Does Banking’s Optimism Match Tomorrow’s Reality?

The majority of banking executives are optimistic about the future and their ability to meet consumer expectations. With new market entrants and legacy challenges, will today's perceptions match tomorrow's realities?

By Jim Marous, Co-Publisher of The Financial Brand and Publisher of the Digital Banking Report

Despite numerous challenges over the past decade, including the need to restore trust, reduce costs, defend business against new market entrants, and develop a more responsive digital banking model, the majority of larger bank executives remain optimistic about the future. In fact, many banks have embraced the digital movement and are confident they are making strides to keep pace with emerging fintech competitors.

Unfortunately, according to the 2016 Banking Industry Outlook, published by KPMG, the strides overall are small compared to the movement of the marketplace. Now more than ever, the need for speed is paramount, as new competitors continue to enter the marketplace and the digital expectations of the consumer increase.

“Banks realize they must adopt a truly digital mindset across the entire organization to keep up with consumer expectations,” said Brian Stephens, national leader for KPMG’s U.S. Financial Services practice and the firm’s U.S. Banking and Capital Markets sector. “This means going far beyond digital capabilities on the front-end and instilling a core focus on the customer that permeates every aspect of the organization.”

Key banking trends identified in the study include:

• Optimism regarding future growth
• Progress in becoming a digital bank
• Lack of ‘fintech fear’
• Embracing omnichannel distribution
• Postponement of systems upgrade
• Lack of commitment to innovation

Optimism Regarding Future Growth

87 percent of the executives surveyed in the KPMG study expect revenues to grow over the next year. The projections for growth were more modest for larger organizations than for smaller firms, with 60% of the larger organizations (>$250 billion) expecting 0-5% growth and 54% of smaller firms ($20–$50 billion) projecting over 10% growth.

When respondents were asked about the drivers of revenue growth, the majority expected to grow investment services business, with cross-selling and additional fee generation on new services also being important. While there is optimism around the potential for growth, it is important to note that many of the sources of growth are also where fintech firms are becoming more competitive.

According to the KPMG report, “Banks willing to seize the opportunity to become innovators of new products and services by embracing disruptive technologies and transformative forces will be better positioned to reach growth targets.”

Progress in Becoming a Digital Bank

Are legacy banking organizations overestimating their ability to compete in an increasingly digital marketplace? In the KPMG survey, more than half of the banking executives surveyed feel confident of their digital banking capabilities, with almost three-quarters of executives rating their organizations from 7-10 on a 10 point scale ...

To read the rest of the article about what is needed to prepare for the future of banking,  go to the complete article here ...

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