SRM (Strategic Resource Management), an independent advisory firm serving financial institutions, has shared its semiannual summary of how the key trends identified by the firm in January are impacting the marketplace.
Brad Downs, CEO of SRM, commented, “The consolidation of large payment players commanded much of the attention in the first half of 2019. However, several important trends we highlighted in January continue to have a material impact on banks and credit unions including mobile payments, conversational banking, artificial intelligence and cloud-based IT models. The pace at which innovations are impacting these areas is accelerating and our mission is to help clients adapt to that environment and add value to their bottom line.”
SRM annually interviews a subset of its clients concerning the areas of focus within their institutions. In addition, the firm utilizes secondary research from a variety of sources to cross-reference the results from client interviews to determine what areas of focus are in response to industry-wide trends. The results of this process are shared with the industry at the beginning of each calendar year. At midyear, the firm revisits these trends to determine the impact to banks and credit unions’ ongoing decisions with their supplier relationships.
Payments, Part One: More of the Same, but Bigger. Much attention was given to the mergers involving the major payments processors in the first half of 2019. The Fiserv/First Data, FIS/Worldpay and TSYS/Global Payments deals represent the pinnacle of the consolidation trend that has been going on in this space for years. The difference in these cases is the sheer size of the players involved, which materially reduces the level of competition in the marketplace and, therefore, the potential that the leverage banks and credit unions have in negotiations with these entities will be diluted. Many financial institutions are taking a “wait and see” stance, not rushing into new agreements especially if their existing terms are favorable.
Payments, Part Two: The Beat Goes On. The growth of mobile payments continues to accelerate as consumers increasingly revert to their smartphones and tablets to buy and pay for goods and services. According to the IMARC Group, mobile payments are expected to grow from an annual total transaction value of $881 billion to $3.081 trillion from 2019 to 2024. Perhaps even more impressive is the fact that research suggests mobile devices now influence 56% of every dollar spent as consumers use them to research purchases before they buy. On a related note, watch for a resurgence of mobile wallets primarily offered by financial institutions, a model that has some considerable flaws.
Voice: Can You Hear Me Now? In 2018, the installed base of voice-activated smart devices grew 39.8% with 66.4 million Americans owning one or more. Some financial Institutions are responding by introducing their own voice assistants. This approach retains direct control of the customer relationship, making it easier to harvest the data necessary to anticipate their needs rather than letting Google, Apple or Amazon capture it to do the same. However, if these large tech companies are not willing to integrate the virtual assistants created by financial institutions, consumers may revolt. The friction involved in using an institution’s app versus the Alexa or Google Home three feet away will be a deal breaker for both.
I’ll Be Back: AI Is All the Rage. If anything, the adoption of AI is running ahead of previous predictions. The speed at which adoption is occurring in industries other than financial services – the impact of AI on the global economy will reach $15.7 trillion in 2030 – is a good indicator that financial institutions who have not contemplated AI or are still debating if it is for them, should move on to finding ways to incorporate AI into their operations. Banks and credit unions can take small, affordable steps that will lead to an understanding on a larger scale how AI can deliver efficiency, improved quality and excellent customer service.
I’ve Looked at Clouds from Both Sides Now: As noted previously, the growth of software-as-a-service (SaaS) continues at an 18% CAGR, fueled largely by the ability of SaaS offerings to reduce complexity and costs. While SaaS options are simplifying IT operations, most financial institutions are struggling to evaluate the technology behind them relative to industry trends and their future goals. To keep pace and avoid a decision that will place limitations on future opportunities, more financial institutions will “outsource” the subject matter expertise needed to evaluate and prioritize these solutions.
“Each of these trends has a substantive effect on most U.S. banks and credit unions, regardless of their size,” added Michael Carter, EVP at SRM. “However, there is a backdrop against which all of them will play out, characterized by the speed at which technology is moving. It seems likely that this speed will continue to increase and that most institutions will struggle to keep pace. Now, more than ever, banks and credit unions should be evaluating their options for partnering with fintechs and finding trusted sources to help them assess those options.”
SRM (Strategic Resource Management) has been trusted by more than 700 financial institutions to serve as a trusted advisor in areas such as payments, digital banking, core processing and operational efficiencies. The company has unlocked billions of dollars in value and improved the competitive advantage of its clients with its reputation for its industry-leading subject matter expertise, proprietary benchmark database and proven negotiating skills. Visit www.srmcorp.com for more information and follow the company @SRMCorp.