SRM (Strategic Resource Management), an independent advisory firm serving financial institutions, annually reports on key trends likely to impact banks and credit unions’ decision-making in the year ahead. This report consists of information recorded during client interviews and secondary research from industry sources.
Brad Downs, CEO of SRM, commented, “Technological change continues to accelerate. Looking back over the last decade, the devices from 10 years ago seem primitive considering the digital tools we have today. In 2020, we see continued disruption – and opportunity – in all aspects of payments, digital, intelligent tech and data. Though there will be winners and losers, for those who want to survive and thrive, SRM is here to help adapt to these changes.”
Excerpts from the SRM findings show that just studying the impacts of these disruptions is not enough. Proactive, strategic action is needed to harvest potential and avoid the pitfalls.
Payments: Consumers Flock to Convenience
- Financial institutions may lose their way – and customers – if they fail to get how little people care about the economics of payments. Time and again, consumers will choose convenience over risk while also expecting banks and credit unions to keep them safe. Any action that creates friction will threaten customer loyalty. The reward will go to the institutions that add convenience; focusing only on security puts friction before achieving their goals.
- In 2020, banks and credit unions need to focus on the growing embedded payments trend. While Amazon and Starbucks get the attention, subscription-based services also have a growing number of cards on file. The consumer thinks more about the purchase than what must happen to pay for it, suggesting that institutions should offer more incentives to use debit cards in the embedded payment scenario, and elsewhere.
- What’s in your wallet? Increasingly, contactless cards. Look for a steep climb in adoption, especially now that it’s being adopted by major U.S. transit authorities. Offering the convenience of contactless can book a significant win over the next 12 months simply by enabling this feature within card portfolios. Late adopters will stay content with the “insert here” option and risk losing wallet share.
- The “death of cash,” at least in the United States, is neither imminent nor linear. Although the volume of cash used is actually growing, cash usage is not growing as quickly as digital payments. To protect from economic discrimination, some states and cities have even made “going cashless” illegal to B2C businesses. Financial institutions will need to monitor the situation carefully, especially to defend cash-handling organizations’ margin and market standing.
Digital: Winners Will Partner to Innovate
- Many financial institutions are still unsure of where to go with their digital brand and what they will need to make the journey. What’s more, addressing this vital area with a mindset that worked 10 years ago may be a losing approach in 2020. Those institutions wishing to win the digital arms race may find value in going slower, not faster. Before considering a single vendor or vendors, the top performers will spend time and money locking down a method for continuous innovation.
- Those who gamble with “the branch” as their only human touchpoint for consumers will lose their bets. The fact is if many institutions are to survive margin compression through ways other than acquisition, they must find operational economies of scale. Those looking ahead are already seeking ways to integrate technology into operations that will, over time, minimize the need for the branch.
Intelligent Automation: It’s a Strategy, Not a Technology
- High-touch, personalized service remains a key differentiator for most community and regional institutions. Larger banks and credit unions are using intelligent technology to improve their personal touch. 2020 winners in the community and regional space will follow that path and leverage intelligent automation’s operational scalability.
- The repetitive, manual processes of the back office is another area where smarter tools can lower overhead and improve productivity and accuracy; vendor invoice auditing is one use case. Applying AI here means not only automating the discovery of potential errors, but also auditing the invoice before it’s paid each month.
Data Literary: Actionable Information from Consumer Data
- Most banks and credit unions still struggle to get at the data needed to create actionable information about their customers and members. Some have even given up, but this acceptance will eventually make them irrelevant. Winning institutions will buck this trend and start delivering personalized offers to their clients that anticipate consumer needs.
- Speaking of relevance, “good enough” isn’t. Worse than remaining data illiterate is pushing consumers offers based on an erroneous data analysis. This faux pas sends the message that an institution does not know its clients, damaging brand integrity. Validating consumer data is another area where moving more methodically may be recommended to ensure data is actionable and accurate.
As we enter this new decade, SRM president Patrick Goodwin adds, “What we’re seeing now from working with financial institutions across North America and Europe is that the best-in-class are investing in flexible technologies, giving them deeper visibility to their data while enabling customers to play a greater role in self-service across all of their banking products. It has never been more important for banks and credit unions to know what’s negotiable – not only to enhance the capabilities in their operations, but also to thrive in a climate of constant change.”
SRM (Strategic Resource Management) has helped more than 1,050 financial institutions to realize $2.4 billion in critical areas such as payments, digital transformation, core processing, artificial intelligence and operational efficiency. Our decades of experience have lowered costs, enhanced revenues, increased productivity, expanded customer satisfaction and provided a competitive edge for clients in an environment of constant and accelerating change. Visit www.srmcorp.com for more information and follow the company @SRMCorp.