It’s that time of year when experts pull out the crystal ball and start talking about "what they see". Banking pros are no exception. When it comes to 2016, they expect plenty; change is on the horizon. Here’s a look at some of them.
1. Banks will figure out that big data shouldn’t be the focus, but wide data
Basically, this means they will turn their attention from the mass accumulation of data and looking at isolated data sets with the hope of finding value or some meaningful insight. Instead, they will take the wide view and hone in on areas where the seemingly disparate data sets actually intersect, says Damien Hayes, senior revenue consultant at Saylent.
Take for example, a bank notices an increase in debit card transactions. The upward trends seems to be coming from the younger demographic. There’s a new mall that just opened up in town. By looking at the merchant data, the bank determines that it’s coming from businesses within the mall. "The ah-ha moment is the idea of developing a merchant-funded cash back program for customers that shop in the various businesses in the mall using the bank’s debit card. This embraces the trend, encourages further growth in transaction volume, rewards the customer for their loyalty, increases interchange revenue, and most (if not all) of the cash back expense is covered by the merchants’ fee-based participation in the program," says Hayes.
John Rosenfeld, head of everyday banking at Citizens Bank believes there are big opportunities in the area of data and analytics. "We can do a better job of connecting the streams of data we collect to generate a more holistic view of each customer," he says. This will help banks better serve their customers and operate more effectively.
2. Anticipate more artificial intelligence
Usage of AI is becoming increasingly popular – from virtual assistants to predictive analysts, banks are trying to harness AI to improve customer interaction and gain efficiencies, says Dror Oren, co-founder and vice president of product at Kasisto. Oren’s company’s virtual specialist technology allows banks to add AI to their channels so customers can interact with a bank’s mobile platform like they would in person at a branch. "As more consumers look to integrate the convenience of a virtual assistant in their lives, banks are meeting customers where they want to be by leveraging AI technology."
3. Instant rules the day
Financial institutions are already offering the ability to send funds digitally to a family member or friend instantly, but a growing number of banks and credit unions are extending these capabilities beyond personal payment. "This will likely continue. In a world where you can order food, groceries or a ride on demand, consumers expect the ability to pay a bill, send money to a friend or transfer funds between separate bank accounts immediately. Banks are picking up on this demand and responding with faster payment options, benefiting all consumers with a need for speed," says Scott Hess, vice president of UX, Consulting & Innovations for Fiserv.
Also there will be more of a push to offer instant access to funds from checks deposited via mobile devices. Many banks already offer mobile deposit, and this evolution allows them to meet consumers’ expectations for speed and compete with stores that allow consumers to cash checks directly, says Hess. The upside for consumers is huge. "They get access to their money and can use the funds in their account to make a purchase, pay bills, or repay a friend, without any wait."
4. Exotic mortgages increase
David Reiss, a professor at Brooklyn Law School, specializing in real estate believes that banks are going to get more comfortable with originating more exotic mortgages as they have more experience with the mortgage lending rules that were prescribed in Dodd-Frank. These rules, such as the Qualified Mortgage Rule and Ability To Repay Rule, encourages lenders to make "plain vanilla" mortgages. But there are opportunities to expand non-Qualified Mortgages, so "2016 may be the year where it really takes off," says Reiss. The bottom line? "This means consumers who have been rejected for plain vanilla mortgages, may be able to get a non-traditional mortgage. This is a two-edge sword. Access to credit is great, but consumers will need to ensure that the credit they get is sustainable credit that they can manage year in, year out."
5. More big name partnerships are on the horizon
This year there have been several marriages between banks and fintech companies. "Banks, who have historically been viewed as ‘stoic’ are seeing the value in looking towards alternative lenders as innovation partners – integrating online lenders’ tech developments into their more traditional foundations," says Glenn Goldman, CEO of Credibly. "Working together, banks are able to serve a much wider range of consumer and small business owners’ needs, across industries and credit-worthiness, with more financing options than ever before."
6. Sunlight banking will replace shadow banking
As regulatory scrutiny into the industries continues, self-imposed transparency standards will emerge from both banks and alternative lenders, serving to protect consumers from predatory lending scams and also protect lenders from suspect players who bring the industry into disrepute, says Goldman.
7. First class customer service
Successful banks will differentiate themselves with customer service that is personalized and provided at the human level. "The physical network is now de-emphasized, and technology has leveled competitive distinctions. What’s driving a banking customer’s decision? It’s all about how you’re treated – that’s the Concierge Economy," says Gary Ambrosino, CEO of TimeTrade, which helps banks and other financial institutions personalize banking. "Services have to be responsive and they must provide a point-of-presence (a person) for your banking needs that demonstrates personalized knowledge about you. In the Concierge Economy, banks will layer VIP treatment into standard services – like having an Uber ride dispatched as part of a bank appointment," he says. The attempt to get more involved in customer’s lives will propel banks towards e-commerce, shared services, entertainment and more, says Oren.
8. Credit cardholders will want more control
Cardholders will seek control of their card much more assertively and expect this from their banks and processors, for example to be able to turn their card on/off, specify where the cards can be used using location preferences or specify type of merchants or transactions their payment cards can be used for, says Rachna Ahlawat, former Gartner banking analyst and currently executive vice president of Ondot, "Cardholders know where best they shop, with controls, they can keep their cards active for their need and avoid misuse."
9. Biometrics get bigger
James DeBello, president and CEO of Mitek believes in 2016, biometrics will become the norm. "It will be used for nearly 50 percent of mobile transactions, including banking, shopping and enrollment."
10. Push notifications for enhanced security
Traditionally, accessing online banking is a tedious process and remembering complex usernames and passwords is a hassle. In the coming year, says Ray Wizbowski, vice president of Financial Vertical at Entrust Datacard, many more banks may begin implementing push notifications to confirm customers’ identity on mobile devices. With this method, customers can securely authenticate their identity to access mobile banking services with one click – no password will be required.