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07.07.2016 2016 Banking trends | Center for Financial Services | Deloitte US
http://www2.deloitte.com/us/en/pages/financialservices/articles/bankingtrends.html 1/5
What are the top three issues for the bankingsector in the coming year?Some are predictable – regulatory issues for instance. I’m sure regulatory will be onthe short list next year, and the year after, and so on. Lots of regulations have emergedover the past few years, and banks continue to adapt to the changing environment.This is not something we see ending anytime soon – it’s just going to continue on arolling basis for the foreseeable future.
Meanwhile, cyber risk, while not at all new, has rocketed up the list of leading issuesfor banks – for the board, the CEO, the C-Suite, you name it. Nobody wants to be onthe wrong side of that headline. One reason this continues to loom large is that thenature of the threat is constantly evolving, and not just from a technology perspective.For example, today a bank may be threatened not just by groups that are looking tosteal money, but by actors that may simply want to be disruptive. It’s a big issue thatcommands a lot of attention – and, these days, a lot of investment.
I expect continued innovation to be a big issue over the coming year. We’ve alreadyseen a decent amount of disruption from new entrants into the marketplace. By andlarge, these offerings may not be disruptive on their own – it’s not like the market hasbeen turned upside-down by something entirely new yet. But their impact on the moretraditional players can be disruptive – we’re seeing banks really reevaluate how they’reinteracting with their customers, for example. They’re looking at new channels forinteracting with customers. They’re having to respond to new products. The cumulativeeffect can be significant.
Key takeaway:
Banks are driving a lot ofinnovation on areas one mightexpect FinTech companies tolead. We’re seeing a lot ofinnovation from banks on areaswhere you might expectFinTech companies to lead.
2016 Banking trends: Taking a closer lookInterview with Kenny Smith
Perspectives
Kenny Smith, US Banking & Securities leader, outlines expected trendsand issues for the year ahead - including trends that may disruptbusiness as usual.
07.07.2016 2016 Banking trends | Center for Financial Services | Deloitte US
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Where do you see opportunities for growth andinnovation?Consider the intense amount of effort that banks have poured into using businessanalytics to better understand, navigate and predict their risk environment. Now,switch gears and think about the way that banks are growing these days – less throughmergers and acquisitions, and more through expanding their relationships withconsumers.
And now they’re really starting to apply those skills to the job of understanding andservicing their customers better, in order to grow those relationships. Customerexperience is clearly a path to growth, and it’s going to be enabled by sharpercustomer insights. That’s one reason why we see analytics serving a big role in growthand innovation over the next year and beyond.
Key takeaway:
Analytics will serve a big role ingrowth and innovation over thenext year and beyond.
What trends might disrupt “business as usual” in2016?Obviously, there’s a lot of talk – and concern – about the rise of financial technology(FinTech) offerings lately. Usually the conversation is about the threat banks face ifFinTech firms insert themselves between banks and their customer base. I do thinkFinTech has the potential to be disruptive, and there are already signs of suchdisruption. But here’s the thing: While there’s always the potential for a disruptivethreat, I think disruptive opportunities are more likely. Because it’s not like banks havebeen asleep at the wheel on this development. Trust me, they’ve been paying closeattention, and as a result we’re seeing a lot of innovation from banks on areas whereyou might expect FinTech companies to lead.
The interest rate environment is also, as always, a potentially disruptive force. It’sbeen quite stable now for a long time – and meanwhile, costs continue to rise, in anenvironment where margins are already thin. All of this is forcing an intense focus onmanaging costs, leading to everything from business restructuring, moving to moreambitious technology platforms, and more. Depending on how interest rates play outin 2016, costs could move near the top of the list of pressing concerns.
Key takeaway:
While there’s potential for adisruptive threat, disruptiveopportunities are more likely.
What are some steps companies can take toaddress these challenges?For starters, we’re seeing a lot of partnering with FinTech companies, rather thanstraight-up competition – and I would anticipate more of this. When it comes toFinTech, I think a lot of banking leaders are asking themselves “where could thesecompanies wedge themselves in between the relationship between our bank and ourcustomers?” And rather than fight it out on those fronts, they’re looking to collaborate.In that regard, it’s really just an evolution in their operating models.
Also, as I mentioned earlier, customer experience really is seen as a key path to growthtoday. We see banks making larger investments in streamlining and optimizing thecustomer experience – basically making it easier for consumers to consume services.Even more traditional offerings are being served up through multiple channels. I thinkthere’s no way around this: The banks that will lead the way in the future are the onesthat can figure out how to keep their customers happy. As a practical matter, thatmeans they’re going to have to continue digitizing processes or experiences that wereanalog in the past, making more progress on customer-focused analytics, and more.
Key takeaway:
Banks will make largerinvestments in streamliningand optimizing the customerexperience.
In their quest to better understand and manage risk,banks really honed their analytics chops.
07.07.2016 2016 Banking trends | Center for Financial Services | Deloitte US
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What long-term disruptors could reshape theindustry?
Today there’s a lot of chatter about nonbank players and how they could disrupt thebanking industry. In the near term, I think those threats are overestimated. This is notan industry where it’s easy for an up-and-comer to emerge quickly and turn everythingupside-down. But at the same time, long term it would be foolish not to entertain thepossibility that a large technology company could set their sights on banking and scaleup to the point where they really have disrupted things. To be more specific, they couldsimply start with payments or lending, and then steadily expand their sphere of influence.
The other long-term disruptors are the ones we are beginning to become morefamiliar in banking, such as:
Blockchain
Cryptocurrencies
Cognitive computing
Collaborative economy
There are lots of interesting possibilities here. We will be releasing a point-of-view onthese disruptive forces later this winter.
Key takeaway:
Technology companies couldset their sights on banking andscale up to the point wherethey really disrupt things.
Explore additional resources and insightsRead our Financial Services Industry Outlooks blog series, which provides ateaser into our longer-term reports coming out next year.
Register for our upcoming Dbriefs webcast entitled, "2016 Banking and CapitalMarkets Industry Outlook: What lies ahead?" with Jim Eckenrode, director,Deloitte Services LP.
Browse the 2015 Industry Outlooks.
Learn more about the Deloitte Center for Financial Services.
Access the archive2015 Banking Industry Outlook: Boosting profitability amidst new challenges.
Meet our leader
Kenny M. SmithFinancial Services Industry Leader
[email protected] +1 415 783 6148
Kenny is Deloitte's Financial Services Industry leader, responsible for overseeing a team that works with 90percent of the largest financial institutions across Deloitte's audit, tax, consulting, and... More
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