A few weeks ago, many of us set New Year's resolutions for ourselves. Deloitte's Center for Financial Services preferred to avoid this introspection and instead laid out a few for the banking sector for 2014. [download report]
Some people make resolutions to get fitter and shed some weight. Banks have made a lot of progress on getting in shape and their balance sheets are now stabilising. Other people pledge to give up a bad habit. Banks, with the help of regulators, have reformed how the industry is run, making scandals like Libor-fixing and PPI mis-selling less likely to happen in the future. Another popular resolution is to learn a new skill. This is where Deloitte thinks banks would be wisest to invest their efforts. Forget learning a musical instrument or taking up a second language – the industry needs to upskill in technology.
Economic forecasts are more optimistic than they have been in years. If these prove accurate, banks will have more business to compete for in 2014. But the competitive landscape will also be heating up. New players are entering the fray – think Paypal, Google, Metro Bank. Regulators are still breathing down banks necks. And capital pressures remain high.
To cope with this challenge, banks should embrace technology – an area that includes everything from big data to security against cyber attacks. Technology is also the driving force behind one of the most important trends in the industry, the shift to digital banking. The jury is still out on how much money this can save the industry. But what is certain is how it can improve the customer experience. Research has shown that people who use digital banking are more likely than those who don't to recommend their bank to friends and less likely to switch to another bank. Sentscheck – a real-time social media sentiment analysis produced by Deloitte and SAS – has shown that people are more positive when speaking online about digital banking than about other channels.
Most of us renege on our New Year's resolutions within weeks, knowing we can get by more or less fine without them. Banks may not have this luxury. Technology can give customers what they want. If banks can't do that, someone else will.
To find out more about this and other predictions for the year ahead, check out Deloitte's 2014 Banking Industry Outlook.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
