As climate change increasingly impacts global ecosystems, the financial sector is also feeling the heat with concentrated exposure to climate-related risks in lending portfolios. Recognizing this, global regulators are enhancing their oversight of banks’ climate-related financial risk. The OCC and FDIC have drafted principles requiring large banks to incorporate climate risk assessments across all operations. These organizations must also ensure that climate-related marketing aligns with their operating strategies and eliminate “greenwashing”. Smaller banks are advised to familiarize themselves with these changes, preparing for when climate-related evaluations become more widespread. The European Banking Authority has created a roadmap outlining eight objectives for sustainable finance which may offer additional guidance for financial institutions.
JPMorgan Chase continues to bet on its brick-and-mortar branches, opening 114 new locations in 2022 despite the banking industry’s shift towards digital. The bank believes digital channels and physical branches strengthen each other, and this blend has helped it grow its customer base by 8% over the last three years. Half of new Chase cardholders come from branch signups along with 75% of mortgage referrals. The bank plans to increase the proportion of the US population living within a 10-minute drive from its branches to 70%, up from 60% today, implying more branches will open than close.
Bluestone Bank has launched a saving/checking product called the Milestone account that evolves as its young account holders age. The account offers features such as a $25 account-opening bonus, access to Zelle, and a 5% interest rate on the first $500 in savings. These features are intended to engage younger customers and compete with digital banking competitors. The account offers additional perks and more control as account holders age, changing across four phases: from birth to 12, 13 to 15, 16 to 18, and 19 to 23. The product aims to provide financial literacy to younger generations, helping them understand the ins and outs of managing their finances.
The adoption of Artificial Intelligence tools like ChatGPT is crucial for banks to keep up with the rapidly changing customer expectations in the era of personalized, digital experiences. Community banks in particular have been slow to embrace technology changes, often struggling to justify large capital investments in technology and talent. However, the increasing prevalence of AI technologies and growing demand for hyper-personalized customer experiences will necessitate a shift in their approach. Embracing AI will require a mindset shift towards experimentation and learning, acceptance of initial failures, and a readiness to respond quickly to changing customer needs and expectations. The future of the banking industry will be dominated by those willing to experiment with AI tools, understand the nuances of their use, and adapt to their learnings to provide a better customer experience.
Digital transformation in financial institutions requires a shift in focus from transaction efficiencies to customer engagement, rapid technology deployment, and the development of existing resources. The CFO is a key player in this process, evolving from a reactionary role to a strategic one, applying financial expertise in every division. The CFO must leverage data analytics for strategic decision-making, using it to identify growth opportunities, optimize revenue, and manage risks. Beyond efficiencies, the finance function should help adapt to market changes and deliver customer value. However, CFOs often face challenges in expanding their roles due to a lack of expertise in emerging technologies and data analytics, and unclear strategies and priorities.
Financial institutions are facing an increased need to enhance their data and analytics capabilities amid various economic and market challenges, including higher interest rates, inflation, regulatory pressures, workforce shortages, and rising competition. Recent bank failures have heightened the risks. Financial executives must use data and analytics to monitor trends, predict impacts, and decide on the best course of action. Key steps for success include prioritizing data in strategic decision-making, leveraging analytics and reporting to guide strategic initiatives, and using AI to increase efficiencies. The importance of having the right data and using it for timely decisions is critical.
Further, institutions should leverage analytics to gain comprehensive insights for more accurate decisions.
Further, institutions should leverage analytics to gain comprehensive insights for more accurate decisions.
