The banking industry has always been in a state of change, especially over the past decade. With new technologies and ways to improve productivity surfacing every year, banks are engaging in these changes to increase customer loyalty and maintain competition. 2016 has brought about various trends in a number of industries. Just as specific trends are booming in these industries, they are also booming in the banking industry. Here are the top banking trends of 2016.
Banks are going digital by using online banking and mobile apps for their customers more. This allows customers to check their balances, pay bills, view transactions and make account transfers without having to walk into a branch. Some banks, such as USAA, even let their customers deposit checks using their mobile devices. Other banks are installing self-service kiosks and video ATMs.
Raised Interest Rates
In December of last year, the federal reserve raised its benchmark short-term interest rate for the first time since 2008. They are expected to continue to gradually raise rates throughout the year. It is not much of an increase, but it is good news for those with savings that originally were making no money from their savings accounts. Rising interest rates allow banks to be competitive with those with higher rates, which in return lets them attract deposits from rate sensitive customers without having to re-price their entire portfolio.
Making Data Actionable
Banks are using data analytics to get closer to customers needs and to also get a competitive edge on the industry’s competition. This data helps banks improve customer experience, increase efficiency and speed, and predict useful business strategies. Using this tool will aid in helping banks build new relationships and maintain current ones.
Instead of competing with each other, banks and fintech firms may partner together and become a strategic banking platform that offers a variety of services and experiences. This type of platforming is similar to Amazon’s platform in retail. Banks have strengths that fintech does not, while fintech is strong in areas banks are weak in. Joining together will give them the leverage to establish high levels of trust, experience, navigation of compliance and regulation requirements, and access to significant capital.
Stronger Cyber Security
The banking industry is one of the primary targets of data breaches over the past decade, targeting them 300% more often than other industries. As electronic payments and mobile banking are increasing, so is the need for stronger security. Banking institutions know they need to invest in reliable security resources to keep their customers. Cyber security solutions that are currently the most important in the banking industry are data encryption, cyber security intelligence, and SIEM.
Chip cards are a security upgrade to credit/debit cards. They were created to deter identity theft and better secure payment processors and merchants and are more secure than the magnetic strip on original credit/debit cards. Although chip cards haven’t made a huge emergence as of the beginning of 2016, all merchants are required to accept these cards. If they don’t, they can be held liable for a breach of consumer card data. Some merchants have not upgraded their systems yet, so debit cards are not leaving anytime soon.
Customers may want to enjoy the mobility of online banking, but they also want the same customer service that they would receive while in a branch. When customers have concerns, they typically go to the banking branch. Banks have to figure out the proper balance of digital banking, while also ensuring customer service is still a top priority.
New European banks regulations require banks to offer application program interfaces to the market. This is expected to make a large impact on the banking industry. Some see this as a threat, while some see it as an opportunity. Although the regulation has not yet been a requirement in the U.S. it easily opens the door for fintech firms to compete in this country. Although these seem a challenge to U.S. banks, as they don’t know how to respond to these changes yet, 57 percent of global financial services state that regulatory compliance enabled business growth.
Closing Doors/Branch Cuts
Numerous banks nationwide, such as JP Morgan and Bank of America are planning to close their doors over the next few years. Why is this occurring? One reason is that due to the rise of easily accessing banking over the internet. There is no longer a need for a branch on every corner. Another reason is due to the fall in the mortgage industry, which has caused banks to reduce their resources to compensate for delinquencies and adjust refinancing.
As you can see, there are plenty of changes happening in the banking industry in 2016. Will these changes really make banking more efficient and secure? Only time will tell, but so far things are looking to improve over the year.