Three trends for banks to watch this year
The financial services space is currently marked by a shifting regulatory environment, skyrocketing consumer expectations and an increasingly competitive landscape, introducing both new challenges and opportunities for banks. As banks navigate these evolving dynamics, the following are top trends to watch for those seeking to carve out a competitive advantage and grow.
Ongoing liquidity concerns
Liquidity challenges persist as banks continue to endure fluctuating interest rates and market conditions. As the battle for deposits intensifies, it is more important than ever for community and regional banks to closely monitor yields and identify areas to reduce operational costs.
This is an area where technology can help, offering ways to reduce costs. However, banks should be careful not to get distracted by unproven, flashy solutions that are often little more than vaporware. There have been too many instances of banks wasting time, resources and focus on technologies that simply won’t move the needle. Instead, look for proven automation and workflow tools that can save time and boost efficiencies, helping to optimize margins.
Expansion of digital infrastructure
As consumer expectations skyrocket, it’s critical for banks to continue to invest in expanding their digital strategy from a holistic perspective instead of simply adding a piecemeal point solution or capability here and there. The width and depth of a bank’s digital strategy must be considered, with diversified technology needed to compete.
For example, as The Great Wealth Transfer looms and younger generations stand to inherit notable wealth from their parents and grandparents, they’ll need more digitally optimized, self-service tools that can help them manage these new assets. This provides a strong opportunity for banks to better attract and engage with sought-after Millennials and Gen Z by offering a wider range of wealth and financial services, including equities trading, investment options and guidance and possibly even insurance.
Digital banking solutions that don’t include expanded functionality risk losing relevance, as consumers have proven they are not afraid to look to third parties for these services and solutions instead. Those that proactively invest in these expanded capabilities, finding the right partners, will come out ahead.
Preparing for potential deregulation
With the changing of the guard in Washington, many are anticipating widespread deregulation to occur this year. Such a shift is likely to result in a reduction in banks’ required investment in compliance, audit and risk management tools, allowing that budget and employee time to be reallocated elsewhere. This presents a strong opportunity for banks to evaluate how to instead leverage those resources to areas that will increase efficiencies, improve customer relationships or support longer term growth strategies.
To stay ahead in the complex financial services landscape this year and beyond, banks must proactively address liquidity concerns, strategically evaluate and invest in their digital infrastructure and prepare for potential regulatory changes. By intentionally leveraging the right technologies and strategies, banks will be positioned to strengthen their competitive edge, increase efficiencies and bolster customer relationships, even in a challenging environment.
About Author:
Mike Nicastro is the CEO and principal of Coppermine Advisors, LLC, a business advisory firm offering a wide range of services such as strategic plan development, capital acquisition, succession planning and exit planning.