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The banking industry, like many other industries today, is facing unprecedented change as it moves toward digitalization. While most bankers have started to embrace the technological revolution, there are still challenges that need to be overcome.
The future of banking will require new ideas and methods for accomplishing tasks on a greater scale. And, perhaps most significantly, the customer will be at the forefront of the future. Today’s banking customer expects more, demands faster access, and expects better results than in the past. Banks and financial institutions that are unable to compete with these expectations will likely struggle to maintain viability in the long run. The banking industry is being challenged in many ways, but there are 4 that stand out.
1. Consumer expectations.
The customer experience is at the forefront of the challenges facing the banking industry today. In many ways, traditional banks are not delivering the level of service that customers are demanding, especially when it comes to technology. For example, more customers are using mobile devices for transactions. A 2018 study found that 50 percent of banking customers use their smartphones or other mobile devices. But customers still expect in-person customer service as well. The same study found that 25 percent wouldn’t be comfortable opening an account with a bank that didn’t have a local presence.
2. Increasing pressure from competition.
Young consumers especially are open to change in their financial services provider. In a recent survey, Accenture found that 31 percent of banking customers would consider banking with Facebook, Amazon or Google if they offered the same type of services they currently enjoy. Already, financial technology (fintech) startups like Robinhood or Acorns are taking advantage of this mindset by offering apps that support investing and other innovative financial services.
3. Investor expectations.
Despite all of the news about banking profits, banks and other financial institutions are not meeting their shareholders’ expectations for return on investment or equity. Part of the reason for this is the lack of accurately understanding customer expectations, which translate into lower customer enrollment and retention rates.
4. Regulatory conditions.
Regulations in the banking and financial services industry continue to escalate, requiring banks to spend a large part of their discretionary budget on compliance. Building systems and processes that are able to keep up with regulations and industry standards require resources on every level.
Traditional banks especially are experiencing these types of challenges, forcing them to constantly evaluate and improve their operations to keep up with the swiftly changing tide of consumer and stakeholder expectations, technology and industry regulations. Financial services companies now are facing a new set of factors as they contemplate how to generate sustainable growth. Banking and other financial services companies need to secure a controlled strategy to innovate and help refine the consumer engagement model in a digitally native world.
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