Top Predictions in Banking 2013

Gartner Group just recently published their top predictions for CIOs in 2013. Not that I have the ambition to compare myself to them, but I feel obliged to you readers to give my personal predictions on what will happen in the banking industry ahead of all the other lists and predictions that will flood media when we approach New Year’s Eve. The timing of this list is no coincidence. There is some stretch in several of the predictions so you might as well call it a wish list J.

  • Product commoditization. We all remember the Credit Default Swaps (CDS) that were bundled in so many creative ways that no one understood that they were sitting with toxic assets when the financial crisis erupted in 20008. But there are  several more recent drivers in both the retail and corporate market space that push banks to unbundle and simplify their products. Several banks have received slaps on the wrists for their fixed income and hedge funds where they imply that retail customers will get a positive yield whatever happens on the market. The Basel III and Solvency directives have corporate investors to shy alternative investments. Many of them have sold their Private Equity holdings and commitments to secondaries at large discounts to ensure liquidity and lower capital requirements. I think that this back to basic trend will continue next year. So you can expect to see more promotions for regular savings accounts next year.
  • Multichannel advisory services. Banks will realize that they have to promote their advisory services to differentiate themselves when the products are getting commoditized. And next year, we will see that the advisory services will not be limited to the branch network any longer. Banks will offer multichannel advisors to their multichannel customers. So next year, you can expect to get the chance to engage in a session with your advisor using a slate from your favorite couch in the living room.
  • The informed and social customer. 2012 was the year when Svenska Dagbladet won the price Best Innovation on the Publicists annual award ceremony for their solution räntekartan. It is used by retail customers to prepare themselves for the negotiation with their bank on the mortgage rates. Using the application, the user can drill down on his/her region to find the lowest rate that has been reported by twitter users using the #sägdinränta tag. 2013 will be the year when the banks realize that they do not have an upper hand in better information than the customer any longer and that they better embrace the fact that the customers will validate the recommendations they get using social media.
  • Wallet and mind share acquisition. We can expect to see an increased interest in cross-selling as the net interest income will decrease due to increased price competition and self-imposed regulations to curb the indebtedness of the households. You will see that relationship managers at the banks will be equipped with business intelligence solutions so that they easily can calculate the value of an increased wallet share when they are confronted with the informed and social customer. I will stretch my prediction to say that the banks will find new and creative “Gets” that they will ask for when negotiating mortgage rates. There are already banks in the US that “Give” lower rates to customers that like them on Facebook.
  • Mobile payments. There are many indications that 2013 will be the year of mobile payments. The major banks recently launched the joint effort Swish for Person-to-Person (P2P) payments and we will see the ramp-up in Business-to-Consumer (B2C) too as new cell phones are launched with support for the NFC (Near Field Communication) protocol. So, you can expect to see several retailers to follow ICA and provide new innovative solutions for mobile payments in 2013.
  • STP in Compliance. You cannot neglect compliance when making predictions on what will happen in the banking industry. Especially when a company estimates the total compliance costs at the 100 largest banks in the US to a staggering $ 1 billion! Given that close to 90% of these costs are related to process support, I predict that the Nordic banks will look into opportunities to extend the concept with Straight-thru-Processing (STP) to compliance. The banks will start eliminating paper based forms to reduce manual work and provide an electronic audit trail. And they will apply the lessons learned from security trading and look for ways to intercept potential problems early in the transaction flow using workflows.

There have been lay-offs and many comments on “Back to basics” and “The New Normal” in the industry this year, but I truly think that next year will be an interesting one with exciting new challenges. Especially if some of my predictions come trueJ. So, I want to conclude this blog post by wishing my readers a Merry Christmas and a Happy New Year!

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