Banking Leaders Predict Major 2013 Trends

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Trying to predict what is going to happen in the banking industry is like trying to predict tomorrow's weather. While you may get the forecast right, it could be more a case of luck than skill. And what you see today could quickly change tomorrow.

With that as the backdrop, I asked almost fifty industry leaders who author blogs I read, post on Twitter, speak at industry trade shows or make banking a career for their thoughts on what may be the most important trends in retail banking in 2013.

The predictions ran the gamut from what may occur in payments to how bank distribution could begin to transform. While some focused on larger megatrends, others had a narrower scope. In all cases, however, the predictions provide food for thought for bankers and industry providers. It is clear the one forecast that is guaranteed to be accurate is that the industry will be different this time next year.

Battle For Payment Supremacy Will Continue

The past few years has seen a massive amount of change in the payments world, with a reduction of interchange fees, the infiltration of retailers and non-banks like Starbucks, PayPal, Square, MCX, etc. and the beginning of a shift from plastic to smartphones as the payment device of choice. While past predictions around NFC, an Apple mobile wallet and a cash-less society have not yet come to fruition, there are still no lack of industry luminaries placing bets on how we will transact in the future.

Tom Noyes, author of the mobile, payments and advertising blog, FinVentures, states, "Retailer friendly value propositions (MCX, Square, Levelup, Fishbowl, Google, Facebook, etc.) will get traction . . . but MCX will not deliver for another 2 years."

Ron Shevlin, senior analyst from Aite Group and publisher of the Snarketing 2.0 blog believes the most significant trend in 2013 will be the evolution of the digital wallet concept. According to Shevlin, "The digital wallet will be the new battleground – for technology companies, financial services firms, and retailers/merchants. They say that politics makes strange bedfellows – but so will digital wallets. The evolution of the concept will involve a lot of interesting partnerships and joint ventures." 

Matt Wilcox, senior vice president of Zions Bank and financial industry blogger believes we will begin to see the separation of contenders from pretenders in the payments space. "While there will still be multiple players vying for position, I believe a few companies will begin to emerge as leaders in this space." Alex Bray, retail channel solutions director at Misys in London agrees, saying "I think we will see the market coalesce around a standard form of mobile payments - and contrary to what PayPal may say, I think this will involve NFC."

Delivering On The Promise of 'Big Data'

There is no doubt that 'big data' was overused and misunderstood as a term and underutilized as a tool in 2012. There is also little disagreement among industry leaders that banks will be aiming to use both structured and unstructured data more extensively in 2013 as the collecting, storage and processing capability becomes easier and less costly.

As David Gerbino, digital product, marketing and strategy manager at Provident Bank in New York told me, "The big trend for me every year is data. Not big data, not small data, just the right data". He went on to say, "Once the data elements needed are identified, the challenge becomes using these components correctly to drive success."

Rod Witmond, SVP of rewards platform provider Cardlytics, emphasized the trend of utilizing data from the consumer perspective in 2013 but warned, "Big data can be incredibly insightful but, if it isn't leveraged in a simple way that allows the consumer to maintain their current habits – or adds enough value that the consumer is willing to change their habits – the value of the big data will be lost because consumers don’t ‘try something new or different’ if what they have already is working."

Some of the Twitter responses I received regarding banks improving the utilization of both structured and unstructured data at their disposal included:

Finally, Nate Gardner, vice president of strategic partnerships at Provo Utah based MoneyDesktop, believes that intuitive data visualization will begin to deliver on the promise of big data for banks in 2013. According to Gardner, "Intuitive analytics will make it easier for bank executives and marketing teams to customize the user experience and deliver tailored messaging, product offers and solutions that best meet specific consumer needs and interests."

Transformation of Delivery Channels

Consumers want a convenient, secure and familiar experience when they interact with their bank using mobile, online, phone, ATM or their branch. They also want their bank to realize that they may use multiple channels at the same time. This channel agnostic interaction has been recently referred to as an 'omnichannel' experience in the retail industry.

According to Mary Monahan, EVP and research director at Javelin Strategy, “To correct current shortcomings, FIs will focus on changing their perception of omnichannel banking as necessary rather than novel. Moreover, for FIs to increase or even maintain their competitive positions in the coming years, they will need to invest in developing an integrated architecture wherein data and platforms can seamlessly converge while enhancing the quality of the brand experience.”

Branch Delivery

Under the heading of 'traditional branch banking', there was no hesitancy for industry leaders to provide warnings. Serief Meleis, a partner at Novantas warned, "Continued overcapacity of branch distribution resembles the airline industry of the early 80's. Fundamental restructuring must begin sooner rather than later." Not surprisingly, Brett King, author of the new book Bank 3.0 and founder of branchless start-up Movenbank added, "Market analysts will start to discount retail banking stocks with large branch networks as poor branch performance becomes visible."

Andy Will, senior vice president of deposit products and card services at BMO Harris agrees that the traditional mid-sized branch has too much real estate and staff costs to be viable going forward. Discussing a trend he believes will extend beyond 2013 Will states, "I believe branches will get simultaneously bigger andsmaller. There will be the addition of regional 'Apple store' sized branches in prime locations combined with micro branches to 'fill in' the rest of the markets." Will adds, "Both the large and small branches will be highly automated with two-way video, touch terminals, etc."  

None of the experts put the trend in perspective better than Bart Narter, SVP of Celent who stated, "The branch is banking's new alternative channel."

Mobile Banking

In a report just released by Juniper Research entitled, 'Mobile Banking: Handset and Tablet Strategies 2013-2017', it was estimated that more than 1 billion mobile phone users will have used their device for banking purposes by 2017. In addition, it was projected that more banks will have multiple mobile offerings, maximizing customer penetration potential. These trends were reflected in many of the predictions for 2013.

Fred Hagerman, CMO of FirstMark Credit Union out of San Antonio, TX emphasized, "Mobile is a freight train coming down the tracks - and it's here to stay. Banks that need proof only need to look at their web analytics from the holidays to see a significant bump in mobile device usage in the days after holiday gift-giving."

Some believe that banks, in an effort to speed delivery to market, have created fragmented mobile apps that served limited purposes. Bradley Leimer, Vice President of Mechanics Bank and publisher of The Discerning Technologist feels that 2013 will be the year we move the mobile banking conversation beyond transactions (transfers, bill pay, a brief snapshot of transactions, maybe some financial management) to include enhanced engagement through personalization . . . and more. 

According to Leimer, "We need to engage our customers with their own data, and drive new levels of personalized service to help them create their own value from their transactions. Our mobile applications will see renewed focus on engaging and simplified customer experiences, and improved contextual offer placement. We’ll see more applications leveraging voice, as well as the social graph, because individualized preferences are critical."

Matt Wilcox, from Zions Bank agrees, "I believe we will see the proliferation of “fat apps” that allow for a convergence of multiple applications as well as enhanced personalization for an enhanced customer experience."

Online banking will improve as well in 2013 if the industry leaders are correct. The online banking experience will be holistically reviewed this year according to Bryan Clagett, the chief marketing officer at Geezeo. "The user experience will finally take precedent, and the definition of a 'banking website' will be re-written. Products like PFM will help consumers make better decisions, save money and leverage the vast merchant data that lies within."

Serge Milman, CEO and founder of Optirate sees the focus on new and enhanced delivery channels as being a requirement to stay relevant, but not an inexpensive proposition, especially for smaller institutions. "Mobile and other delivery decisions will become 'infrastructural' initiatives", states Milman. "Banks will spend significantly to implement technology, but smaller organizations may find these expenditures prohibitive and will be slow to see returns."

Marketing and Technology Converge

Significant changes in marketing have been occurring for the last couple years, allowing bank marketers to leverage new technologies to improve targeting, offers, timing and the marketing channels used to communicate. The ability to combine structured and unstructured data described above, with the digital channels available, are a powerful combination for those bank marketers able to keep pace with change.

According to Nicole Sturgill, research director at CEB TowerGroup, "The embrace of digital channels as primary to the customer experience is significant for two reasons. First, it acknowledges the fact that the branch is no longer primary in many customer’s eyes; and second, it places digital sales at the top of the technology priority list for 2013."

Bank website design will also improve in 2013, enabling sites to become better selling tools. Tim McAlpine, president and creative director of Currency Marketing, believes that the use of HTML 5 will flourish saying, "Firms will put more weight into building websites that work on every screen size, versus the current trend of building dumbed-down mobile versions of corporate websites."

David Gerbino, digital product, marketing and strategy manager at Provident Bank in New York agrees. As he stated in my recent post on bank marketer resolutions, "Bank need to rapidly say goodbye to the web. The web of decades past is dead. Today's web needs to be responsive and device agnostic with one website supporting all devices."

These changes will improve the customer experience as is mentioned by Jelmer de Jong, global head of marketing for Netherlands based Backbase and editor of the BANKNXT blog. "Banks have to focus on creating ONE unified superior customer experience, across devices, across channels. Multi-channel strategy and creating a cross channel journey will be key."

While some banks are just beginning to utilize digital channels for their marketing efforts, some have found the power of new strategies such as search engine optimization for digital ads and retargeting for reaching people who are ready to buy.

According to Lloyd Lee, SVP, Integrated Services for direct and digital agency New Control, "The benefit of retargeting is clear - among all offline and online channels, retargeting is often the most efficient acquisition strategy on a cost-per-approved account basis." Lee added, "In 2013, retargeting will become much more widely used by banks as it ensures that banks are capitalizing on all of the traffic being driven to a bank's site from both offline and online acquisition efforts. It will be at the core of the most progressive bank's digital strategies."

The technology will also allow lifecycle and multichannel marketing efforts to merge, providing bank marketers to know who should get what offer, in which channel, in addition to WHEN they should receive the offer according to Bill Secrest, director of Datamyx. "New data solutions are emerging that can add context around when to target a consumer for marketing treatments."

Many of the industry leaders emphasized that these new tools and strategies will be more important in 2013, as the industry moves further away from the industry meltdown of a few years ago and into a period where shifting market share will be needed to grow top line revenue.

J.P. Nicols, CEO of wealth management consultancy Clientific, was rather blunt when he said, "All of the popular buzzword talk of improving client experience, optimizing channel preference and engaging clients on social media is now being viewed through the filter of 'how quickly can we see the impact in our results?' In 2013, this emphasis will put additional pressure on marketers, vendors and partners to prioritize the right projects and the right products and features that will yield results quickly."

On a more fundamental level, Mark Arnold, President of Market Strategies in Dallas, sent me the following trends which will be required as marketers implement new customer-facing technologies:

Product and Segment Opportunities

With regard to which products and services will be most important in 2013, some leaders believe there are untapped opportunities that will emerge in 2013. "Business account acquisition will be – or should be – a top priority for most FIs in 2013 since hardly any bank has been aggressive in this space or made many positive product changes in response to the repeal of Reg Q" offered Mark Zmarzly, vice president of financial services for ACTON Marketing.

Salil Ravindran, lead solutions architect for Oracle in the Netherlands agrees, "Banks will start focusing more and more on servicing the business banking segment through digital channels. The extent of services required by this segment is largely an extension of retail banking and not as complex as those required by the higher end wholesale segment, and hence banks should be able to largely leverage existing digital channel infrastructure to extend these services."

Credit union leaders provided the following tweets regarding where financial organizations may focus in 2013:

Roger Conant, curator of the original credit union tweet tracker site out of Houston believes that focusing on the women's segment will move beyond a niche play in 2013, while Salil Ravindran and J.P. Nicols both believe banks will focus more than ever on the mass affluent market in 2013. In referencing trends in both the EU and US, Ravindran says, "I believe more banks will start offering financial planning services over digital channels, thereby scaling the scope of digital channels from simple products and services to much more complex ones."

New Entrants and Non-Bank Competition Increase

Competition in and beyond the payments marketplace will continue to grab headlines and customers in 2013, making it imperative for traditional banks to keep a watchful eye on both new entrants and new forms of competition. As Simple continues to grow by providing streamlined banking to a growing list of consumers standing in a virtual queuing line to open accounts, Movenbank will open their virtual doors in early 2013>

At the same time, Walmart continues to innovate, leveraging partnerships like those with American Express for Bluebird, focused initially on the middle class consumer. And there is no reason why Walmart should stop with a prepaid offer according to Emily McCormick from Bank Director Magazine. "If successful with Bluebird, I'd look at what Walmart's next move would be, especially if they can dodge the regulatory hurdles than encumber banks."

Of greater concern in the longer run could be those offerings that bypass traditional banking channels completely. The rise of alt-lending (p2p lending, crowdfunding) in both the consumer and small biz space could present interesting challenges according to Jim Breune, CEO and founder of the Online Banking Report and founder of The Finovate Group. "Lending Club's $600-million-year (in loan originations) shows that US investors are buying into the concept and the British Governments recent announcement that they will lend 10 mil (GBP) through Zopa and 22 mil (GBP) through Funding Circle demonstrates that at least one government understands the economic potential of alternative forms of banking."

Continued Focus on Compliance and Security

Viewpoints differ on whether banks have fully adjusted to the impact of increased compliance and the CFPB. On one hand, a mid-sized bank executive stated, "The CFPB will still be a factor in 2013 for retail bankers. The question is, will it help add transparency and customer choice to the market for financial services or will their actions end up stifling choice and innovation because banks will be afraid to try creative new approaches to products or processes for fear of criticism or fines?"

Steve Cocheo, executive editor of the ABA Banking Journal has a more positive perspective when offering, "I believe that bankers will get over their compliance shell-shock in 2013, understandable as it is. While the regulations they face are often overwhelming, many will figure out new ways to meet their regulatory obligations with creativity and some fresh ideas. Not every institution will follow this path, but I believe more will than some think."

Management consultant Steven Ramirez from Beyond The Arc Consultancy sees potential for banks that embrace the context of the CFPB when he said, "Banks that expand the scope of their Voice of the Customer efforts will see an added benefit: mitigation of regulatory risk."

The impact of regulations is not just being felt in the U.S. Of particular concern for banks in the U.K., and potentially the rest of the EU, are proposed 'ringfencing' proposals that are focused on separating a banks' day-to-day retail banking arms from riskier investment bank activities. With the intention of protecting taxpayers from the potential of bailing out banks, these pending rules impact larger banks more significantly and will cause additional distractions similar to what has occurred in the U.S.

While the impact of the CFPB may be stabilizing and many banks are prepared for the impact of ringfencing, the same can't be said for the preparation for cyber attacks. This disturbing trend, which is impacting banks worldwide, may define issues ranging from consumer trust in banks to channel usage in 2013.

Mary Beth Sullivan, managing partner of Capital Performance Group, LLC stated, "I believe the cyber security threat will continue to increase, and retail banking organizations across the country will need to adopt more sophisticated security protocols and educate customers about it much more in 2013."

Bryan Yurcan, associate editor of Bank Systems and Technology agrees with his rather pessimistic post:

Change is Inevitable . . . Or Is It?

As mentioned by Bryan Clagett from Geezeo in development of this post, "Those in traditional retail banking need to realize that banking, as we know it, is evolving largely due to new disrupters in the space. I say, embrace the inevitable and look from within and outward at ways to build better, more efficient experiences."

Jeff Marsico, banking consultant and publisher of his own industry blog, referenced a sentiment similar to Jelmer de Jong's 'Just Do It' resolution for 2013 regarding the hopeful trend regarding the way bankers should look at the future:

Alternatively, maybe we could all step back and hope that Chris Skinner's slightly cynical prediction could become a reality.

Are there any trends you believe will be significant in 2013?

Additional Resources:

Financial Services Analyst Firm Announces Top Ten Trends in Banking, Payments, Mobile and Security for 2013: Javelin Strategy and Research, January 3, 2013

Top Trends in Retail Banking 2012: Celent Research, December 2012

Brand Wars : Sensitive Toothpastes

Indian toothpaste market is worth Rs 6000 crores ( Source Business Line) and growing at 20%. Colgate has been the undisputed market leader in this market.. Competitors has been trying to make a dent in the share through almost every strategy listed in marketing textbooks.

It was an unlikely player- Glaxo Smithkline Beecham (GSK ) which really broke into the stronghold of Colgate. GSK in 2010 brought its global dental care brand Sensodyne into the Indian market. The sensitive toothpaste segment was very small and almost unknown to the larger Indian market. Colgate had presence in that niche with its variant Colgate Sensitive. 

Sensodyne surprised the market by capturing 10% of the segment within 4 months on launch. The heavy awareness campaign made customers take notice of the brand.The campaign featured " Chill Test " where the customers who had sensitive teeth were asked to tryout chilled products after using Sensodyne. The ads were very convincing and prompted many customers to try Sensodyne.Besides the Above-The -Line ( ATL) promotion, GSK also contacted around 15000 dentists to promote Sensodyne ( Source- TOI). In one year, Sensodyne became a 100 crore brand and the Sensitive toothpaste market was growing at more than 45 % p.a.

Colgate being an agile marketer was not keeping quiet . The brand launched another variant Colgate Sensitive Pro-Relief inorder to arrest the growth of the competitor.Both the brands benefited by the growth of the category which has grown to about Rs 500 crore. Sensodyne inched very close to the market-leader and at one point became the leading brand in the sensitive toothpaste category. According to reports, Sensodyne and Colgate Sensitive are now having almost same market share in the category. 

Pepsodent from HUL also got into the fray with its variant Pepsodent Expert.While every brand focused on providing relief from sensitive teeth, Pepsodent differentiated by offering  ' relief and repair'  to the consumer. This move by Pepsodent forced the players to rethink their offerings. In the latest campaign, Sensodyne has added the 'repair' proposition to the brand's positioning thereby achieving points-of-parity with Pepsodent Expert brand. 

Sensodyne success can be seen as the success of a specialist brand's fight with a product-line extension. Consumer's view Sensodyne as an expert in the field and hence the claims are more effective compared to the product-line extensions. However, Colgate and Pepsodent were quick enough to retaliate to the entry of Sensodyne albeit with little success.

The fight in the toothpaste segment became more interesting with the launch of Paradontax by GSK. Another specialist brand against bleeding gums. The war has just began. 

Traditional Banks At Risk Due to Digital Disruption

According to two recent reports from Accenture, 35 percent of banks' market share in North America could be in play by 2020 as traditional branch banking gives way to new digital players. The research also indicates that 15 to 25 percent of today's roughly 7,000 North American financial institutions could be gone as a result of consolidation before 2020.

To combat this shift, Accenture recommends that traditional providers take a radically new approach to distribution, combining a simpler yet more comprehensive branch offering with integrated digital services.

"Digital technology and rapid changes in customer preferences are threatening full-service banks that do business primarily through branches," said Wayne Busch, managing director of Accenture's North America banking practice and author of the report, A Critical Balancing Act: Retail Banking in the Digital Era. "Given the scale of these disruptions, traditional full-service banks, as a group, could lose significant market share by 2020 -- to banks that reorient around digital technologies and to new entrants from the retail and technology sectors."

Digital Disruption

New digital technologies, emerging digital competitors and the extremely rapid changes in customer preferences are threatening to dramatically impact those full-service banks that limit themselves to products and services that get distributed primarily through physical branch channels. The outside disruptors tend to be more agile and more innovative, while traditional banks are weighed down by unprofitable branches, legacy back offices and inefficient silos. 

Business as usual is no longer an option in an industry that could see up to 25 percent of U.S. banks disappear completely.

In conducting online interviews with more than 2,000 US retail banking customers of the 15 leading retail banks in the U.S., Accenture found that 71 percent said they were “satisfied” with their bank and 68 percent said they would be “extremely likely” to recommend their primary bank to a friend, family member or colleague. In addition, only 9 percent of those surveyed switched institutions over the past year.

This loyalty is fragile, however, since more than a quarter (26 percent) of bank customers who remain with their primary provider do so simply because they consider switching to be a hassle, while about half said they haven't seen a competing offer that was attractive enough to make them move. The survey also found that two-thirds of bank customers would consider a branch closure as inconvenient and nearly half would switch banks as a result.

Source: 2013 Accenture Retail Banking Survey

This not only exposes the tenuous relationship banks have with their customers. It also confirms that the right offering and approach can induce them to switch. "The core challenge for banks: how to build a seamless digital customer experience -- and optimize its power with a better and more cost-effective complimentary offering in the branches that customers find so attractive," concludes Accenture.

The Disruption Has Already Begun

According to Accenture, many banks have already begun losing their customers to digital disruptors. The survey showed that customers acquired 34 percent of traditional banking services such as CDs, money market accounts, personal and auto loans and even new checking and savings accounts from institutions other than their primary bank.

Source: 2013 Accenture Retail Banking Survey

While traditional players have the innate advantage of extensive branch networks that the customer still says they value (nearly 60 percent of new product sales are still closed in branches), these same players should be concerned about the the transition to an online sales environment.

The growth rates in online sales since 2012 are strong in several categories, with online auto loans growing from 11 percent to 21 percent in the past year, online sales of mortgages rising from 15 percent last year to 25 percent in 2013 and sales of personal loans through the online channels jumping from 8 percent to 24 percent in only one year.

Source: 2013 Accenture Retail Banking Survey

It is clear that the most fundamental question in the post-financial crisis environment has changed from "how do I find my future customer' to 'how do my future customers find me?" As discussed in my recent post, Is Your Bank Ready for Customer 3.0, digital shifts inside and outside the industry are rapidly changing the information flows and the way that financial firms and customers interact. It is imperative for banks to become an integral part of customers' lives with a ubiquitous presence wherever customers are.

The branch banking conundrum continues, however, since customers still use branches due to proximity. Branches continue to be the number one reason for loyalty and 78 percent believe they will use their branch as often or more often in five years' time. Conversely, with increased use of services like mobile deposit, there has been a 50 percent increase in the number of customers indicating they are using mobile banking in 2013 (32%) than in 2012 (21%).

Source: 2013 Accenture Retail Banking Survey

"The internet is now the most frequently accessed distribution channel on a monthly basis . . . well above the branch. And mobile use has soared in the past year, almost overtaking the ATM in its perceived importance to customers," says the survey.

While the migration to online and mobile channels has been somewhat additive as opposed to a complete transition of behavior, online and mobile banking will continue to weaken the branch's stronghold on the consumer as better applications and more seamless experiences are developed. This migration is imperative due to the high cost to build and maintain a branch and the misalignment between the cost and value of the branch channel.

A Path for the Future

In light of the digital disruption in the marketplace, and as expanded regulation, more onerous capital requirements, economic volatility and consolidation continues, banks need a lower cost operating model that can generate more predictable and sustainable revenues. Branch networks need to be restructured, reducing the number of large footprint offices and increasing the number of 'light' branches and kiosks.

And while some industry observers believe we are quickly moving to a 'branchless' industry, Accenture and others (myself included) believe the environment will be more of a 'less-branch' scenario, at least in the next five to ten years (Chase continues to add branch locations as do other large and mid-sized organizations). But there must be a response to the customer-centric capabilities of the digital players who can leverage big data and analytics to build a better customer experience.

Move to Digital

With inertia being the main reason current bank customers don't switch, traditional banks need to quickly mimic the new digital banking leaders. Agility and a stronger innovative culture will be required to compete effectively as our industry invests to upgrade our legacy back offices and deeper customer insights will need to be leveraged to provide real-time solutions to customer needs. 

As mentioned in my recent post, Bank Product Proliferation: Too Much of a Good Thing, banks and credit unions will also need to eliminate antiquated products, streamline offerings and build new services that leverage the new digital delivery capabilities. By using digital capabilities to track transactional and channel behavior, banks will be able to develop better services and offer new solutions in real-time. This enhances cross-sell opportunities and can increase share of wallet.

Restructure the Branch Network

According to the Accenture research, the top 25 U.S. banks spend more than $50 billion per year to maintain oversized and poorly placed branch networks. While Accenture acknowledges the importance of a branch network, they propose a less costly branch banking model that can balance the sales capability with the digital opportunity:

• 'Light' branches: Oriented primarily to sales, these offices represent less than a third of the network and are highly automated with a minimal staff and reduced real estate footprint leveraging remote advisory specialists.
  
• Kiosks: Representing up to half the total network, these units include feature heavy ATMs with video, and can handle routine transaction activities.
  
• Full-service 'hubs': Similar to conventional branches (but fewer in number), these offices offer full sales and transactional support with extended hours and specialized advisors for services like mortgages, investments, business banking, etc.
  
• Flagships: A minimal number of strategically located flagships will serve as the center of service-excellence, combining a full range of capabilities including expanded self-service tools.

While many banks are already experimenting with more open and flexible branch formats, there doesn't seem to be a silver bullet yet in response to the digital disruption occurring. A bigger question may be which branches to close or reconfigure, especially with the looming eyes of the Community Investment Act (CRA) regulators looking over the industry's shoulder.

"The acceleration in consumer acceptance of digital banking in the past year -- particularly in the areas of mobile banking and online banking product sales -- foreshadows the need for a very different banking landscape in 2020," said Goodson from Accenture. "Branches remain vital to banks, but they need to be reimagined as one one aspect of a radically new approach to consumers. It is an opportunity to recover profitability, reduce costs and to establish a much more sustainable relationship with customers into the future."

The Best of Both Worlds

Given the scope of disruption impacting our industry, organizations need to start their transformation today if they want to be relevant in the year 2020 according to the complimentary Accenture report, Banking 2020: As the Storm Abates, North American Banks Must Chart a New Course to Capture Emerging Opportunities. 

The winning formula may well be to combine the advantages of the traditional bank with the benefits of the digital bank. By reducing the cost structure of branches and optimizing the products and services provided, yesterday's banks can move into the future leveraging a core strategic asset (a reconfigured branch network) complemented by an enhanced digital experience across all channels.

To succeed, traditional banks must become significantly more agile (no more three year planning cycles), embrace an innovative culture (see my post Banking Innovation: Not Made in the U.S.A.), focus on simplification and optimization while delivering an exceptional customer experience . . . in real-time. This is a very lofty ambition for an industry that historically moves at a snail's pace, but there really are no options.

More importantly, traditional full-service banks must shift their operating philosophy from being a product-oriented organization to being a customer-centric organization with the ability to engage with customers anywhere, anytime they want.

The goal is to become a bigger part of our customers' daily lives and to become integrated with other industries in a seamless manner that reduces friction. Unfortunately, organizations such as PayPal, Square, Google and others are already moving quickly down this path, assuming the role of payments facilitators, supplanting a link to merchants and consumers the banking industry once owned.

Additional Resources

A Critical Balancing Act: Retail Banking in the Digital Era - Accenture (Nov. 2013)

Banking 2020: As the Storm Abates, North American Banks Must Chart a New Course to Capture Emerging Opportunities - Accenture (Nov. 2013)

Say Hello to Customer 3.0 - Accenture (October 2013)

Top 10 Retail Banking Trends and Predictions for 2014

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The Top 10 Retail Banking Trends and Predictions for 2014 are compiled from more than 60 global financial services leaders including bankers, credit union executives, industry analysts, advisors, publishers and editors, bloggers and fintech followers.

This year's list runs the gamut from a continuation of past trends to the introduction of new trends in delivery, payments, competition, operations, customer experience and marketing. Prioritization of these trends may differ by institution, but none should be ignored.

For the third year in a row, I have reached out to global leaders in the financial services industry to ask for their thoughts around upcoming banking and credit union trends and predictions. As in the past, the response was overwhelming, with more than 60 responses. The emphasis of this compilation is mostly North America, but most of the trends are global thanks to responders from the U.K. and the Asia Pacific region.

While everyone had their 'favorite' trend, and some provided a personal top 10 list, I consolidated their thoughts and came up with trends that were considered the most important. Two significant trends that are not listed, but impact virtually every trend discussed, are the omnipresence of previous and upcoming regulations as well as the continued investment in new technologies to make this year's trends a reality. Two trends that may prove important, but got less than expected mentions were the underbanked and alternative currencies like BitCoin.

This year's Top 10 Retail Banking Trends and Predictions are:


All of the contributors did concur, however, that a guaranteed prediction for 2014 is that disruption will continue at an unprecedented pace and that the industry will look different this time next year.

• Drive-to-Digital: Impacting delivery, marketing and service usage
• Payment Disruption: New players, technologies and innovations
• Increased Competition: Neobanks and non-traditional player pressures
• Branch Optimization: Maybe not branchless, but certainly less branches
• Focus on Customer 3.0: Digitally astute, social and yearning for insight
• Breaking Down Silos: Product and data silos begin to crumble
• Simplifying Engagement: Removal of friction and steps to engage
• Improving Contextual Experiences: Leveraging data for improved service
• Differentiating Brands: Avoiding commoditization in a digital world
• Global Innovation Perspective: Expanding view of tomorrow's innovations

The following infographic is a graphical representation of top trend and prediction terms provided by the contributors to this year's report. The size of each word represents the prominence of terms from the industry leader submissions.

Drive-to-Digital

No trend has impacted the financial services industry as much or as quickly as the drive-to-digital. In fact, according to two recent reports from Accenture, 35 percent of banks' market share in North America could be in play by 2020 as traditional branch banking gives way to new digital players. The research also indicates that 15 to 25 percent of today's roughly 7,000 North American financial institutions could be gone as a result of consolidation before 2020.

With the rapid expansion of ownership of smartphones and tablet devices, today's consumer wants to be able to research, purchase and manage their financial services on demand using the device(s) of their choice in virtually any location. Reinventing the financial services purchase funnel, the way people conduct daily banking, the delivery of insight, and the interaction between channels, the drive-to-digital will provide both opportunities and challenges for financial insitutions of all sizes.

"In 2014, we'll see greater experimentation in new products and revenue build around mobile, web and social commerce," according to Moven CEO Brett King. "We’ll also see the emergence of Drive-to-Digital competing with Drive-to-Branch. Mobile and web have all been about brochureware and transactional services to this point – finally we’ll start to see a concerted effort to revenue fulfillment digitally." 

Bryan Clagett, chief marketing officer at Geezeo also believes it will be the 'year of the digital bank' in 2014. According to Clagett, "There will be a realization that channels are owned by consumers, and not banks, and thus must meld into a digital experience that exists seamlessly regardless of channel or device. The silos of traditional retail delivery channels will begin to erode and a more holistic approach to a digital banking experience will take hold."

"In a mobile-first environment, banks will begin to support more complex types of functions and transactions on the small screen, new forms of authentication that better balance security and convenience, and more relevant, contextual information delivery via alerts, push notifications, and other forms of messaging, predicts Bryan Yeager, financial institution analyst for eMarketer. "Banks will also likely promote mobile banking to an older, more risk-averse cohort than in the past."

An example of this more complex integration is provided by Stessa Cohen, banking industry analyst and research director for Gartner , referencing a recent report entitled, 'The Best Thing to Do With Your PFM Tools May Be to Get Rid of Them', "Driving revenue for banks will require that personal financial management (PFM) tools evolve to become true digital personal financial advisors (DPFAs). These digital advisors will use a customers' own data and other business intelligence to learn about a personal financial habits. It will enable the bank to proactively help the customer perform the intermediate steps involved in accomplishing short- and long-term personal financial goals."

The drive-to-digital will impact all areas of the bank and all levels of customers in 2014. April Rudin", founder and CEO of The Rudin Group predicts, Fewer private banks will have street addresses and more will have IP addresses – HNW clients want the bank to come to them."

Chris Skinner, chairman of the London-based Financial Services Club and author of the book Digital Bank believes banks may begin to move beyond traditional mobile in 2014 embedding services in devices, citing the advances by Banco Sabadell with Google Glass Banking and Westpac's Smartwatch banking app.

Alex Bray, retail channel director at U.K. based Misys agreed with Skinner saying, "I believe Google Glass will drive a whole new device category for banking. Customer value propositions and bank's transaction, marketing and sales processes will have to adjust accordingly – just as they did for mobile banking." He also believes the appearance of thumb print readers points to a more biometric future for retail banking in 2014. "We will see easier payments and quicker sales processes – further underlying the drive-to-digital."

Realizing that not all banks even have mobile banking yet, Bryan Yurcan, reporter and editor for Bank Systems and Technology recommended, "If I'm a tiny community bank and I don't even offer mobile banking, I would set out to do that. The point being, as consumers continue to become more comfortable conducting transactions online, I want to at least keep up with what they expect from a mobile experience in other industries." 

Payment Disruption

It is virtually impossible to keep track of the new players hoping to disrupt the payments marketplace. With so many steps and interactions in a normal P2P or retail payments process, there is no shortage of players trying to grab a piece of the payments pie. And for good reason . . . since the scale is so large. For instance, FIS, the company atop this year's FinTech 100 list, moves more than $5.5 trillion annually (which is larger than all but three of the larges economies in the world).

Of greater consequence than the loss of steps in the payments process to non-traditional players is the potential impact of losing the insight connected with payment transactions. This 'big data' is the crown jewel of the overarching financial relationship and the foundation of a contextual customer experience and future loyalty.

Dave Birch, director at U.K. based Consult Hyperion says, "In the next year, I think technology will continue to drive competition in the payments space, with the emergence of new competitive structures based on APIs." He continues, "Nobody really knows how this will pan out, but that's what makes it fun."

"The move to create a joint standard for tokenization of payments credentials will create new opportunities for payments improvement in the digital realm," offered Dominic Venturo, chief innovation officer for payment services at U.S. Bank. He also wasn't the only contributor who believed BitCoin will continue to get buzz and maybe additional traction in 2014.

Zilvinas Bareisis, Senior Analyst at Celent believes that payments will take a backseat to the overall purchase experience, with merchants continuing to launch their own apps. "All payments players will focus on engaging the customer early and throughout the shopping cycle," says Bareisis. "In 2014, it will be even more important for banks to make sure their issued payment instruments are used to facilitate transactions."

"I think real-time payments (or at the very least real-time notification of said payment) need to become a reality," offered Paul Amisano, vice president of electronic money movement and emerging payments at BB&T.  "Banks need to work together on this for it to happen, but I think the pressures they are all facing from regulatory bodies and non-financial start-ups may be the best thing that ever happened for bank "coopetition" - see clearXchange for a glimpse into what could happen if banks work together, and most importantly, KEEP IT SIMPLE."

Cherian Abraham, Mobile Commerce and Payments Lead at Experian Global Consulting, is most concerned about the impact of courtroom battles in 2014, citing the interchange settlement in front of Judge Gleeson in Brooklyn and the NASC v Board of Governors of the Federal Reserve. "The rulings will have a domino effect – starting with severely impacting the economics around debit." 

"Payments (especially mobile) will reach a critical mass with Apple, Paypal, Square and Google providing some attractive use cases for both consumers and merchants using technologies like iBeacon, Beacon, Real-time P2P and HCE emulation," offered Deva Annamalai, SVP of marketing technology and data insights at Zions Bank, "The player(s) who play nicely with the card providers and FIs by sharing data will definitely see more traction in the market place," he added.

Alex Jimenez, SVP of Rockland Trust agree. "We’ll start to see the eventual winners of mobile wallets clearly emerge.  Personally, I think that Apple, Amazon, Visa and MasterCard will be the leading providers while ISIS, PayPal, Google and others will falter. I also think Apple and Amazon will finally make their wallet plays in 2014, with Amazon being first."

David M. Brear, principal consultant at Infosys Lodestone in the U.K. sends a cautionary note regarding Apple, by predicting, "Apple will finally get into the payments space in 2014, and all hell breaks loose with banks beginning to be disintermediated  from their customer data."

Veteran banker P. Andrew Will, formerly from Norwest, Wells Fargo and BMO Harri points to the rollout of EMV chip enabled cards (particularly in the second half of 2014) in advance of the October 1, 2015 POS liability shift date in the U.S. He also foresees other new innovations in the payments space as transactions become more mobile and less card based.

A somewhat sobering thought came from Starpoint LLP partner and payments industry investor Tom Noyes who believes that banks will begin to realize that they are not in control of mobile payments and can not force the use of credit cards. "Payments are NOT about banking," Noyes stated. "Payments are only the last (and easiest) phase of a long commerce process."

Increased Competition

In 2014, the trusted role of banks and credit unions as the collector of funds, provider of loans, processor of payments and advisor of financial relationships will continue to come under fire from non-traditional players including new financial organizations (neobanks), hardware providers, third party payment processors, and mobile app developers that merchants and consumers are using to chip away at the traditional financial services model. And as anyone who attends Finovate knows, crowdsourcing options for investment and lending are just a regulator's approval from going mainstream.

Jim Bruene, founder of Finovate and publisher of the Online Banking Report boldly predicts, "Debt crowdfunding (aka P2P lending) will become hyped in 2014 with Lending Club going public in potentially the biggest fintech startup IPO of all time". He continues, "The alt-lending sector will begin to be taken as a serious competitive threat to mainstream lenders with an outside chance that one or more mid-size or larger financial institutions will begin offering P2P lending services of their own."

Serge Milman, principal consultant of SFO Consultants warns that while personal financial management (PFM), mobile, P2P and other 'things that glitter' will continue to receive buzz, most community and regional banks and credit unions will be unable to benefit from these solutions. He recommends proactivity in pursuing these opportunities.

"It strikes me that a number of conversations have shifted from the 'big vs. small' to 'smart vs. stupid,' stated Al Dominick, managing director and EVP at Bank Director. "That is, leadership teams that both identify and implement innovative strategies and tools have a chance to more realistically compete with the BofA's of the world."

Banks and credit unions that take a fast follower position can also leverage innovation of neobanks and non-banks or can invest in the best customer engagement and new product development advances, eliminating the need to build from scratch.

Branch Optimization

Current branch-based distribution models are no longer sustainable and are unable to meet the rapidly evolving customer needs for real time access and simplicity in banking interactions. Brett King's Bank 3.0 vision of a branchless future may be a ways off, but there is no arguing his belief that 'banking is no longer somewhere you go, but something you do'. In other words, while not branch-less, we are definitely moving to a less-branch distribution model.

As a result, retail banking and credit union executives will be focusing on 'smart-sizing' distribution networks in 2014, closing offices, shrinking footprints and integrating new technological breakthroughs to digitize transactions without dehumanizing interactions.

Sherief Meleis, Managing Director at Novantas concurs that a new round of cost reduction is coming in 2014, with banks turning to more fundamental transformation, particularly in retail distribution. "Banks will begin to figure out how to achieve 'perceived convenience' much less expensively than in the past." P. Andrew Will also believed branch automation pilots will become more prevalent in the coming year, improving the integration of systems and platforms.

"Branch transformation has already moved from talk to action, albeit in a small minority of banks and credit unions, states Bob Meara, senior analyst at Celent. "The efforts will pick up steam as growth in mobile banking usage and the resulting inexorable erosion in branch foot traffic leave banks with no choice." He also predict that mobile RDC will be offered by nearly a fourth of U.S. financial institutions by year-end 2014, while he doesn't see significant growth in other mobile photo apps. 

Sam Kilmer, senior director at Cornerstone Advisors predicts, "At least a dozen banks will announce significant branch network realignments under the guise of technology and customer experience next year, but under the covers, most of them will be largely about distribution cost take outs." 

The branch reduction efforts have not just occurred in large financial institutions. Dominick from Bank Director mentioned, "I'm hearing that more community bank CEOs are thinking about – or actually closing – branches due in part to mobile's impact." Jim Perry, senior strategist for Market Insights, Inc. also expect that 2014 will be a year when many smaller institutions stop wringing their hands about the “future of the branch” and actually develop strategies for the incremental evolution of their branch network and delivery channels. 

The impact of regulations and costs related to 'keeping up' will even push some credit unions and smaller banks to consolidate and/or close at a faster pace than in 2013, according to Sarah Cooke from the Credit Union Times. George Hofheimer, chief research and innovation officer at Filene Research Institute concurred, reiterating that the cost of regulations will force more organizations to gain scale through consolidation.

Closing offices doesn't come easily, however as mentioned by Jeff Marsico, EVP of the Kafafian Group. "I think the decline in bank branches will challenge financial institutions to minimize customer attrition and maintain their community commitment to those locales affected by consolidations. This will require a disciplined and multi-channel approach that includes media (traditional and social), participations in community organizations, charitable giving, lending, and a strong digital distribution platform."

Alternatively, Patricia Hines, director of financial services industry marketing for GXS sees a geographic expansion of global and super-regional banks.

The importance of moving the sales process out of the branches is more difficult than moving transactions as many banks and credit unions have seen. David Hodgkinson, principal advisor for KPMG in the U.K. agreed, saying, "As mobile banking adoption accelerates, banks will need to work harder to develop non-intrusive sales techniques through this channel or risk losing cross-sales opportunities as customers shift much of their online and in-person banking to mobile."

"Banks will start to offer video-based services for higher value, complex sales such as mortgages and investment products," Hodgkinson added. "Expect to see second screen usage to sit alongside the video call – so customers can review the numbers on their ipad while conversing with the bank agent through their SmartTV," David M. Brear from Infosys and Accenture also believed that banks will begin to invest heavily in video conferencing capability to maximize the use of existing staff.

Finally, Tom Pritzker , EVP at John Ryan provide this glimpse into the future of branches in 2014 and beyond:

• Increased and innovative use of technology to transform the branch into more collaborative and relevant sales and information centers including:
• Enhanced use of tablet technology for side-by-side selling applications
• Greater use of mobile, and digital interactivity within the branch – particularly with a view to starting conversations, understanding customers' needs and generating cross sales
• Sophisticated targeting of marketing messages within the branch based on improved cross channel customer data.
• Use of geo-fencing to provide highly relevant and location based offers and to lure customers into the branch.
• Novel uses of technology to start conversations — Use of augmented reality to prompt sales demos.

Focus on Customer 3.0

Customer 3.0 is digitally connected, highly informed and demands a highly personalized approach in their communications, their products and the service they receive as referenced in a recent Bank Marketing Strategy post. This customer begins their bank and credit union product shopping experience at their desk, in their car or on their couch, relying on friends and family reviews and published reviews across social media channels. Instead of walking into a local branch office and sitting down to open an account during banking hours, these customers purchase their banking services much like they purchase music, books or other products . . . online, 24/7.

The bar for engagement is set high for these customers, since their frame of reference are the best digital retailers and social marketers. Neobanks and banks with a simplified mobile-first strategy are the strongest competitors for these customers.

Scott Bales, Director of User Strategy, Innovation Director for Next Bank and author of the soon to be released book, Mobile Ready reminds bankers that digital natives, the same age as Google, will begin to need banking services and that their vote on providers will be a huge leading indicator for industry shifts for the next decade. 

"When implementing a mobile-first strategy for the digital consumer, banks will need to be sure to include the same service fundamentals that were found in staffed branches, recommended Wade Arnold, founder and CEO of Banno. "Effectively migrating customers to a unified mobile solution that will last requires support at an individual level; anything less is a transactional commodity and will simply be viewed as replaceable by these connected customers."

According to Arnold, "The bar has been raised for mobile self-service to satisfy more than OLB parity. In 2014, organizations will have to provide improved levels of individualized engagement and simplified consultation. If done well, institutions will be rewarded by gaining intimate customer knowledge that can be used to improve revenues and communication. Once we get there, our industry will never be the same."

Breaking Down Silos

"As non-bank competitors continue to materialize, banks will discover their entanglements to antiquated and siloed core systems along with a lack of agility in utilizing data, will present quite a challenge in 2014, according to Mike King, founder and president of Bankwide. 

In order to manage customer information more effectively, banks will begin to eliminate both human and insight silos by integrating data, systems and processes across different product lines. Moving to a service-oriented architecture (SOA), data will be shared and leveraged in real-time on all of the bank's touchpoints, allowing the bank to provide more personalized service based on a complete customer profile.

"The single biggest priority of 2014 should be innovating in a customer-first and lean startup manner." stated Mark Zmarzly, business development executive of Deluxe Corporation. "Too often banks have made product-first decisions that are designed to solve the bank's profitability problems instead of the consumer's problems. Then the bank wonder why adoption is in the low single digits."

"Instead, banks need to understand current customer financial product problems, break down current silos and build a pilot project to solve, test in beta, and measure the results. Then repeat. 'Build, measure, learn' is the lean startup mantra, and it works," continued Zmarzly.

David Sosna, founder and CEO of Personetics predicted, "Some leading banks will try to move from a product approach to a customer focused strategy especially in the digital channels. FIs have been 'talking the talk' for a while and now a few will be in the position to execute on that strategy as silos are eliminated.".

In 2014, we'll start seeing banking examples of cross-channel experiences, driven by insights and powered by channel analytics, according to Danny Tang, worldwide financial transformation leader at IBM. "The leaders in the industry will eliminate silos, starting the convergence of mobile and online banking and building a linkage between the digital and physical channels. Conversely, the laggers will unfortunately realize that a siloed mentality and the lack of multi-channel platform is an inhibitor to success."

Mike Bartoo, regional manager for Marquis challenges financial marketers to go beyond just advertising and branding and to break down data silos. "Hopefully, we’ll see the trend of actually USING insight from across the organization to drive revenue. While it is great to have the insight, it's more valuable to use it."

Simplifying Engagement

At a time when everything around us seems to becoming more complex, consumers are searching out those products and companies that can simplify our lives. But it's important to recognize that simplifying an interaction with customers does not mean that the underlying product or service is simple. Instead, the key is to rethink as opposed to append and look for ways to eliminate steps, paperwork and processes that overly complicate.

In 2014, financial institutions will begin to realize that simplicity is mutually beneficial to both customers and the organizations. Not only will those firms that simplify see improved trust and loyalty, they will also realize savings from redundant and outdated processes, reduced customer inquiries and fewer refunds and reversals.

Jin Zwicky, vice president of experience design at Singapore's OCBC Bank and publisher of the Designful Co. blog that focuses on simplicity in financial services, told me in an interview that, "Simplicity is the 'forever' black". Brett King agrees with Jin when he said, "Removing friction will become the catch cry of 2014 though – whether it is a real-time core system replacement, or trying to get application processes streamlined, the big push will be for simplification of the engagement."

Beyond mobile deposit capture, Kofax and Mitek have taken mobile simplicity to a new level by leveraging the photo taking capability of a mobile device to eliminate keystrokes, simplify applications, facilitate bill payment and account transfers, provide digital security for documents and validate customer information. Both firms also say new simplified processes are on the way, making mobile banking easier and even fun.

Some additional ways banking will be made simpler in 2014 will include voice and gesture recognition, multichannel video chat, branch-based digital billboards and real-time spending updates via a customer's mobile device according to Accenture. Penny Crosman, editor for The American Banker agrees that simplification and innovation in mobile banking will continue – with voice recognition and video conferencing potentially becoming part of many banks’ apps this year, as well as contactless payments. 

Responsive web design will also become more prevalent in 2014 according to Melanie Friedrichs, contributor to Bank Marketing Strategy and analyst for Andera.

Finally, as Jill Castilla, EVP of Citizens Bank of Edmond mentioned in an email to me for this post, even compliance processes will be simplified with new decision tools that allow bankers to better assess adherence to new regulations.

Improving Contextual Experiences

According to Aite Group senior analyst, Ron Shevlin, a new type of marketing will emerge in 2014 — activity-based marketing — or marketing within the context of an activity being performed by a customer or prospect. There are a number of examples of financial institutions already doing activity-based marketing: 1) USAA’s Auto Circle app; 2) Commonwealth Bank of Australia’s home buying app; and 3) Caixa Bank’s ticket-purchasing app.

The common threads in the examples is the creation of a new point of interaction for banks based on the context of the interaction. Activity-based marketing changes the point of interaction for banks, moving that point much closer to the identification of the need or want for the product or service using advanced customer insight. 

As Bradley Leimer, vice president of Mechanics Bank wrote in his great American Banker article, There Will be Blood: The Era of Engagement Banking, "Delivering contextual financial services with beautifully crafted interfaces and experiences is becoming a necessity to maintain relevance with the digital consumer." To achieve this, banks will focus on personalizing engagements with a wider range of insight, going beyond demographic and account level data to include transactional, locational and social insight.

In the coming year, new location-based merchant-funded reward platforms will emerge that improve the targeting of offers and social media channel insight will be used to improve service and delivery. Finally, banks will continue to improve real-time alerts and notifications that will strengthen loyalty and engagement.

According to Brett King, "The new skills we’ll see in demand in 2014 include Data Scientist and User Experience specialists . . . more around trying to build great contextual revenue opportunities, not ad campaigns."

"Digital channels will mature from being transactional to being engaging in the coming year," stated Nicole Sturgill, research director for retail banking at CEB TowerGroup. "Financial Institutions will also focus more on developing the channels to improve customer service and to help customers better manage their finances."

Fred Hagerman, chief marketing officer of Firstmark Credit Union, believes that organizations need to focus on the mobile, online banking and lending experiences in the coming year since these are the primary areas of 1:1 contact between the consumer and most banks. Both Hagerman and Hofheimer from Filene also believe that organizations need to make sense out of the mountains of data within their firewalls to improve the customer experience. Gertjan Reinders, senior IT manager for ING Bank in Amsterdam concurred when he offered, "2014 is all about being data-driven—not just in marketing and sales, but within the entire organization. For improving the customer experience, big data will become more of a game changer."

"Banks will get serious about using analytics to assess customer interactions across channels in 2014—to identify needs, trends and complaints and take corrective actions to improve customer experience and increase satisfaction" predicted Jenni Palocsik, marketing director of retail financial services at Verint. "We’ll also see 'Identity 2.0' emerge as FIs learn how to combine voice biometrics plus data science in their evolving models to more accurately detect and reduce contact center fraud."

Steven Ramirez, CEO of Beyond the Arc agrees that the mobile banking experience will rise to the top of the strategic agenda in 2014. "Simply having a mobile app will not be enough. Leaders will re-architect the relationships they have with customers using mobile to provide personalized offers and mine the data to further increase the effectiveness of the platform."

"The most successful credit unions and banks preparing for business in a digital economy will begin to focus on optimizing their digital user experiences built upon a marketing automation platform to target, capture, nurture and convert leads within the market segments they have identified," predicted James Robert Lay, CEO of CU Grow. He also is a strong believer that financial institutions will expand their use of personalized digital and video content in the coming year.

Paul Kadin, financial category development officer for AOL agrees that the importance digital content and video will increase in 2014, as mentioned in his recent tweet. 

Scott Bales goes a step further, saying that user experience design and Design Thinking will shape not only the mobile experience, but a bank's web site and product development as well.

James Anthos, SVP of BB&T may have summed it up best when he said, "As banks focus on the holistic client experience in 2014, no matter what the channel, banks can create an environment that fosters constant connectivity between them and the client, which should allow for deeper relationships, bigger share of wallet, and increasing confidence of the client in managing their finances."

Differentiating Brands

In the Financial Brand blog post written by Simon Clough, Partner and Group Board Director at U.K. based Clear, it was accurately stated that "Consumers view most banking brands as undesirable and wholly undifferentiated". The digitalization of the industry is further commoditizing our brands, with fewer face to face interactions limiting our ability to set ourselves apart.

That's why Clough's battle cry of 'Differentiate or Die' has never been more relevant. Banks and credit unions will begin to find ways to stand out in a crowded competitive marketplace in 2014, leveraging all channels to make their message heard.

"The most significant driver of improved results in 2014 will be the ability of leaders to manage through ongoing, ever-changing regulatory changes to focus on key customer segments with innovative products, new technology and exceptional customer experience across all channels," stated Debbie Bianucci, president and CEO at BAI. "Leaders who can balance innovation and customer experience with the pressure of regulatory compliance will differentiate their brand and win," she added.

JP Nicols, CEO of Clientific and co-founder of the Bank Innovators Council predicts that many banks and credit unions will continue to pull the familiar levers of price and promotion to drive new business in 2014, which will put further pressures on already compressed margins. Alternatively, he states "The winners will be those institutions that differentiate their brands by innovating new client experiences and leverage better targeting and segmentation."

New and/or improved products can also help differentiate banks in 2014. "We will see a massive growth in online and mobile banking in the coming year," stated Hansjörg Leichsenring, Germany-based consultant for Meniga. "More and more banks will adapt tools like Personal Finance Management (PFM) to improve their brand, increasing retention and loyalty and to keep their customers away from independent new players in the market.

As a note to financial institution marketers, John Mathes, director of brand strategy at Weber Marketing Group, warned, "More banks and credit unions will realize that most of their marketing content is just noise and they will embrace the art of storytelling to help differentiate their brand in the crowed and commoditized world of financial services.

Global Innovation Perspective

As I mentioned in my November post, Banking Innovation: Not Made in the U.S.A., some of the most exciting (and award winning) innovations have been occurring in the Asia Pacific and Eastern European regions as well as the unlikely regions of Africa and South America. Beyond unique mobile and online banking applications, banks in these regions have developed entirely new ways to structure a financial institution and deliver services to customers.

Banks and credit unions will begin to look beyond our shores for innovative ideas in 2014, learning from overseas organizations that in some cases are far ahead of our domestic offerings.

"This year's study of bank innovation indicates a global convergence of innovation practices around overcoming the barriers presented by legacy technology and ensuring that customer experience is optimized," stated Patrick Desmares, secretary general at Efma. "Many retail banks are now creating innovation strategies by looking in other regions and underpinning these strategies with increased investment."

Edward Chatham, managing director of Mapa Research reinforces this viewpoint as the demand for his company's global online and mobile banking research continues to escalate. "More banks are realizing that innovation is being done beyond their own borders. In fact, some of the most interesting innovation is being done in some of the least likely places in the world."

Finally, JP Nicols from the Bank Innovators Council shares, "Banks in the U.S. need to raise the periscope and take a broader look for inspiration. There is some great innovation going on all over the globe, and too many banks here are only focused on the incremental moves of local competitors."

Breaking Banks Interview with Brett King, Chris Skinner and Jim Marous

On January 2, I joined Chris Skinner on Brett King's Breaking Banks online radio broadcast to discuss what may be in store for us in 2014. Below is a link to this one hour show.

A Note of Thanks

I would like to take this opportunity to thank the dozens of individuals and companies that assisted in the development of this annual report. The insight shared and the continued support of this effort is greatly appreciated.

I would also welcome any comments or discussion around trends believed to be missed or shortchanged. Nobody's perfect, and it would be great to receive even more insights for the readers of this post.

Additional Resources

Banking Leaders Predict Major 2013 Trends - Bank Marketing Strategy (Jan. 2013)

2014 Banking and Capital Markets Outlook - Deloitte (Dec. 2013)

Global Banking Outlook 2013-2014 - Ernst & Young (2013)

Banking 2016: Accelerating Growth and Optimizing Costs in Distribution and Marketing - Accenture (2013)

Trends in the Global Banking Industry - CapGemini (Oct. 2013)