As we move into 2018, we’ve seen a shift in where financial institutions in the United States are focusing. Jay Mossman discusses six trends that Temenos has encountered, that will continue to emerge and make an impact throughout the year.
1) Return to traditional banking. Bankers increasingly see their branches as key sales and service delivery vehicles. Leveraging their presence in the physical world, bankers will employ a new generation of AI tools, a concierge approach with a coffee-shop feel, real-time analytics and robotics to create new customer experiences at the local branch.
2) Focus on a comprehensive digital experience. The digital courtship of Millennials will continue, but in 2018 banks will create digital platforms aimed at all customer segments. Banks will continue to lure Millennials with new apps that de-mystify and simplify (ie, Umpqua’s BFF app, Temenos’ integration with Idology) but in 2018 bankers’ IT spend will be increasingly directed towards creating a single digital platform to serve all segments – Baby Boomers, GenX, etc)
3) Macro forces arise in 2018. New tax regime and rising interest rates, chief among them. Agility will be demanded in the face of uncertainty. A long cycle of low interest rates and static tax policies have given rise to a style of banking, products and services that may or may not be profitable amid a tax code revamp in the U.S and rising rates. A generation of bankers from Wall Street to Main Street have never experienced an environment of rising rates.
4) Regulatory barriers come down, creating openings for new competitors — We will see a new wave of companies trying to break into the finance space, with renewed efforts to change regulation to break down the barriers to banking and create the ultimate 360/IoT experience. Banks will have a choice to make – do you partner with these companies and integrate through APIs, or try to compete? The majority will choose to partner and create an ecosystem of fintechs (as Temenos has done with MarketPlace), supported by open architecture. Where banks were previously looking for inspiration, now they are encountering competition – if they wait for inspiration in 2018, it will be too late.
5) Credit unions will find a disruptive opportunity – In 2018 the continuing evolution of technology and consumer expectations will present opportunities for credit unions to serve as disruptors in the market. Credit unions will emphasize speed-to-market and use technology to eliminate friction points that can slow delivery on new initiatives. The use of data analytics will become paramount.
6) Open API adoption will accelerate the “Open Banking” and “Platform Banking” trends.
Banks will see fintech not as a threat, but an opportunity in 2018. They’ll build systems and APIs to connect. APIs will become a point of competition. We will see more alliances and acquisitions to push integration in the banking ecosystem.