Viewpoint: 5 Banking Trends for 2016
By William Inman, MyBankTracker
Banks have always been in a state of flux, and today is no exception.
The first “banks” involved lending grains to people who transported goods from place to place. Thousands of years later, Renaissance Italy saw major advancements in the banking system through the rise of a number of powerful banking families, and during the 20th century, banks became Wall Street behemoths that used sophisticated technology to conduct complex financial transactions.
Now in 2016—following the financial crisis, the rise of mobile technology and other sweeping consumer trends—financial institutions as we know them are undergoing another seismic transformation. Digital technology is reshaping what consumers want from their banks and the way they conduct transactions. Let’s take a look at the top five banking trends for 2016.
Classic films such as “Mary Poppins” and “It’s A Wonderful Life” depict scenes of banks closing their doors as a cause for panic. In 2016, we will see many banks close their doors, but for different reasons (and without the same drama). Consumers today are increasingly accessing banking services via the Internet. Eighty-one percent of people have banked online in the past year.
The fact that people can readily access financial services remotely means there’s no longer the same need for a bank branch every couple blocks. As a result, major banks such as Bank of America and JPMorgan have recently announced plans to shutter hundreds of bank branches across the country. They are working to remove people from the process and do as much as they can electronically.
Focus on Mobile
While they are reducing their brick-and-mortar presence, banks are ramping up their mobile presence, since according to the Federal Reserve, 52 percent of smartphone owners with a bank account use mobile banking and more than half of users log in at least two to three times a week. Mobile clearly represents the future of banking, and strong mobile services are clearly important to consumers, which is why these organizations are doubling down on their mobile apps. This entails creating a streamlined user experience, as well as delivering innovative features. For example, some banks are providing short-term account balance forecasts, while others adapt the background picture in the app to whatever city the customer is in when they access the app.
Putting People in the Process
Customers may want the convenience of online/mobile banking, but they also want the level of customer service that only people can provide. Dealing with money is sensitive, and financial transactions can get wrapped up in a lot of anxiety. According to a MyBankTracker poll, people still want to go to a bank where there are people and have their questions answered. They want to know that when they need help, they will be able to get it from a human instead of from a machine.
Every bank will have to figure out the right balance in 2016 between going digital, while also providing the responsive customer service that users still want.
The Fading of Plastic
For years, there has been speculation about when plastic payment cards will disappear and people will pay for everything with their phones. Adoption of mobile wallets and payment services in the U.S. has remained fairly low and lags behind many other countries. The fact is that whipping out our phones just isn’t that much more convenient than whipping out a payment card. And, since the benefits are minimal so far, the change is incremental.
That said, we may finally see a sea change in 2016. Technology advancements have lowered the bar for e-commerce and made mobile payments more accessible through services, such as Apple Pay. In addition, we’re seeing more services that make using mobile payments over card payments worthwhile, such as the ability to order ahead and earn loyalty points. This trend will pick up momentum in 2016 as retailers and mobile payment providers alike come up with new and interesting ways to leverage cardless payments.
As electronic payments increase, so must the security surrounding them. America is the world leader in payment fraud, and card-not-present fraud is on the rise. Any institution, whether it’s a retailer, payments network or bank, will have to invest considerable resources in security if it hopes to keep its customers. This means robust fraud prevention and flagging capabilities, as well as online or in-app authentication features.
Following a string of high-profile hacks, security is a top priority for customers, and they are willing to take the necessary steps to protect themselves (especially if they have been affected by fraud before). While delivering strong security should be a given, some banks may end up trying to make money off the fraud risk by charging more for additional security features.
As we head into the New Year, banks and other financial services providers must continue responding to changing consumer behavior and technology trends. The ones who can adapt and deliver what connected consumers want will prevail.
William Inman is a personal financial expert and editor-in-chief at MyBankTracker. He is the former editor-in-chief of The Street and former editor of publishing at Bloomberg L.P.
In Viewpoints, payments professionals share their perspectives on the industry. Paybefore’s goal is to present many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.