By Steve DuPerrieu
What will rise as the hot-button issue for bankers in 2019? To find out, CSI annually polls executives at U.S. financial institutions across the country, asking questions that uncover the strategies and issues they believe will most affect the financial sector in the year ahead. 220 bankers answered our survey this year, and shared how they plan to exceed customer expectations in 2019.
As we analyzed the findings, five key topics stood out: Customer Acquisition, Digital Banking, Cybersecurity, Regulatory Compliance, and Lending.
- 44% of bankers are adding self-service options like online account opening, 17% are adding ITMs/ILTs and 19% are pursing M&A activity.
- 39% of bankers recognized loans as the most important channel for attracting new customers in 2019.
- 32% of bankers see self-service account opening as essential to improving the customer experience.
Customer acquisition is the name of the game, and it’s a battlefield out there. So, how are banks stepping up to the fight? Automated online account-opening solutions are a strong vehicle to both increase banks’ customer base and solidify existing account relationships through cross-sales.
Elsewhere, bankers are dead-on in naming loans as the most important channel for acquiring customers in 2019. The market is quite favorable, despite rising interest rates. However, without a solid presence in digital lending, you’ll likely miss this opportunity.
- Approximately 3 in 4 banks plan to offer P2P by the end of 2019.
- 72% of bankers cite expanding digital channels as the primary means to improve the customer experience.
- 4 out of 5 bankers are confident in their institution’s mobile banking app.
The average P2P transaction is $150+, clearly not the small-dollar, meal-splitting transactions originally thought. So why the hold-out for the remaining 25%?
“Is it that they think it’s too expensive relative to customer demand, or simply that they don’t think their customers want it?” says Dan Latimore, senior vice president and head of banking with Celent. “And fair enough, if they’ve done their homework, but if it’s just a gut feel that their customers don’t want it, that’s not great.”
In addition, while bankers plan to strengthen digital capabilities, they should remember that customer-facing technology that’s delivered through seamless core integration empowers customer engagement.
Kari Book, human resources and compliance manager for The Fairfield National Bank in Fairfield, Ill., wholeheartedly agrees: “It is glaringly obvious that if we don’t make things more convenient for our customers, both through digital channels and with our customer service in general, we’re going to lose them to other companies like Amazon that know how to do it.”
- 44% of bankers say the number one issue affecting the financial industry is cybersecurity.
- 72% of bankers said they will spend up to 20% of their budget on cybersecurity.
- Nearly all bankers (96%) noted that employee education is the most important tactic to pursue in 2019.
It’s no surprise respondents called cybersecurity the number one issue for 2019. This illustrates that cybersecurity awareness is finally accepted as a fundamentally important concept of business. Cybersecurity is an enterprisewide issue and affects all aspects of an institution.
It’s also great to see employee education topping the list for 96% of respondents as the best cybersecurity tactic, as it’s one of the strongest controls institutions can implement to provide tremendous security value in a cost-effective manner.
As to other tactics for battling hackers in 2019, on-going vulnerability assessments came in at 78%; social engineering/penetration testing at 79%. The survey’s overall responses demonstrated that institutions realize the need for a layered security approach.
- More than 75% of banks are spending up to 20% of their budgets on regulatory compliance alone.
- 16% of respondents think the Regulatory Relief Act will most affect the financial industry in 2019.
- Most banks (nearly 75%) will spend up to 40% of their budget on compliance and cybersecurity!
With the Regulatory Relief Act signed into law by President Trump, it’s reasonable that bankers are anxiously awaiting the changes—and new rules—expected to regulatory guidelines.
Further, cybersecurity goes hand-in-hand with compliance, as prudential regulators will examine financial institutions’ vendor management and incident response programs to ensure a robust cybersecurity program.
And, a good portion of institutions’ budgets will surround the usual suspects:
- CECL: As the implementation date nears, many bankers are looking for third parties to assist in their CECL calculations.
- BSA: Bankers implemented the beneficial ownership rules and regulations, along with on-going monitoring known as the “fifth pillar” in 2018. Therefore, they must ensure their policies and procedures adhere to the recent guidance.
- Change Management: Regulators want to ensure that institutions have adequate resources to handle the changing regulatory landscape.
- 39% of respondents’ customers are small businesses. And nearly 90% of bankers surveyed service small-business customers through commercial lending.
- 40% of bankers identified loans as the most important channel for attracting new customers.
- 10% of respondents say loan growth will be key in reaching new customers.
Bankers can augment their small-business lending by letting automated solutions handle the establishment of basic lines of credit and term notes. And since lending is most certainly a top strategy for 2019, here are important things to consider:
- It’s difficult for small-business loans of less than $25K to be profitable for a bank. The market would suggest that there are better ways to originate loans in the small-business space, especially if those loans are less than $100K and NOT secured by real estate.
- If your institution’s loan volume is down, it’s likely your customers are securing those funds elsewhere. The opportunity in this space becomes very appealing when digital technology is applied. These are high-margin, short-term loans you can deliver through a digital channel with minimal investment.
- Flexible opportunities delivered via the proper channel of mobile banking services/internet banking are plentiful. Investments in digital technology as it pertains to traditional lending, like residential real estate, also are important.
Also, over the next few months, CSI’s industry experts will be diving deeper into each of the areas mentioned above, so please watch for further insight on the survey results. In the meantime see how your strategies compare by downloading CSI’s Executive Report: 2019 Banking Priorities.
Steve DuPerrieu is vice president of product management for CSI. In his role, he provides leadership for CSI’s delivery channel strategy, which includes digital banking, payment services, business and analytics software, and branch/retail delivery solutions. Steve is also a board member for the Association for Financial Technology (AFT).
Part of the BankNews OnPoint Series