FROM FIGHTING the war for deposits to breaking down silos in digital transformation and analysing the payment landscape, FICO is confident that banks will make substantial progress next year in three areas of tactical concern within consumer banking.
1. Banks will get smarter in the deposits war
The good times are over. In our current rising rate environment, any bank that can’t grow (or at least sustain) its deposits base will face shrinking net interest margins and a competitive disadvantage in their consumer lending businesses. Indeed, we are already starting to see signs of distress among community and regional banks that lack the advertising budgets and sophisticated digital capabilities of the big national banks.
In response to this competitive pressure, top 100 banks will invest in an area that has been neglected for too long — deposit pricing strategy. Sophisticated analytics tools, like optimisation, and the ability to rapidly deploy the models developed by those tools will give banks the ability to deliver smarter, more granular pricing, enabling them to compete effectively in this increasingly frenetic environment.
2. Banks will address the problem of silos
Digital transformers need to realise they have a silos problem.
A majority of banks are undergoing digital transformation, ranging in scope from simple channel technology upgrades to massive enterprise re-platforming initiatives. The goal is to create modern, compelling customer journeys that will differentiate the organisation from its competitors. In 2019, it will become increasingly clear that these transformation projects require more than just new technology – they also require significant organisational changes.
Siloed business units and technology stacks for credit risk, marketing, fraud and compliance work extraordinarily well for maintaining the status quo, but poorly when it comes to large-scale transformation.
Banks will increasingly recognise this and work to ameliorate the negative effects of silos as they shift from product-centric to customer-centric business strategies.
3. Emerging Payment Solutions Will Grow Up
Emerging payment solutions — mobile wallets and P2P payment networks most notably — are slowly but steadily displacing legacy payment options like cash and credit cards and cementing themselves in the day-to-day lives of consumers (particularly Millennials and Gen Zers). Big strides are already being made in Asia Pacific with mobile payment usage climbing 30 per cent in 2018, a trend that will only accelerate in the coming year.
However, the faster these new payments move, the more attention they will attract from criminals. Emerging payment solutions will become more mature in 2019 as payments executives focus on educating their customers and adapting their fraud controls to compensate for this growing threat.
Written by TIM VANTASSEL, vice president and general manager for risk of FICO.