2023 has commenced, and rates are climbing, inflation is bubbling, and banking customers are continuing to demand hyper-personalized products and experiences from their institutions. Here are five banking trends we’re forecasting for the new year.
1. Banks are focused on efficiency initiatives to optimize their operations and lower costs.
Three prominent areas where there is a strong desire to optimize:
- Data. Institutions are seeking to clean up their data pools to enable the cultivation of insights that lead to actionable change.
- Applications. Institutions are investing in more sophisticated application capabilities, and there is a new focus on the scalability of these applications. They want applications to be able to grow and progress alongside their growth and progression.
- User experience. As the use of technology continues to increase, it should not get more difficult to use. While institutions want to increase their technology play, they are weary of overcomplicating operations.
2. Banks have a heightened interest in customer-first initiatives regarding overdraft fees, non-sufficient funds, and loan products.
And with new legislation surrounding overdraft fees leading to a decline in service charges, banks are seeking to make up for the profit loss elsewhere. The movement has ignited a renewed sense of openness toward pursuing more creative business solutions. For example, many banks have launched small-dollar loan products that give eligible customers a few hundred dollars for a small flat fee. Such products give customers access to funds virtually instantly, and they can typically be repaid over several monthly installments.
3. As institutions rely more heavily on self-service channels to serve their customers, branch consolidation and renovation are on top of mind.
According to the Federal Deposit Insurance Corporation (FDIC), in 2000, there were 8,000 commercial banks in the United States, but as of March 2022, that number had dwindled to 4,194 operating physical bank branches. Most banks are not wanting to do away with their physical spaces altogether, as lack of physical presence has proven to contribute greatly to attrition, but they want to get more use out of their spaces. Many institutions are seeking to design more open-concept-styled branches that have greater multipurpose potential.
4. Digital sales are growing, and virtual assistants are giving human sellers a run for their money.
For instance, Bank of America’s digital sales represent half of all sales in its consumer business, and its virtual assistant, Erica, has passed a billion interactions since its introduction. Another example is Eno, Capital One’s virtual assistant. Eno uses artificial intelligence to analyze customer data and make personalized product recommendations, a highly effective sales tactic.
5. Institutions are dedicated to remediation work and more adamant than ever about risk prevention.
This renewed sense of urgency regarding remediation and risk prevention is in part due to The Consumer Financial Protection Bureau’s (CFPB) recent formation of a Repeat Offender Unit. The Repeat Offender Unit is a group within the CFPB that is dedicated to “reviewing and monitoring the activities of repeat offenders; identifying the root cause of recurring violations; pursuing and recommending solutions and remedies that hold entities accountable for failing to consistently comply with Federal consumer financial law; and, designing a model for order review and monitoring that reduces the occurrences of repeat offenders.”
Interested in discussing how you can ensure your financial institution is up-to-date with industry trends? Contact one of our financial services experts today.