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2018 Top Banking Trends Guide

Mid-Year Update

Blog,
Temenos – Company

We’re halfway through the year so we’d like to pause and give an update on the top 2018 banking trends. Some of the trends we uncovered were from our 2018 State of Digital Banking Report, which found significant improvements in digital and mobile capabilities among banks that we surveyed. Read on to find our list of great resources as well as the surprising trends that we’ve uncovered.

Online Banking is Increasing, But Bank Digital Customers Experiences Are Lagging

One of the most important trends of 2018 is the continued shift of more consumers leveraging digital banking. A full 73% of U.S. adults now bank online at least once per month and according to J.D. Power’s 2018 U.S. Retail Banking Satisfaction Study, 30% of retail bank customers are now digital-only. The problem? Digital-only customers are the least satisfied of all groups. The most satisfied group is customers who use branch 2 or more times in the past three months and also utilized online and mobile banking. This means that banks still have a long way to go in aligning their digital experiences to match consumer demand.

Banks Investing Billions in Security and Compliance

Last year, the banking and financial industry was beset by 134 separate data breaches, an almost 200% increase from 2016 (51). In the first half of 2018, banks experienced another 84 hacks, which puts the industry on pace for another substantial year-over-year increase. In addition, banks have been working hard this year to comply with GDPR regulations and a new CDD rule that FinCEN began enforcing in May. Due to these threats, IDC reports that between 2016 and 2021, banks will see an 11.4% CAGR in spending on security solutions, one of the top 3 sectors that combined will spend $91 billion on security solutions in 2018.

The Rise of Open Banking & Platformification

Over the past year, the debate has shifted more to the merits of building on a platform in a process called platformification. Increasingly, we’re seeing banks reacting to significant consumer demand for more integration across FinTech companies handling peer-2-peer (P2P) payments like Venmo, investment apps like Robinhood, and money management sites like Mint.com. The challenge for banks is building an integrated system while maintaining a secure environment for users and their personal data.

Customer Service Greatest Differentiator for Banks

The Financial Brand’s 85-page report on Improving the Customer Experience in Banking found a startling statistic—while improving customer experience was ranked as the number one strategic priority for global banking leaders, only 37% of organizations reported having a formal CX plan. There seems to be a significant organizational disconnect regarding CX because Gartner recently found that by 2019, 81% of marketers expect to be competing mostly on the basis of customer experience rather than product differentiation.

Our DSR report illustrated that the largest banks made tremendous progress in 2018 in digitizing the personal banking onboarding journey, and many have more than 2/3 of all retail banking products ready for mobile account opening.  This push forward has created an advantage over smaller institutions, and the mid-sized banks are now pushing hard to close the gap.  Regional and Community banks and large credit unions do not want to cede the digital-oriented customer to the largest players in the market, and this competitive pressure has mobilized them to take swift action to upgrade their digital account opening.

Reimagining the Banking Workforce

In their 2018 Banking Outlook, Deloitte highlighted the need for banks to upskill their workforce to address the digital demands of customers. The report highlighted Singapore’s DBS Bank which is investing $20million to train its existing workforce in digital banking and emerging technologies. Overall, 78% of banking executives believe their workforce is going to change considerably in the next 3-5 years as a result of digital business trends. With the rapid innovation occurring in bots and AI, it’s easy to imagine a future where digitally-enabled bank employees are mixed with large-scale automation to handle easier, labor-intensive tasks.

Bank Digital Transformation is Accelerating

Earlier this year, EY released its Global Banking Outlook for 2018. The report found that 85% of banks list implementation of a digital transformation program as a business priority in 2018, which aligns with our own research which found that 55% of banks are currently working on a digital transformation plan. In our 2018 State of Digital Banking Report, we saw significant year-over-year improvement with a 51% increase in banks who had reached the “Digital Promised Land.”

Consumer Banking Leads Innovation, But Business Banking Catching Up

In our 2018 State of Digital Sales in Banking report, we found that 69% of personal banking products can now be applied for online, double where it was just two years ago. On the other hand, only 30% of business banking products can be opened digitally, though that number jumped up significantly from just 9% in 2017. That means that while business banking is still far behind personal banking, digital transformation is accelerating at an extremely high rate for this sector.

At Temenos, we’re focused on helping banks and financial institutions build better customer experiences, integrate with leading FinTech vendors, comply with banking regulations, and onboard customers faster and easier. Contact us today to learn how we can help you achieve your goals in 2018 and beyond.