An action-packed year lies ahead for banking

Our most recent BAI Executive Report identifies a number of new challenges for financial institutions that we expect to grow in importance in 2022.

It feels pretty safe to say that, as we were all leaving our offices in March 2020, none of us expected that the pandemic would stretch into a third year. But the rise of the latest variant and other factors make it increasingly likely that a dominant theme in banking in 2022 will be how financial services providers deal with the lingering impacts of COVID-19.

We expect many of 2021’s other leading macro trends and challenges for the banking industry to continue this year. Among them, a relentless quest for scale via merger or acquisition; greater emphasis on providing pleasing customer experiences; further acceleration of digital banking to deliver products and services more efficiently; ongoing evolution in the role of branch networks; and growing competition and partnerships between traditional financial institutions and fintechs.

Those are all areas that we have covered extensively in 2021, and they will get plenty of our attention his year as well. But there are other trends and challenges emerging for banks and credit unions that are the main focus of this month’s BAI Executive Report.

Our lead article by Karl Dahlgren, BAI’s managing director for research, digs into our latest BAI Banking Outlook findings. The research finds that traditional financial services providers are still trying to figure out how to attain, and then maintain, primacy among America’s younger generations. Millennials and Generation Z may have modest deposit levels and banking needs now, but that stands to change as they move deeper into their careers and life stages.

Rapid digital advances in banking make it harder to keep a customer all to oneself, but there’s a big payoff for banks and credit unions that can limit the leakage to fintechs and other providers. “Primacy, often determined by where customers maintain their checking account, is worth its weight in gold,” Dahlgren writes.

Along with keeping customers, another key theme for financial institutions in 2022 will be keeping their workforces. Debbie Bianucci, BAI’s president and CEO, offers insights on employee retention in her article on the competition for talent. “How people want to work, how they use technology, how they set priorities and how they allocate their time—the pandemic has changed all of this,” she writes.

Offering flexibility is important, but even more valuable is having the right corporate culture because workers increasingly want to feel good about the work they do and who they work for. Banks and credit unions aren’t just competing with each other for talent – they are also going up against tech and other industries that have long prioritized culture as a differentiator.

Another aspect of banking that we believe will rise in importance in 2022 is the focus on broad societal values, including diversity, equity and inclusion (DEI), and on the impacts of climate change on the industry.

Holly Hughes, BAI’s chief marketing officer, writes about how financial institutions are now thinking more about the potential environmental risks facing their current lending and investment portfolios, and how they might alter their allocation of capital going forward.

“Here at BAI, we definitely see this as an important issue for financial services leaders, some of whom are now getting together with us to explore what the issues are and how to best approach them,” she writes.

Also in this Executive Report:

Looking ahead to greater risk: Eric Tran-Le from NICE Actimize predicts that the key fraud and AML trends that surged in 2021 – largely propelled by the sharp growth in digital banking – may present an even greater threat to banks and credit unions this year.

No assembly required: Rebecca Martin from Total Expert makes the case for customer relationship management platforms built specifically for retail banking. She writes that today’s increasingly competitive industry landscape makes time-to-return more important than ever.

Better check that ID: Christina Luttrell from IDology suggests that banks and credit unions can improve their customer experience and, in doing so, build greater customer loyalty by taking a more strategic approach to identity verification.

A case for contactless cards: Nicole Machado from Vericast writes about the surge in contactless card use during the pandemic. She says financial institutions should be moving toward this standard to ensure their cards remain top of wallet.

We hope you find value in this Executive Report that guides us toward what to expect in 2022.

Terry Badger, CFA, is the managing editor at BAI.