The banking industry faced a difficult year in 2015, highlighted by an increasingly complex regulatory environment, cost, and operational challenges, and struggles with the maintenance of a sustainable growth trajectory. As competition continues to increase, and more options for personal finance are available to consumers, banks are being confronted with the reality that consumers shifting their focus to ease of access and use when making their banking decisions, and the traditional branch-based model is rapidly becoming antiquated. The proliferation of smartphones and internet access around the world has fundamentally shifted consumer preferences, and banks will have to take this into account when building strategic plans for 2016.
Building on this new paradigm of the ‘mobile’ banking consumer, here are our top 5 projected strategic challenges in the banking industry for 2016:
Optimizing the Mobile Experience
Traditionally, banks have leaned on their physical branch locations to be the primary touchpoint of engagement with their customers. However, with the explosion of smartphones and associated applications, customers are much more inclined to complete their banking online whenever possible. With this in mind, having mobile-friendly banking experiences, coupled with applications that aid the consumer’s financial life will be strategically paramount for banks to retain their current customers and attract new ones. A mobile strategy is no longer a nice to have for banks – It is now a necessity for those who hope to remain competitive for years to come.
As mentioned in a previous post (LINK TO A Story of Disruption – Mobile Payments for Smaller Banks and Credit Unions), mobile payments are becoming much more pervasive throughout the consumer economy. Services like Apple Pay and Google Wallet have paved the way for the banking industry in this arena, as consumers, having had these services offered on their phones off the shelf for years, are becoming more comfortable with the security of this method of payment. Chase Bank recently announced that it will be rolling out its own mobile payments offering for its customers, and one would expect similar financial institutions to follow suit soon. Expect 2016 to be a big year for mobile payment adoption, and therefore represents a huge strategic opportunity for banks that are willing and able to enter the fray.
Security and Authentication
This trend builds on the previous two, as security and authentication will become significant strategic challenges as consumers continue to adopt the mobile ecosystem for their banking needs. Banks will have to take a closer look at how they confirm the identities of their customers who are accessing their accounts remotely. With security breaches and identity theft on the rise, the protection and security of banking information are paramount to instilling trust in the minds of consumers, so banks will have to devise strategic plans accordingly to ensure the safety of all their customers’ financial data.
The Continued Rise of Technology Disruption – FinTech
Experts do not anticipate new financial technologies (FinTech) to take substantial market share from the banking industry as a whole, but it does pose a significant strategic challenge to the industry given its recent cost-containment and growth struggles. FinTech is software that serves to displace some of the most profitable offerings of a traditional bank-like financial advising, loan alternatives, payment processing, and money transfers. Additionally, FinTech includes very disruptive innovations like crypto-currency, which threatens the underpinning of the banking industry as a whole. As FinTech companies continue to innovate and challenge the status quo of the banking industry, there may be a groundswell of consumer adoption that will throw the industry into further peril. Look for banks to make strategic maneuvers to ward off competition from FinTech, such as building competitive products in-house or acquiring these companies to add to their portfolio of offerings.
Use of Multiple Channels to Reach New Customers
With the increased pressure on new customer acquisition across the industry, banks are having to become more innovative in their acquisition strategies. One area that is projected to yield a significant return on investment is multi-channel marketing. Using a combination of traditional, digital, and social channels, banks can expand their marketing reach and get their messaging in front of the cohorts of new customers they hope to attract. Before engaging in a full-scale multi-channel marketing effort though, banks need to do deep data analysis of their target customers and how to best reach them through the different channels. Then, they can allocate marketing spend accordingly to ensure they will get the best return for their dollar.
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