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Bankers’ wish list for 2023

The three leading business challenges as identified by banking leaders who took part in the latest BAI Banking Outlook survey.

Jan 6, 2023 / Consumer Banking

The only certainty for the banking industry in 2023 is continued uncertainty. How high will interest rates climb before the Federal Reserve finally calls it quits? Will tighter money tip the economy into recession next year, and if so, when will it start, how long will it last and how severe will the pain be? What about credit quality and balance sheets?

In the latest BAI Executive Report, we examine key issues facing the banking industry in the coming year. We focus on the three leading business challenges as identified by banking leaders who took part in the latest BAI Banking Outlook survey.

Holly Hughes, BAI’s chief marketing officer, writes about issues surrounding new customer acquisition, which topped the business challenges list in the latest BBO survey.

She says competitive factors remain a key obstacle facing banks and credit unions—too many institutions chasing too few customers new to the market, combined with a reluctance by most established customers to abandon their existing bank. The BBO survey found that more than 45% of customers plan to give all of their future business to their primary bank.

Our research shows that community banks and credit unions have the most at stake in getting the new-customer acquisition strategy right, Hughes says, as they are the ones feeling the most pressure from the upstart direct banks.

Digital-only competitors figure into the No. 2 business challenge for banks, which is providing a more compelling digital banking experience. Karl Dahlgren, managing director for research at BAI, takes on that topic in his article.

In what might be the starkest finding in the BBO survey, only 4% of financial institution leaders believe their digital customer experience is “excellent.” For their part, customers weighing in on digital quality tend to judge it as “average.” An average rating sounds sort of OK until it’s paired up with another survey finding: More than 70% of millennials and Gen Z respondents say they’ll happily change banks if it gets them better digital capabilities. Institutions developing their new-account acquisition strategy may want to take note.

Third among the leading business challenges is acquiring and retaining talent, which shouldn’t come as much of a surprise to anyone, given the focus on the recent wane in banking’s career appeal among younger workers. BAI’s president and CEO, Debbie Bianucci, applied her long-standing interest in banking talent issues in crafting our outlook piece.

Resistance to hybrid work models by many banking institutions is often cited as one of the reasons why the industry is less of a draw. Her view is that banking leaders should accept that the pandemic changed the workplace for good. Once they’ve done that, she says, they can look at new ways of working as an innovation similar to a process improvement or breakthrough technology.

Also in the Executive Report:

6 trends financial marketers need to know: Lisa Nicholas from Vericast examines macro factors that marketing teams at financial institutions should be on top of in 2023. Her broad list includes that customers will be more aggressive in pursuing higher deposit rates and that alternative payment options will gain in popularity.

Using tech to build relationships: James White from Total Expert starts from a premise that banks and credit unions fail to capitalize on many of their opportunities to strengthen their connections to customers. The fundamental reason for these misses, he tells us, is that financial institutions are not focused enough on customer engagement.

Winning big with fearless tech partnerships: Nathaniel Harley from MANTL writes about some of the ways that financial institutions and fintechs can work together to drive growth and innovation. He builds his story around a small but fast-growing bank based in Texas that has built a strategy around leveraging fintech vendors.

Trends, scams and fighting back: Eric Tran-Le from NICE Actimize offers pointers on how banks and credit unions can better protect themselves against the growing threat of fraud in the coming year. Digital payment fraud losses are expected to top $300 billion by 2027, with community banks and credit unions facing heightened risks.

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