P. Nicols from the Bank Innovators Council, “Banks in the U.S. need to raise the periscope and take a broader look for inspiration. There is some great innovation going on all over the globe and too many banks here are only focused on the incremental moves of local competitors.”

While many of this year’s contributors differed on the importance of 2014 trends and even whether some trends would occur, all of the contributors agreed that a guaranteed prediction for the coming year is that disruption will continue at an unprecedented pace and that the industry will look different this time next year.

Mr. Marous is the co-publisher of The Financial Brand and publisher of the monthly publication, Digital Banking Report. He can be reached at jmarous@thefinancialbrand.com.

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ozlem memis
1/17/2014 5:55 AM


Jim, this abridged version is full of great stuff. Thanks for doing this again this year. I recommend everybody go read the unabridged version at: http://jimmarous.blogspot.com/2013/12/2014-top-bank-trends-predictions-forecast-digital-disruption.html There are some great comments there. @dmgerbino