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A businessman is consulting a crystal ball to foretell the future.

So begins a new year, a new administration and new possibilities in the ways banks will approach business and operations


This article was originally published in BAI Banking Strategies .


It’s that time of year again—time to put away the ball in Times Square and polish up our crystal ball for 2017. What do we think will be the key trends for the industry? Here we present our picks for distribution, innovation, technology, and compliance.


  1. Banks will open 1,000 new branches. OK, this sounds counter intuitive – yes, there are too many bank branches and the total number will decline. Furthermore, more banks will take advantage of sale-leasebacks, which will get them out of the real estate business and allow them to free up capital for investment in new channels that better meet changing customer needs.

But banks are still opening 900-1,000 new branches a year. One thing we’ve learned over the years: there is no “build it and they will come” (except in fictional sports movies with the word “Dreams” in the title). It takes the right location—supported by the right marketing and the right staffing—to create success. Maybe those attributes were always important, but they will prove even more so in today’s environment with changing customer channel usage.


  1. Rebirth of the call center as virtual branches. The customer contact center is even more important in an omni-channel environment. Customers now use more channels than ever before but they expect consistency across them:  centralized contact centers are well positioned to provide this.


Banks are using their contact center for video conferencing with product experts, remote teller management for low transaction branches, or on-line chat to simplify access. More banks are moving toward centralized services where small business and investment experts can be instantly available instead of mixed into the branch network as circuit riders for a group of branches, with the result that they are rarely in the right place at the right time.


But achieving the potential of these new Customer Experience Hubs requires different management strategies and operational metrics.  New training, knowledge management, and simplified customer interactions designed for more complex cross-channel interactions will be required.


  1. Fintech, Fintech, Fintech! We used to think they were competitors, but more and more we see them as partners. The reality is that Fintechs are particularly skilled at creating a frictionless and intuitive customer experience.  Many offer faster payment processing. Others provide simplified, instantaneous business loan processing by connecting directly to information sources for verification instead of relying on the customer to gather and provide paperwork.


Where do we see the most effective partnerships?  Robo-advisory and small business loan processing are natural fits. The models are tested and they have high consumer acceptance. Furthermore, the speed to market achieved by partnering with Fintech’s is at warp pace, compared to the typical in-house or major core provider bank implementation. And that means that banks can bring new products and services to market in a few months, vs. years in the IT pipeline.


  1. The Regulators aren’t going away. Yes, we can expect some rollback of the Wall Street reforms and consumer protections that took effect when Dodd-Frank was signed into law in 2010. More constraints will likely be placed on the Consumer Financial Protection Bureau (CFPB) under the new administration as well. But it will take time before these changes are codified into regulation and create practical impact.


What’s more, new regulatory concerns may offset any easing. Cybersecurity is clearly on the minds of both regulators and lawmakers and we expect even more attention to this area.


Furthermore, the CFPB’s new compliance bulletin on sales incentives requires banks to strengthen their compliance management, step up Board oversight, review training,  and review incentive programs. According to the CFPB, “The risks these incentives may pose to consumers are significant and both the intended and unintended effects of incentives can be complex, which makes this subject worthy of more careful attention by institutional leadership, compliance officers and regulators alike.”


  1. Big Data will transform marketing. Marketing drives sales, but with even more different marketing channels it has been hard to tell whether we are spending too much or too little in specific digital and traditional media; or understand exactly which programs and investments are really driving sales.  The old adage is particularly relevant:  “Half the money I spend on advertising is wasted: the trouble is, I don’t know which half.” 


But now we can know – new data analytics really can tell us with a high degree of predictability  how to optimize the overall marketing mix, and this has resulted in savings of up to 30% without loss of sales.


These models, which used to be affordable for only the largest marketers, are now cost efficient for community banks and we expect more to shift from agency driven “rule of thumb” and experience to “Moneyball” style customer, channel and marketing analytics.


How accurate are our predictions? Time will tell. We’ll keep our eyes on the ball, crystal or otherwise, until the next ball drops in December.


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