Moving forward faster
It's no secret that slow and steady no longer wins the race. Yet, for banks, the need for speed is becoming more important than ever before.
Banks have certainly made progress in recent years. In many respects, they are in good shape and are optimistic about the future. In fact, 87 percent of the 100 US banking executives1 surveyed in our 2016 Banking Industry Outlook Survey foresee revenue growth over the next year. Approximately two-thirds of respondents believe their organizations are actively embracing change, and more than half rate their current digital capabilities in the above average to excellent range.
But perception today may not match reality tomorrow. There is much more to do. And quickly. Today, any and all parts of a bank's business model are fair game. Newer, tech-savvy entrants have speed and agility on their side and continue to successfully nip away at different facets of a bank's business. Meanwhile, consumer expectations of highly personalized experiences continue to evolve daily.
So how fast is fast enough? For banking executives, this question looms large. Depending on bank size, strategic priorities will differ but common challenges remain. Managing costs, upgrading outdated legacy IT systems, complying with evolving regulation and changing a process-driven culture are just a few. In addition, they also must grapple with their own identity. Bankers by tradition, are typically risk- averse, long-term strategic planners—the antithesis of the tech entrepreneur rapidly encroaching on their space.
A key to future success will rely on banks' ability to fully integrate digital into their business. 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. Banks continue to incorporate digital capabilities and recognize the need to continually innovate the customer experience. However, digitization has not yet become a foundation for their business. Therefore, to keep their home field advantage, banks will need to continue making adjustments to their business model, incorporate new and emerging technology in ways that customers will find favorable, and adapt a truly digital mindset across the entire organization.
Change is, and will continue to be, hard. Still, as you will see, many of the results of our survey indicate positive strides in the right direction. However, they also serve as a reminder that time is of the essence. Banks need to accept it's no longer a race the big and strong are guaranteed to win. Speed and agility count just as much...if not more. And the time to accelerate is now.
Gaining ground on growth
The long-awaited banking technology revolution is taking root. It's true the progress to date has been small, and much work remains before fundamental changes gain real traction, but banks continue to move in the right direction. And the positive momentum is clear.
Our survey results reveal optimistic expectations as 87 percent of the banking executives surveyed foresee revenue growth in the year ahead. Larger banks are more modest in their growth predictions, with 43 percent expecting to see growth of up to five percent, while 46 percent of their smaller counterparts are more optimistic, anticipating revenue growth in 11 to 20 percent range in the next twelve months.
Q: How do you expect your company's revenue to change in the next 12 months?
According to survey respondents, the top three growth drivers include developing and selling new investment services, cross-selling services and charging fees for innovative and valuable products. It's worth noting that many of the sources banks are relying on for future revenue growth are underpinned by digital technologies—and the field for those services is becoming increasingly competitive as financial technology (fintechs) and other tech companies chase after the same valuable margins.
Q. What specifically is your bank doing to drive revenue growth?
The optimistic expectations for growth signal that banks see real opportunities ahead. Despite an increasingly competitive landscape, new revenue opportunities will likely be found by increasing personalized services to customers. 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.
1 Responses in our 2016 Banking Industry Outlook Survey include senior executives at 70 of the largest banks in the U.S., which hold nearly 80 percent of all banking assets in the U.S. banking system.
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