Banking institutions are looking at major changes in 2017, including some upheavals that could alter the nature of the industry. Let's take a look at three of the biggest trends coming, and just why they are important for top-down strategy.
The Fallout from Consolidation
Consolidation has been the name of the game for the past few years (or much longer, depending on your perspective), with massive convergence due to M&A activity throughout the industry, specifically in 2015 and 2016. These types of mergers are familiar sights in the financial industry, but the particular impact on banks is going to be pronounced in 2017: In other words, get ready for local market disruption.
Marketing and advertising are growingly increasingly localized, which puts these new conglomerates at a disadvantage in some areas. Locations rich with small businesses and entrepreneurs, for example, are interested in local banks. They want financial companies that understand the area, its unique needs, its cultural outlook, and the specific goals of nearby business people – in addition to local representatives and branches. While M&A activity certainly introduces its own efficiencies, it doesn't do much to meet such area-specific needs. How will banks respond when they lack a regional presence, as well as the resources to establish one?
However, the old "it's an ill wind" saw applies here as well. Banks and other financial institutions that remain highly regional will have a built-in advantage when it comes to appealing to these community-oriented customers. On an individual basis, who doesn't prefer to visit a nearby branch with a brand that has local involvement? We could be looking at a revival of community banks and credit unions in a variety of economic areas. All eyes will be on consumer preferences in the coming year, and you can expect a flurry of "we love local" marketing campaigns from megabanks.
Big Questions About Regulatory Freedom
It is like that banking regulations will see upheaval in 2017 – the question is what kind. Make no mistake, this is primarily political, and there is a great amount of uncertainty in any political foretelling, especially in the political environment born from 2016. Soon-to-be President Donald Trump has made it clear that he is no fan of over-regulation, and that requirements may need to be eased to encourage economic growth. With a Republican House of Representatives and Senate to work with, deregulation is certainly possible.
The problem is defining that deregulation. No specific repeals or ideas have yet surfaced. Certain types of regulation, like Dodd-Frank, have become so cemented in the industry that repealing them may be too much of a headache even for this Congress to attempt. Also, political capital may be at stake – politicians will want to avoid any appearance of helping "Wall Street."
So what will happen to regulations is up in the air, but loosened restrictions appear likely. The most promising targets are laws like the Durbin Amendment, which could make local growth easier if repealed. Incentives are also a possibility, although what form they would take is still (literally) up for debate. One thing we can forecast is a growing need for experienced talent, employees who have built-in knowledge of compliance law, and the ability to learn new guidelines as they arise.
Fintech Settles Down – and Starts Addressing Real Problems
It's been a wild few years for financial technology, but now the dust is starting to settle. Most financial institutions now offer mobile apps. Websites have been overhauled with friendlier interfaces. Chat software has been adopted. New financial advice sites have been created. The industry has thrown features out to the millennials, and the millennials have responded. Now the real work begins.
You see, the rise of fintech was the easy part. Banks looked at digital solutions, chose some, and adopted them. But fintech is like traditional financial management, and its new requirements are now catching many companies off guard. Just look at the rise in data security breaches and compromised devices that 1)haven't been properly secured on a software level and 2)haven't been properly protected on a physical level, regarding employee behavior.
Banks, with their reliance on valuable financial data, have quickly realized that they are prime targets in today's hacking world. They are also spotting where tech strategies fall short: It's not enough to have a mobile app, you have to have an app that stays constantly updated. It's not enough to have encryption, you also have to think about the flow of data, and where that data is housed.
As a result, 2017 is going to be a big year for fintech, but in a very different way. Instead of adopting new solutions, financial institutions are going to be adjusting the solutions they have, making them safer, easier to use, more scalable – and less vulnerable to attack. That will increase demand for a variety of adjacent services.
Of course, changes like these require new talent. Let's talk about what the upcoming year has in store for you!