As the fourth and final quarter of the year begins, many find themselves yearning for the end of 2020. It has arguably been a year filled with unprecedented adversity for millions of people and business owners all around the world. Community banks, credit unions and financial institutions have not been immune to the fallout.
Trying as it was, there have been more than a few silver linings for the industry. Drive-thrus have experienced a resurgence, and were able to successfully manage in-person service for many branches amidst rampant lobby closures. Another plus has been the dramatic growth in bank deposits, supporting overall industry health. Indeed, as we discussed in a previous post based on a report released by the Federal Deposit Insurance Corporation, nationwide deposits grew by an incredible $865 billion in the course of just one month — more than the entirety of the year before. That number now tops $2 trillion when including deposits dating back to January.
Mobile banking apps have also witnessed a boost in popularity, supporting consumer need. These downloadable applications were already regularly used by millions of bank and credit union customers, but interest and activity picked up significantly amidst the shutdown and have maintained their traction. As American Banker reported from survey research done by Harris Poll, 60% of respondents acknowledged using these apps to manage their money more during the pandemic than they did previously. More than half — 56% — went so far as to say they were a saving grace. In other words, they would not have been able to get by with their financial management tasks as easily had digital options not been available. Financial institutions who were able to appropriately respond were rewarded by increased customer/member loyalty.
Given these developments, you can’t help but wonder: What’s ahead for the banking world in 2021? No one knows for sure, of course. However, industry experts and prognosticators have some educated guesses about what to expect:
1. Fewer branches, more self-service automation
Over the past several years, branches have trended downward fairly consistently. Indeed, in 2019, full-service branch offices across the country hit 83,000, down from roughly 95,000 in 2010, Quartz reported from FDIC estimates. That’s a drop of approximately 12%. Forbes expects this trend to continue as FIs seek to cast a smaller and more nimble footprint, including among big names in the sector. Since 2015, a little more than half of the U.S.’s largest banks reduced their locations by 50%, Forbes reported from McKinsey & Company data.
“More full-service branches may be replaced by ITMs.”
In this decommissioning environment, full-service branches may be replaced by streamlined operations with interactive teller machines or next generation advanced terminals. The latter are especially capable of performing all of the basic functions of traditional ATMs, and much more, including video teller services, bill pay and other financial services that are available through assisted self-service automation.
2. Digging deep into digital for account onboarding
The digital revolution isn’t coming; it has arrived and isn’t going anywhere. And in addition to banking by digital channels, FIs are now gaining more new customers through digital onboarding. According to a study conducted by J.D. Power earlier this year, of every three newly opened bank accounts, one is done through an FI’s website or a mobile app. That’s up from around one in every five in 2019.
Paul McAdam, senior director of banking intelligence at J.D. Power, said he expects a continuation of all things digital moving forward, including how financial advice is disseminated.
“Based on this year’s study results, it is safe to say we’ve reached the tipping point, where banks that get their digital formulas right are seeing strong gains in both adoption of and satisfaction with advice and guidance delivered via digital channels,” McAdam explained. “Within the next year, digital will surpass the branch as the most commonly used retail banking customer advice channel.”
3. Ramped up security focus
Encouragingly, bank crime has dissipated throughout 2020, particularly from a standpoint of physical break-ins. FBI data corroborates this, as FIs large and small have become more sophisticated and tactical in deterring theft and unauthorized entry.
However, attackers are nothing if not persistent, and because more FIs are moving business processes online, so too are fraudsters, looking for any possible opening they can exploit. Forbes noted that since digital onboarding is proving to be an effective method of seamlessly signing up new customers, FIs will be looking to ensure they fully protect their ecosystems so financial data doesn’t end up in the wrong hands. According to RSA Security, when account fraud occurs, nearly half affect accounts that are 24 hours old or fewer, Forbes reported.
The strategies FIs employ to make onboarding more secure — such as encryption, identity verification and know-your-customer checks — may be actively advertised to provide more assurance and confidence to customers.
What does 2021 hold? We’ll all find out together, and BranchServ will be there for you, however you need us. From branch transformation to electronic security and physical security, we’re in the business of making your operation better than ever moving forward. Contact us today and let’s get those process improvements underway.