61% of survey respondents will invest in new digital technology, with a focus on digital account opening, data analytics and reporting, and others
Computer Services, Inc. (CSI), a leading provider of end-to-end fintech and regtech solutions, released its eighth-annual Banking Priorities Executive Report. The report is based on the company’s yearly research initiative that asks bank representatives to reflect on their performance across various industry categories and select the technologies they expect to drive the future of the financial sector. Community bankers, representing the backbone of the traditional U.S. banking system, made up the bulk of the 228 respondents.
“Our survey contributors are doubling down on real-time payments technology, exploring the possibilities of open banking and using public cloud technology more than ever before. By prioritizing such technological advancements, financial institutions are not only underscoring their commitments to customers but securing their position against megabanks and other non-traditional newcomers.”
Bankers shared their thoughts after a year in which high employee churn persisted and deposits at challenger banks continued to grow. These disruptions were set against a backdrop of ever-present cybersecurity threats and costly regulatory enforcement actions. Respondents deemed employee turnover (34%) as the most significant issue bankers expect will affect the financial industry in 2023, with regulatory change (27%) as a close second.
Despite such challenges, 88% of bankers feel most confident about retaining their current customers. Findings from the 2023 survey also indicate bankers see strengthening customer relationships through digital evolution as imperative.
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Technology will facilitate customer connections in 2023
Bankers’ top three strategies for increasing market share all revolve around digital transformation as bankers intend to harness tech-enabled opportunities to reach new customers and enhance their current base. Insight from the report shows:
- 80% will enhance or optimize their current digital channels
- 61% will invest in new digital technologies
- 57% will utilize customer data
“Today’s evolving technology ecosystem offers financial institutions an exciting opportunity to continue serving as pillars of their communities while expanding beyond their pre-digital imaginations,” said David Culbertson, CEO and president of CSI. “Our survey contributors are doubling down on real-time payments technology, exploring the possibilities of open banking and using public cloud technology more than ever before. By prioritizing such technological advancements, financial institutions are not only underscoring their commitments to customers but securing their position against megabanks and other non-traditional newcomers.”
To grow brand utility and loyalty, bankers plan to prioritize technologies that enhance the customer experience, such as digital account opening (55%), data analytics and reporting (47%), and digital lending (41%). Nearly 25% of bankers also see Banking as a Service (BaaS) as an opportunity to create new revenue streams and 32% are evaluating how BaaS can streamline operations.
“What used to be a fear is now seen as an opportunity. Many fintechs need financial institutions to provide exceptional, secure and compliant customer experiences. They will continue to pursue BaaS partners that can demonstrate scalability as users seek expanded banking services,” said Tara Schultz, vice president of Open Banking at CSI.
Cybersecurity to safeguard customers is paramount
Customer trust in a financial institution’s ability to safeguard personal resources plays a critical role in the health and well-being of a banking operation. Unsurprisingly, P2P or other digital fraud topped respondents’ cybersecurity concerns (29%), followed by data breaches (23%) and ransomware (20%).
This year’s survey also delved into financial institutions’ cybersecurity readiness:
- 80% say their institution knows how to respond to a cyber incident within their walls
- 77% of bankers agreed strongly that they clearly understand their cyber risk
- 51% of bankers also strongly agreed that their institution would not be found negligent in the case of a breach
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Fluctuating regulatory obligations are inundating bankers
Bankers expressed widespread concern about several pressing regulatory issues, including Unfair, Deceptive or Abusive Acts and Practices (UDAAP), Bank Secrecy Act (BSA) modernization, and cybersecurity. Respondents cited being very or somewhat concerned about:
- UDAAP, in terms of overdraft fees and the proposal to ban junk fees (74%)
- Cybersecurity compliance (68%)
- BSA/AML modernization (57%)
Bankers were also vehemently clear about the dominant compliance risk their institutions face, with 91% of respondents selecting fraud. Money laundering came in a distant second at 8%. The lopsided response reflects the industry’s increasing concern about the Regulation E implications of P2P and other digital fraud.
“Complying with ever-growing and ever-changing regulations is consuming more and more staffing resources at the same time as financial institutions are worried about employee retention,” says Steven Ward, manager of CSI Advisory Services. “It’s no wonder more than half of bankers are very or somewhat concerned about four of the seven regulatory issues listed in this year’s survey.”
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