The heightened use of customer insight for the delivery of financial services and the continued impact of digital channel development dominated the list of predictions that I gathered for the fourth edition of my annual banking trends study. The contributors also agreed that customers will continue to demand more from their financial institutions and that competition will increase in 2015.
For this year’s report, I crowdsourced the support of more than 60 financial services leaders, including bankers, credit union executives, industry analysts, bloggers, advisors and finserv followers. Predictions and trends came from across the globe including the U.S., U.K. and the Asia Pacific region.
The 2015 list advances some of the trends we have seen in previous years, with new trends in the areas of digital delivery, mobile, customer experience, payments, innovation, operations, security and product design. Due to differing organization sizes and levels of digital maturity, how any particular institution responds to these trends may differ.
Below are the top 10 predictions from this year’s trends survey:
Customer analytics will drive contextual experiences. In 2015, banks and credit unions will leverage richer analytics-driven insights to enable a more personalized approach to targeting and engaging with consumers. From location-based offers to improved service delivery, organizations will use spending patterns, product use, and channel interactions to enable improved experience-driven banking.
“The financial services industry will move beyond omnichannel banking and more fully realize that financial institutions can use data and interactions, regardless of channel, to genuinely connect with consumers on a more emotional level. This includes predicting consumer needs and serving in more of an advisor role,” says Bryan Clagget, chief marketing officer at Geezeo.
Expedited deployment of digital branch delivery. “The increasing pace of digital adoption will see more innovation from large banks in their digital strategy – and simultaneously the reshaping of branch networks and front line roles to re-position physical distribution as a strategic asset in the digital omnichannel world,” say consultants at Accenture. These smaller, digitally transformed, primarily self-service branches will increase advisory services and provide new revenue opportunities for financial institutions.
Danny Tang, channel transformation leader, Global Banking & Financial Markets at IBM, forsees a digitization of the branch employee. “Banks will expedite the deployment of omnichannel, in particular the use of tablets in the branches and video chat on mobile devices.”
Mobile-First design. The banking industry is still well short on harnessing the power of mobile, beyond simply a channel or technology. Many on our crowdsourcing panel believe 2015 will be the year when leading banks use mobile design strategies as the foundation for all customer touchpoints and when the expansion of capabilities will provide digital differentiation.
Matthew Wilcox, senior vice president, Marketing Strategy and Innovation, at Fiserv, says that the most significant change in financial services will be the shift in digital banking strategy from a self-service delivery channel to a full-service delivery channel and a shift from using mobile as a cost reduction tool to a way to expand share-of-wallet and become central to a consumer’s financial life.
One example of an underutilized capability is mobile alerts. Brett King, CEO/founder of Moven, says, “Mobile notifications are the main game in town … it’s all that matters in 2015. Notifications are driven off data, and deliver insights, but will quickly evolve into a real-time revenue capability. So, if banks aren’t building this in 2015, they’re slipping behind.”
Increasing digital and social selling. Forrester Research has found that many banks continue to have too little in the way of marketing, merchandising, and product research tools available to prospects on tablets and smartphones – and too little mobile cross-selling to current customers. Even so, the Forrester analysts predict that twice as many customers will research financial products on their smartphones and tablets in 2015 as in 2014.
The percentage of customers who apply for a financial product via mobile will also grow, although not by as much, as more banks support this option for mobile-savvy consumers. The key will be to combine customer analytics with mobile delivery to drive sales.
“These new forms of interaction will be especially important to the digital-first, Gen Y consumers, who value advocacy, not advertising and conversation, not clichés and who are shaping financial brands and defining their success now and into the future, says Gina Bleedorn, executive director at Adrenaline.
Mass market acceptance of mobile payments. With new services such as Apple Pay, mobile payments are likely to become increasingly commonplace in 2015. According to Capgemini’s 2014 World Payments Report, m-payments are projected to grow by 61% in 2015. However, until mobile channels are fully integrated with back-end support systems, banks will continue to struggle to drive value from mobile.
David Brear, director of digital banking at Gartner, believes banks and credit unions are going to have to make moves in 2015 to re-establish their direct communications channels with customers with regards to payments or come to terms with their services becoming commoditized and marginalized.
We will also see changes at the retail point of sale as merchant adoption of EMV and contactless terminals increase, according to Dominic Venturo, chief innovation officer for payments at U.S. Bank. Venturo also expects to see wearable devices move from the experimental category to consumer facing solutions, although he believes initial solutions may be relatively basic.
Focus on security and authentication. Mobile identity authentication has become more important for financial institutions as consumers migrate away from online banking to smartphones and tablets. Consumers’ changing preferences, combined with emerging technology, has forced financial institutions to take a closer look at how they identify and authenticate mobile banking users logging into their accounts.
Dave Birch, director at Consult Hyperion, predicts that Apple has, effectively, decided the model for the next phase of technology-driven evolution in retail payments. “Apple has created a model – local strong authentication with a revocable standard token – and established that devices will be the bridge between the product being purchased and digital identity.”
Industry consolidation. The FDIC’s Summary of Deposits report shows that the most precipitous year-over-year drop in the number of branches occurred from 2013 to 2014, with most asset-size groups showing a decline in the number of offices in operation. Most of our crowdsourcing panel agrees that consolidation within the financial services industry will continue or possibly even increase in 2015. Not surprisingly, none of our experts predicted that industry would expand this year.
Enhanced customer rewards. Sherief Meleis, managing director at Novantas, predicts that the potential for interest rate increases in 2015 will result in a renewed emphasis on relationship rewards to reduce potential churn and to moderate the increase in rates paid on deposits if overall rates do rise. “In 2015, banks will be more actively testing relationship and customer-level pricing schemes to use price as a lever to drive deeper relationships,” Meleis says.
The consultants at Accenture also believe that as banks continue to embrace digital, we will see many organizations begin to explore how to create customer value and interaction outside of core financial products, starting their journey towards being the center of a consumer’s financial life.
Innovation, incubation and uncommon alliances. As the industry continues to be buffeted by agile start-ups and niche players, banking organizations are beginning to think more like disruptors, obsessing about consumer experience and using digital technology to avoid being outflanked by new entrants or established competitors. This has resulted in the development of innovation labs, fintech investment funds and uncommon alliances between traditional financial institutions and start-ups. 2015 will see a continued expansion of these strategies.
Eric Lindeen, marketing director at Zoot Enterprises, Inc., believes that 2015 will be the year financial institutions begin infusing non-bank innovations and technologies into their operations to bring about radical change. He predicts more banking app stores, innovation centers that cut across silos and says partnerships with Fintech startups will “shift banking from an obligation to enabling a preferred lifestyle.”
Increased impact of digital disruptors. Digital disruption has impacted the financial services industry on a global basis. While most disruptors are smaller niche players that won’t grab substantial market share from traditional banks in 2015, they still threaten profit margins by “eating around the edges.” The biggest threat is that banks lose their daily connection with consumers and businesses and the flow of customer insights trickles to a stop.
To partially negate the impact of disruption, traditional banks need to become disruptors themselves. As Michael Carter from D3 Banking says, “The battle for the digital customer will only increase in intensity. Leading banks and credit unions will need to look to new and non-traditional allies, partners and vendors to gain a competitive advantage rather than choosing to work with established legacy Fintech providers who struggle to commercialize innovations due to size.”
Chris Skinner, chairman of the Financial Services Club and author of the book, Digital Bank, predicts that 2015 will see banks finally focusing upon getting fit for the digital future by re-architecting their back office systems, cleansing their data and creating accessible digital services that are consistent across channels. He believes the trends for front-end developments across mobile and tablets will eventually extend into wearables and connected channels, such as cars and televisions.
Joe Sullivan, CEO of Market Insights Inc., provides one word for the changes expected in 2015: intensification. He foresees an acceleration of digital banking features and usage, digital payments, usage of data and analytics to drive engagement and an improved customer experience, competitive disruption and increased branch/channel rationalization.
Mr. Marous is the co-publisher of The Financial Brand and publisher of the monthly publication, Digital Banking Report. He can be reached at email@example.com.