A volatile economy, the widespread expectation for all interactions to be hyper-personalized, and the evolving role of physical touchpoints have each had significant impact on financial services this year. Financial institutions are challenged to keep pace with rapidly evolving technology and an increasingly precarious security landscape all while expanding customer relationships and operating under thinning margins and staffing shortages. Experts from NCR today shared commentary on how these factors will shape trends to watch in 2023 and beyond.
Data & AI
Financial institutions will make more progress in transforming data into action through leveraging sophisticated AI, with a particular focus on helping customers improve financial wellness. Gone are the days when just talking about data collection and analysis is enough; next year, sharp focus will be given to making data actionable, using the information to boost efficiencies, bridge customer experience gaps and generate revenue.
A key theme will be providing personalized advice to help customers better manage their finances. After all, community financial institutions are the ideal partners to step up and help customers during times of economic turbulence. Institutions will offer AI-driven education via digital touchpoints, such as through video-based curriculum models and gamification.
Institutions will also strive to deliver deeper budgeting assistance, like through automatic budgeting tools, advice around savings goals and paying off debt, and proactively pointing out potentially problematic behaviors (such as engaging in an excessive amount of BNPL-type services or cryptocurrency investing).
Providing more comprehensive payments capabilities will be critical to competing with a broadening and intensifying competitive landscape. BigTechs, fintechs and even major retailers (like Walmart) continue to vie for market share, entering the space with different payments offerings, such as small business payments, P2P, BNPL, etc.
Better serving small businesses will remain a goal for many, especially when it comes to offering relevant payment options for these customers. Even though there are countless digital payments tools currently available for small businesses, it can be a confusing market to navigate. Small businesses’ trusted institutions must be doing more to deliver secure, flexible payments offerings for their small business customers, helping them understand which options best meet their unique needs as well as the needs of their customers.
And don’t discount cash, despite regular predictions of its demise. Cash represents approximately 30% of in-person payments, and this figure could very well rise as a surging cost of living and potential recession are making consumers turn increasingly to cash to improve their budgeting; after all, you can’t spend what you don’t have. But as labor and cash-in-transit costs increase, financial institutions will look for more efficient ways to manage cash throughout their network
Channel services to create the connected experience
Financial institutions finally start to break down the complex and bespoke silos of infrastructure. Cloud, APIs and micro-services continue to be the path forward to both rearchitecting existing services and bringing new services to market. The key is developing channel services that are reusable across touchpoints and optimized for both customer and banker experiences.
Converging the channels delivers better experiences, enabling customers to move their transactions across different touchpoints. These converged channels then operate consistent business rules and enable better use of data. By modernizing, financial institutions can transform fragmented customer experiences into seamless journeys.
Digital-first branch and banking
The transformation of physical touchpoints persists, infusing digital elements. As financial institutions optimize their physical footprints, providing remote assistance through traditional self-service channels often known as Interactive Teller Machines (ITMs) is becoming an increasingly important vehicle to offer customers digital-first, efficient self-service options and lower the cost to serve. ITMs have also become a strong way to provide greater flexibility to employees, including work-from-home options for tellers, which is especially critical in the face of The Great Resignation and staffing shortages.
Channel services will also have a major impact on branch modernization. Connecting previously disparate channels will enable institution employees to engage with the customer in multiple, more interactive ways. Enabling simplicity and convenience will be a main priority in all customer interactions, including providing easy, digital-first ways to open and onboard accounts.
Strategies for ATM management will shift, as more institutions embrace the ATM as a Service model. Outsourcing provides significant benefits to both financial institutions and their customers. Institutions can reduce costs and complexity, innovate more quickly, mitigate risk and enhance their regulatory compliance. At the same time, customers are benefitting from expanded services and greater availability.
A customer’s ability to use their voice instead of a keyboard will see a significant resurgence, especially as more institutions adopt chat and virtual assistants. While there was a major focus on voice banking several years back, it failed to live up to the hype. However, now that voice recognition technology has become more sophisticated, the time is finally right for widespread adoption. Smartphone voice assistants and home smart devices will become yet another vehicle to conduct banking transactions as well as conversations with virtual assistants.
Focus on security
Security will continue to take center stage, as advanced biometrics and AI become mainstream to better protect the end user. Convenience and ease of use are the hallmarks of a great digital customer experience. However, an increase in these factors can unintentionally lead to security gaps. The financial institutions that are able to blend security and seamless interactions most effectively, regardless of channel, will gain a significant advantage in delivering superior digital-first experiences.
Brand reach and branch experiences trending to outweigh branch reduction efforts
The trajectory of branch reductions will flatten after several years of significant change. While a record number of branches closed from 2020 into 2022, net branch closure data from Q2 and mid-Q3 of 2022 shows a significant slowdown. Investment in improving remaining branch experiences from interior redesign to technology will become front and center versus closing sites. The largest institutions (both banks and credit unions) will continue to grow in markets they previously had limited presence and corresponding market share.
A continued shift to consumer-directed money movement and payment methods
We have seen two major payments milestones so far this year: Apple Pay passing Mastercard in dollar volume processed, and Zelle moving more funds on a gross dollar basis than Venmo and CashApp combined. The consumer is choosing what platform to use based on what meets their needs and expectations and offers a seamless experience. Integrated, one-touch solutions are winning over “new to wallet” or “new to phone” offerings. Consumers are rewarding the frictionless platforms with their transactions and engagement which will accelerate in 2023.
Changing Demand Deposit Accounts (DDA) propositions have issuers revisiting existing customer development
The combination of widespread changes in overdraft fees coupled with card not present regulatory action in 2022 will retrench issuer focus on cross-selling existing customers versus acquiring new ones. Priority will be placed on growing share of assets, services and more profitable products such as credit cards or personal loans with existing customers. Developing existing customers through awareness and follow-through in their physical and digital interactions with issuers will become even more critical as customer-level profitability continues to be under pressure.
2023 and beyond
“It’s been a year full of challenges and opportunity for financial services. Those institutions that lean into modern, open technology will be well-positioned to quickly innovate, boost efficiencies and deliver exceptional, personalized customer experiences for the new year and beyond,” said Frank Hauck, president and general manager, NCR Banking. “At NCR, we are proud to deliver the software and services that transform, connect and run technology platforms for institutions across the globe.”
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Author: Mike Lawson
Married to a most gorgeous and wonderful wife, raising 5 kiddos (including twins!), enjoy helping others tell their stories, and love surfing SoCal waves. Keep it simple.