Faced with tough economic times in 2023, banks may begin to scale back digital transformation initiatives as a cost-cutting, capital-preserving move. Yet there will continue to be a focus on creating greater efficiencies through the deployment of advanced technologies, reducing branch footprints, leveraging third-party solution providers, increasing back-office automation, and developing workforce optimization strategies. But this also remains a vital time to pursue new sources of revenue beyond traditional products, find ways to leverage embedded banking and BaaS opportunities, and rethink existing business models.
Small businesses are looking to digital payments as a marketing tool and revenue driver. Large fintechs like Square, PayPal, and Stripe dominate the small business digital payments space, but J.P. Morgan, TD Bank, and other big banks are now catching up with new offerings that combine banking, payments, and other services under the same roof. Emphasizing the importance of this, a recent Visa survey indicated that nearly three-quarters of small businesses said that accepting new forms of digital payments is fundamental to growth.
Marketing is vital to digital growth, yet there will likely be a push to cut marketing budgets in 2023 at many companies. Tips for navigating this budget season include demonstrating that marketing funds are being used wisely. It is also important to keep a nuanced perspective of ROI, realizing that results may not always be quantifiable. Also, take time to re-examine programs to eliminate any deadwood, and set up ‘triggers’ that will allow marketing funds to be quickly re-established depending on future events.
FedNow, the Federal Reserve’s instant payment service aims to give smaller banks and credit unions a fighting chance in the payments ecosystem that is increasingly dominated by fintech solutions. Instant payments are particularly important for business banking customers. According to a Fed survey, nearly two-thirds of businesses (and more than three in four large and very large businesses) indicate that access to faster payments would factor into their decision to switch banks in the future.
Millennials demand sophisticated digital banking tools to support their needs. But beyond that, Millennial entrepreneurs also value bankers who understand their daily challenges and are prepared to offer helpful advice. Some financial institutions have addressed this need by supporting incubators or accelerators, introducing clients to potential investors, and arranging events to help business owners build connections with their peers at other companies in the community.
Apple’s introduction of a new high-yield savings account has triggered rampant speculation on its significance to the banking industry. Is it a payments play, a banking play, something else entirely, or all of the above? One thought is that Apple’s motivation is not to become a bank but to drive an ecosystem that will lock customers into its hardware platform, software services, and marketing ambitions.
