Top Banking and Credit unions Strategic Priorties in US

The recently conducted 2024 Strategy Benchmark by Jack Henry & Associates found that Deposit growth, attrition prevention, and NIM compression is top of mind of Banks and credit unions. Interestingly, both bank and credit union CEOs are much less concerned about an economic slowdown this year compared to last year.

Reducing delinquency and fraud prevention do not figure in the top 5 strategic priorities but automation for increasing efficiency and concern around NIM compression could drive Banks and credit unions to focus on Risk and fraud initiatives.

With a sample size reflective of Jack Henry's core client population of 1,622 financial institutions, the findings carry significant weight, providing a nuanced understanding of prevailing trends and priorities shaping the industry.

Key Insights:

1. Growing deposit: The most difficult and most important priority: Growing deposits, while deemed the most important strategic priority, is also considered the most difficult to achieve, followed closely by accountholder acquisition and increasing operational efficiency.

2. NIM and ROA are Top Performance Metrics: The top three performance metrics cited across all financial institutions are NIM, ROA, and efficiency ratios, underscoring the enduring significance of financial performance benchmarks in assessing organizational health and viability.

3. Divergent Focus: While banks prioritize NIM as a key performance metric, credit unions lean towards ROA, reflecting differing operational paradigms and performance evaluation frameworks. This divergence is rooted in the contrasting operational challenges faced by each institution type, with credit unions grappling with the fallout of higher operating and provision expenses.

4. NIM compression is Top Concerns: NIM compression and deposit attrition/displacement rank as the primary concerns for both banks and credit unions, followed by talent acquisition/retention for banks and price compression on financial services, and rising loan delinquencies/write-offs for credit unions. Despite lingering concerns, both bank and credit union CEOs exhibit decreased apprehension regarding an economic slowdown compared to previous years

Key Takeaways:

1. Growing Deposits Reigns Supreme: Unsurprisingly, growing deposits emerge as financial institutions' overarching strategic priority in 2024 and beyond. A staggering 72% of bank CEOs and 44% of credit union CEOs prioritize deposit growth, reflecting its importance in driving sustainable expansion and competitiveness.

2. Operational Efficiency Gains Momentum: With expenses exerting pressure on net income, enhancing operational efficiency assumes heightened importance. Both banks and credit unions are doubling down on efforts to streamline operations, signaling a shift towards leaner, more agile operational frameworks.

3. Technology Emerges as a Catalyst: Technology occupies a central role in the strategic agendas of financial institutions, with a notable 80% planning to increase technology spending over the next two years. From fraud detection to digital banking and data analytics, investments in cutting-edge technologies underscore a collective commitment to innovation and customer-centricity.

4. Navigating Challenges: Net interest margin (NIM) compression and deposit attrition/displacement emerge as top concerns, highlighting the delicate balance between revenue generation and customer retention. While banks prioritize NIM as a key performance metric, credit unions pivot towards return on assets (ROA), reflecting distinct operational focuses and performance benchmarks.

5. Fintech Integration and Niche Market Targeting: The integration of fintech solutions into digital banking experiences emerges as a pervasive trend, with 92% of financial institutions planning to embed fintech over the next two years. Moreover, a strategic emphasis on serving niche markets, particularly small and medium-sized businesses (SMBs), underscores a commitment to specialized services.

6. Payments Innovation: Payment services emerge as a focal point for expansion, with 96% of financial institutions planning to enhance their payment capabilities. From real-time payments to digital card issuance, the quest for seamless, efficient payment solutions underscores a relentless pursuit of customer satisfaction and operational excellence.

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