Bankers in the US are optimistic about growth in the industry in 2023, according to a recent survey of senior executives from community banks. Of the nearly 250 respondents, 77% expect their institutions to grow by at least 5% this year. The main areas of growth will come from wealth management, ESG initiatives, M&A, and cryptocurrencies. The executives were also concerned about challenges with attracting and retaining talent. Most are also looking for acquisitions, with 91% of respondents saying they were in the market for purchases.
Sustainability is now a primary consideration for most major corporations. However, banks are coming under scrutiny for not doing enough to drive sustainability within their organizations and to encourage sustainable business practices through their lending policies. Banks can impact sustainability by prioritizing lending to projects and businesses that align with sustainable development goals. Additionally, banks can use other products and services to encourage sustainable choices amongst customers by offering products and services such as sustainable investment funds, carbon offsetting, green bonds, and mobile banking apps that promote environmentally-friendly options. Finally, banks can support broader sustainability initiatives such as investing in renewables and promoting carbon neutrality.
International Women’s Day was March 8, creating a focus on how financial institutions can better support the needs of women. Strategies include promoting women into leadership roles and considering women more mindfully in consumer marketing efforts. Women control a significant amount of wealth, highlighting the importance of developing products and services with women in mind. Gender diversity within the company is also essential for helping develop business strategies that can help attract and retain better talent, enhance creativity, and improve ROI.
ChatGPT has been a media sensation since it was introduced in November, and businesses across industries have been busily identifying ways to begin to employ this technology. Five use cases for banking include:
- Internal Coach – Digest policies, procedures, contacts, and steps to create customized “how-to guides” for bankers to help solve problems.
- Credit Analyst – Connect with borrower’s ERP systems and analyze background information to be able to provide quantitative insight and narrative for each borrower.
- Vendor Management – Assist with contracts, data collection, and due diligence to speed the onboarding of new vendors and partners while providing matching and selection recommendations.
- Customer-Facing Analyst – Provide next-level financial insights for consumers and businesses to help analyze their historical and projected spending, cash flow, and financial performance.
- Internal Financial Analyst – Provide analysis of general ledger and performance metrics to be able to answer internal questions regarding product, customer, or organizational performance.
Customers seek banking capabilities that fit with their increasingly connected habits. Embedded banking is a service that is on a fast track to broader adoption. It allows banking services and financial products to be offered by non-financial organizations, with the security and reliability that traditional financial institutions provide. The widespread interest in embedded finance across the insurance, retail and healthcare sectors is telling, and banks have a unique opportunity to engage digital-first customers by embracing this potential market disruption. As embedded banking becomes a consumer-driven necessity, traditional companies should seriously consider integrating this innovation into their current business model or risk being left behind.
The European Central Bank announced that it will carry out deep reviews of banks that have digital transformation plans due to their increased reliance on third-party providers. Their concern is that these risks are not being adequately reflected in most banks’ governance structures and risk appetite. While nearly all banks have a transformation in the works, a report from EY found that 38% of leaders say transformations underperform against key performance indicators and nearly 70% have witnessed a transformation that has underperformed in the last five years. Transformations are costly, and only 41% of executives believe that sufficient funding is available to undertake institution-wide transformations. Most also focus on investments that yield relatively short-term returns, which runs the risk of ignoring tasks and initiatives that can drive long-term profitability.
