Bank Product Proliferation: Too Much of a Good Thing

When someone walks into your bank or credit union branch or visits online to open a new account, how many options are available to choose from? More importantly, how many different legacy products exist that are no longer offered, but still need customized maintenance, specialized communication and integration with your new digital offerings?

Has our desire to provide the best products for everyone resulted in product clutter, complexity, confusion, and additional costs? Now, there's new evidence that customers will reward us for reducing choice and for helping them move to the right product.

Beyond just reducing the current number of products we promote, it is also important to close the books on outdated product portfolios, consolidating legacy products into a more refined, less complex set of offerings. By doing so, your institution will reduce costs, generate new revenue, simplify your customers' lives and provide the foundation for future growth.

In a recent research paper from A.T. Kearney entitled, Reducing Complexity in Retail Banking: Simple Wins Every Time, it was found that the origin of banking's product proliferation challenge is the industry’s product-centric view and the lack of a traditional product lifecycle. By remaining siloed and focusing on the impact of individual products, there had been little internal incentive to reduce complexity for the customer’s benefit.

And unlike other industries, where customers are proactively shifted to the next generation of products when a new product is introduced and an old product is retired (i.e. Apple), A.T. Kearney found that most financial institutions maintain retired product portfolios forever, avoiding the risks and challenges of product migration. As a result, they found that some of their clients had more than 500 products, with two-thirds representing outdated offerings.

"One of our clients had more than 15 different savings products, with just three accounting for 90 percent of new product sales," states Torsten Eistert, partner at A.T. Kearney and co-author of the report. "Some products were being used by no more than 200 customers."

Beyond ongoing new product introduction, the product proliferation challenge is amplified by the impact of mergers, short duration specialty products, multiple branding, etc. This doesn't even take into account the impact of different behind-the-scene pricing algorithms or customer level customization (waivers, bonus rates, etc.) that is commonplace in banking.

As an industry, we can no longer equate variety of offerings with customer centricity. While customers say they want a variety of products and services, recent research by Filene Research Institute entitled, The Psychology of Choice Overload: Implications for Retail Financial Services found that the assumption that consumers always benefit from more options does not always hold, and in some cases, the consumers (and the bank) benefits from fewer, rather than more, options.

Simplicity Can Reduce Costs

Beyond the potential for improving sales, service and transparency with a simplified portfolio, reducing the number of legacy and current products can reduce costs. On the front line alone, broad product lines mean tellers and platform personnel need more training and time to understand (and explain to customers) a confusing array of alternatives. Each product has unique rules, regulations, rates, fees and transaction parameters that, even for a product no longer offered, may need to be referenced on an ongoing basis.

Imagine trying to know where to look for details about dozens or even hundreds of products on a moment's notice. Just because the technology supporting these products may be able to provide the answer in a relatively low cost doesn't mean the ultimate cost isn't significant.

According to the A.T. Kearney study, 75 percent of processing costs in branch-focused banks comes from the front office, where product confusion can also impact service and time available to sell. The cost that usually can't be calculated is the cost of a frustrated customer who expects flawless treatment. As mentioned in the Filene study, "When a vast array of confusing options are presented, a 'no decision' may be the sales outcome."

Obviously, complex product portfolios and legacy services also impact the back office, where maintaining an extensive portfolio for an undetermined period impacts personnel and IT costs. According to Eistert, "It is not uncommon for banks to keep certain legacy systems running because they host a large portfolio of legacy loans or deposits and they prefer not to have to contact clients in the event of system migration issues."

Simplicity Can Increase Revenues

As mentioned above, a simplified product line can positively impact the amount of time that can be dedicated to selling and can make it easier for a customer to make a decision. In addition, consumers often find it easier to deal with smaller assortments since they need to make fewer choices, leaving time to consider add-on services that may be valuable from a revenue perspective to the bank or credit union.

Interestingly, the revenue opportunity extends beyond current portfolio offerings into the vast legacy portfolio of products that have been mothballed but still held by the majority of an institution's customers. While a difficult endeavor, biting the bullet and migrating outdated product sets to a newer, narrower product line can increase sales, balances, share of wallet and customer satisfaction.

Several years ago, I was involved in a massive checking product migration project with CIBC in Canada. The goal of the project was to move every checking customer in the bank to a 'best fit' product line that included only 5 types of accounts. In other words, to proactively move more than 30 different legacy account types to 5 simpler options.

By evaluating historical balances, transaction volume, channel use and other behavioral data, the bank was able to determine the best product from the revised product line to place each customer. It was up to my firm to build the marketing plan to effectively communicate these changes to the customer with the least amount of disruption (as measured by negative branch impact and call center volume). 

The impact of the migration was far different than we anticipated at the time. Instead of a huge uptick in  call center volume with questions and complaints, the volume of calls remained relatively consistent with pre-conversion metrics. More interestingly, when measured over time, the balance in the accounts increased, ancillary product sales increased, revenue from both the new checking accounts and additional services opened increased and customer satisfaction scores improved. 

Over the years, the positive revenue impact of successful product line reduction efforts has been replicated by several institutions in the marketplace. A recent case study from Fifth Third Bank is included below.

Simplicity, Compliance, Risk and Transparency

New regulations require banks and credit unions to report on customer relationships at a much more granular level. The more types of products an institution has in their portfolio, the more variations that need to be included in risk management systems, CFPB reporting, etc. which impacts IT costs. In addition, with complaints being monitored more closely than ever by government units, a simplified product line can reduce the potential for compliance issues down the road.

Beyond regulatory issues, there is more and more focus on increasing the transparency of products to make them easier to understand and compare with competing services. Customers want uncomplicated offerings that can be compared and eventually used with no surprises. The focus on simplicity of offers can best be seen with new entrants such as Moven, Simple (naturally), Bluebird and GoBank that are mobile-first offerings with historically simple functionality.

Three Steps to Product Portfolio Simplification

Based on all of the reasons stated above (I am sure there are more), there is a greater need than ever to reduce the complexity of both legacy and current product portfolios. The three-step process recommended by A.T. Kearney includes:

1. Clean out the attic: Much like trying to cure a hoarder of bad habits, financial institutions need to analyze products in light of customers impacted, revenue potential and costs to serve. Make deep cuts until it hurts. According to A.T. Kearney, reductions of less than 30 percent aren't enough.
2. Build products like automakers build cars: Instead of each product being built from scratch, it is better to build with a modular design, where the platforms are similar, but the components can be assembled in a variety of ways to meet individual needs. This provides economies of scale, choice and potential for growth in the future. Examples of banks using this concept include Union Bank (Banking by Design) and BBVA Compass (ClearChoice Checking), where customers create an account that fits their needs, choosing only the features they want.
   
   
   
   
   
3. Match products with customer preferences: While few would argue against banking moving from a product-centric to a customer-centric view, it is easier said than done, especially for existing product portfolios. Beyond matching existing products to a new product set, the process of product migration needs to include revenue optimization modeling as well as a deep analysis of customer balance, transaction and channel use history. And since customer financial behavior changes over time, a future perspective of where the customer is going financially is needed to determine the best new product to move the customer to.

Case Study: Fifth Third Product Line Simplification

In a recent presentation at the ABA Marketing Conference entitled, Using Multichannel Engagement to Effectively Convert Customers, Bob Wojtowicz, vice president of 1:1 marketing for Fifth Third Bank illustrated the power of product line simplification. Saddled with a product line that included 25 checking accounts and 17 savings accounts, the bank's goals were to:

• Increase value across segments
• Increase the appeal of higher end products
• Reinforce the 5/3 brand and value proposition
• Grow total share of wallet

More specifically, the bank wanted to exit from Free Checking, which for years had been the backbone of aggressive acquisition efforts, become less reliant on overdraft and debit card interchange and provide incentives to customers for consolidated and expanded relationships.

From 42 to 8 Deposit Services

Rather than introducing a new set of products and 'grandfathering' the existing portfolio, Fifth Third migrated their entire customer base to a new checking and savings product line-up that reduced the number of checking accounts from 25 to 5 and the number of savings options from 17 to 3. As part of this migration, fee structures were simplified and made more transparent, making the entire conversion and future selling processes easier.

As with my CIBC example above, Fifth Third had the following concerns:

• What happens if customers don't like the new products and leave?
• Can the elimination of the traditional Free Checking create a PR problem?
• Could the changes provide an advantage to the competition?
• Are the revenue projections realistic?
• How do we position the changes as a benefit to the customers?

According to Wojtowicz, the key to success was a ton of pre-planning, listening to customer concerns, leveraging all possible communication channels (frequently), developing an effective customer migration mapping analysis and providing the customer multiple ways to engage with the bank.

Also stressed was the importance of top management support, strong conversion team leadership and extensive customer, intradepartmental and strategic partner communication. 

Multichannel Communication

To facilitate the product migration process, customer segments were established based on the depth and current value of the customer relationship. Each segment had a different contact strategy as well as messaging theme based on the account they were migrating from and the potential impact of the migration. More importantly, each individual household was mapped to determine the best post-migration product.

While the change in account structure would be 'business as usual' for some households, others would need more personalized engagement to understand the impact and potential opportunity of the new accounts available. The channels used by Fifth Third prior to the conversion included:

• Direct Mail: What's changing (and not changing), 'you have a choice' and how/when to respond (there were multiple direct mail touches with greater degrees of urgency as conversion approached)
• Email: Multi-touch reinforcement of each direct mail touch with the ability to download a copy of the original letter and take action electronically
• Online: Home page awareness banners and product page messaging with conversion landing page links to online wizard decisioning tools
• Internet Banking: Interrupt screens and integrated messaging served as reminders to online banking customers
• Social: Online monitoring of voice of customer (VOC) with active bank participation and response to negative sentiment
• Outbound Calls: The majority of the consumer bank base was called to set up 1:1 branch interactions to discuss changes in person
• ATM Messaging: Reminder communication on the screen, on facade banners and on receipts

Conversion Results

As a result of the exceptional pre-planning, effective mapping of household level communication, top management and employee support and ongoing monitoring of results on a daily basis, the impact of the massive conversion by Fifth Third was an unqualified success. Based on publicly shared results, the success of the product simplification process included:

• Increased revenue per household
• Increased cross-sell ratios
• Increase in average checking balance
• Increase in average savings balance
• Decrease in single service households
• Increase in new account generation

More specifically, Hendrix says Fifth Third has converted 2.1 million customers to its new products while, in the space of just one year, increasing deposits by almost $3 billion, and the cross-sell ratio to 5.2 products per-customer from 4.6.

For me, the most impressive numbers shared were that 40% of the customer base visited a branch office and sat down with a Fifth Third representative to discuss the best way to structure their bank relationship in the future. This provided the bank team the opportunity to not only make sure the customer was placed in the best product going forward, but also the opportunity to cross-sell additional services. In a conversation with Mark Hendrix, senior vice president and head of strategic marketing at Fifth Third, he says everything went so well, the branches want to find a way to connect with customers again.

When it comes to migrating new and existing product assortments, offering more variety is usually not the best option and may only perpetuate an historical paradox. Empirical research in the domain of retailing, consumer packaged goods and financial services shows that, in many cases, large assortments can lead to confusion, higher costs, lower revenue, lower purchase likelihood and a worse overall customer (and employee) experience. 

As we move quickly into the digital banking world, complexity is not rewarded. People want to make their live's easier and their financial institution choices will be based on which organizations serve their needs best. The best way for banks and credit unions to be prepared for this future is to clean out the product attic and move forward with a much cleaner slate. As in the case of Fifth Third Bank, this adjustment may also lead to more sales and an increased share of wallet.

Additional Resources

Reducing Complexity in Retail Banking: Simplicity Wins Every Time - A.T. Kearney (June 2013)

The Psychology of Choice Overload: Implications for Retail Financial Services - Filene Research Institute (2011)

Keep it Simple: How Banks Can Do Less and Deliver More - Booz (2009)

A New Dawn? Product Simplification: Winning Customers, Reducing Costs - Accenture (2012)

Simplification in Banking - KPMG (2012)

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The Key Ingredient to Successful Business Development

During my first week here at MarketMatch, I’ve been commuting from Columbus to Englewood (a little over an hour drive) in order to get acclimated to the team and my new role as VP of Client Management.  I wanted to maximize this extra time in the car by listening to an audio book.  My business coach, Dan Stover, recommended a book to me about leadership, and so I spent those hours in the car this week learning about how to be a better leader.

One of the things that stood out to me was a point the author made about passion.  Our body language as we speak about something is the indicator of the amount of passion we have about the subject on which we are speaking.  Passion cannot be faked. 

You can know the ins and outs of a given service – for example, like all of the kinds of checking accounts your financial institution offers and their features.  But, if you don’t bank there and realize the benefits for yourself and really look to see how your credit union or bank is truly helping someone financially, your body language is going to convey something less than passion.  Therefore, the likelihood of making a sale is substantially less. 

How many conferences around the country have sessions for successful business development?  Like, a lot.  But here’s a piece of advice: your biggest asset as a business development person is yourself and the stories you have to tell. 

Even though banking is an errand, we are in the business of emotions.  People aren’t emotional about their loans!  They are emotional about what loans get them: a new car, a bigger house with a backyard for their kids to play in, a dream wedding, or a few extra dollars when ends won’t meet.  These are the stories on which we should be building our product suites, our marketing strategies, and our business development plans. 

Everyone has a story when it comes to their financial picture.  Find the stories.  Therein lies the passion with which you can weave a pitch to a new business client, a meeting with a potential new homeowner, or a potential employer group. 

Amanda

MarketMatch solves business problems for credit unions and banks through marketing by providing FOCUS, generating MOMENTUM, and creating measurable RESULTS.  

Contact me to learn how MarketMatch can help you with your marketing efforts, whether it is through marketing strategy, branding or rebranding, budget planning, and much more.  Learn more about all of our client services by clicking herewww.marketmatch.com/services.

Follow me on Twitter!http://twitter.com/AmandaLThomas

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Banking Leaders Predict Major 2013 Trends

Trying to predict what is going to happen in the banking industry is like trying to predict tomorrow's weather. While you may get the forecast right, it could be more a case of luck than skill. And what you see today could quickly change tomorrow.

With that as the backdrop, I asked almost fifty industry leaders who author blogs I read, post on Twitter, speak at industry trade shows or make banking a career for their thoughts on what may be the most important trends in retail banking in 2013.

The predictions ran the gamut from what may occur in payments to how bank distribution could begin to transform. While some focused on larger megatrends, others had a narrower scope. In all cases, however, the predictions provide food for thought for bankers and industry providers. It is clear the one forecast that is guaranteed to be accurate is that the industry will be different this time next year.

Battle For Payment Supremacy Will Continue

The past few years has seen a massive amount of change in the payments world, with a reduction of interchange fees, the infiltration of retailers and non-banks like Starbucks, PayPal, Square, MCX, etc. and the beginning of a shift from plastic to smartphones as the payment device of choice. While past predictions around NFC, an Apple mobile wallet and a cash-less society have not yet come to fruition, there are still no lack of industry luminaries placing bets on how we will transact in the future.

Tom Noyes, author of the mobile, payments and advertising blog, FinVentures, states, "Retailer friendly value propositions (MCX, Square, Levelup, Fishbowl, Google, Facebook, etc.) will get traction . . . but MCX will not deliver for another 2 years."

Ron Shevlin, senior analyst from Aite Group and publisher of the Snarketing 2.0 blog believes the most significant trend in 2013 will be the evolution of the digital wallet concept. According to Shevlin, "The digital wallet will be the new battleground – for technology companies, financial services firms, and retailers/merchants. They say that politics makes strange bedfellows – but so will digital wallets. The evolution of the concept will involve a lot of interesting partnerships and joint ventures." 

Matt Wilcox, senior vice president of Zions Bank and financial industry blogger believes we will begin to see the separation of contenders from pretenders in the payments space. "While there will still be multiple players vying for position, I believe a few companies will begin to emerge as leaders in this space." Alex Bray, retail channel solutions director at Misys in London agrees, saying "I think we will see the market coalesce around a standard form of mobile payments - and contrary to what PayPal may say, I think this will involve NFC."

Delivering On The Promise of 'Big Data'

There is no doubt that 'big data' was overused and misunderstood as a term and underutilized as a tool in 2012. There is also little disagreement among industry leaders that banks will be aiming to use both structured and unstructured data more extensively in 2013 as the collecting, storage and processing capability becomes easier and less costly.

As David Gerbino, digital product, marketing and strategy manager at Provident Bank in New York told me, "The big trend for me every year is data. Not big data, not small data, just the right data". He went on to say, "Once the data elements needed are identified, the challenge becomes using these components correctly to drive success."

Rod Witmond, SVP of rewards platform provider Cardlytics, emphasized the trend of utilizing data from the consumer perspective in 2013 but warned, "Big data can be incredibly insightful but, if it isn't leveraged in a simple way that allows the consumer to maintain their current habits – or adds enough value that the consumer is willing to change their habits – the value of the big data will be lost because consumers don’t ‘try something new or different’ if what they have already is working."

Some of the Twitter responses I received regarding banks improving the utilization of both structured and unstructured data at their disposal included:

Finally, Nate Gardner, vice president of strategic partnerships at Provo Utah based MoneyDesktop, believes that intuitive data visualization will begin to deliver on the promise of big data for banks in 2013. According to Gardner, "Intuitive analytics will make it easier for bank executives and marketing teams to customize the user experience and deliver tailored messaging, product offers and solutions that best meet specific consumer needs and interests."

Transformation of Delivery Channels

Consumers want a convenient, secure and familiar experience when they interact with their bank using mobile, online, phone, ATM or their branch. They also want their bank to realize that they may use multiple channels at the same time. This channel agnostic interaction has been recently referred to as an 'omnichannel' experience in the retail industry.

According to Mary Monahan, EVP and research director at Javelin Strategy, “To correct current shortcomings, FIs will focus on changing their perception of omnichannel banking as necessary rather than novel. Moreover, for FIs to increase or even maintain their competitive positions in the coming years, they will need to invest in developing an integrated architecture wherein data and platforms can seamlessly converge while enhancing the quality of the brand experience.”

Branch Delivery

Under the heading of 'traditional branch banking', there was no hesitancy for industry leaders to provide warnings. Serief Meleis, a partner at Novantas warned, "Continued overcapacity of branch distribution resembles the airline industry of the early 80's. Fundamental restructuring must begin sooner rather than later." Not surprisingly, Brett King, author of the new book Bank 3.0 and founder of branchless start-up Movenbank added, "Market analysts will start to discount retail banking stocks with large branch networks as poor branch performance becomes visible."

Andy Will, senior vice president of deposit products and card services at BMO Harris agrees that the traditional mid-sized branch has too much real estate and staff costs to be viable going forward. Discussing a trend he believes will extend beyond 2013 Will states, "I believe branches will get simultaneously bigger andsmaller. There will be the addition of regional 'Apple store' sized branches in prime locations combined with micro branches to 'fill in' the rest of the markets." Will adds, "Both the large and small branches will be highly automated with two-way video, touch terminals, etc."  

None of the experts put the trend in perspective better than Bart Narter, SVP of Celent who stated, "The branch is banking's new alternative channel."

Mobile Banking

In a report just released by Juniper Research entitled, 'Mobile Banking: Handset and Tablet Strategies 2013-2017', it was estimated that more than 1 billion mobile phone users will have used their device for banking purposes by 2017. In addition, it was projected that more banks will have multiple mobile offerings, maximizing customer penetration potential. These trends were reflected in many of the predictions for 2013.

Fred Hagerman, CMO of FirstMark Credit Union out of San Antonio, TX emphasized, "Mobile is a freight train coming down the tracks - and it's here to stay. Banks that need proof only need to look at their web analytics from the holidays to see a significant bump in mobile device usage in the days after holiday gift-giving."

Some believe that banks, in an effort to speed delivery to market, have created fragmented mobile apps that served limited purposes. Bradley Leimer, Vice President of Mechanics Bank and publisher of The Discerning Technologist feels that 2013 will be the year we move the mobile banking conversation beyond transactions (transfers, bill pay, a brief snapshot of transactions, maybe some financial management) to include enhanced engagement through personalization . . . and more. 

According to Leimer, "We need to engage our customers with their own data, and drive new levels of personalized service to help them create their own value from their transactions. Our mobile applications will see renewed focus on engaging and simplified customer experiences, and improved contextual offer placement. We’ll see more applications leveraging voice, as well as the social graph, because individualized preferences are critical."

Matt Wilcox, from Zions Bank agrees, "I believe we will see the proliferation of “fat apps” that allow for a convergence of multiple applications as well as enhanced personalization for an enhanced customer experience."

Online banking will improve as well in 2013 if the industry leaders are correct. The online banking experience will be holistically reviewed this year according to Bryan Clagett, the chief marketing officer at Geezeo. "The user experience will finally take precedent, and the definition of a 'banking website' will be re-written. Products like PFM will help consumers make better decisions, save money and leverage the vast merchant data that lies within."

Serge Milman, CEO and founder of Optirate sees the focus on new and enhanced delivery channels as being a requirement to stay relevant, but not an inexpensive proposition, especially for smaller institutions. "Mobile and other delivery decisions will become 'infrastructural' initiatives", states Milman. "Banks will spend significantly to implement technology, but smaller organizations may find these expenditures prohibitive and will be slow to see returns."

Marketing and Technology Converge

Significant changes in marketing have been occurring for the last couple years, allowing bank marketers to leverage new technologies to improve targeting, offers, timing and the marketing channels used to communicate. The ability to combine structured and unstructured data described above, with the digital channels available, are a powerful combination for those bank marketers able to keep pace with change.

According to Nicole Sturgill, research director at CEB TowerGroup, "The embrace of digital channels as primary to the customer experience is significant for two reasons. First, it acknowledges the fact that the branch is no longer primary in many customer’s eyes; and second, it places digital sales at the top of the technology priority list for 2013."

Bank website design will also improve in 2013, enabling sites to become better selling tools. Tim McAlpine, president and creative director of Currency Marketing, believes that the use of HTML 5 will flourish saying, "Firms will put more weight into building websites that work on every screen size, versus the current trend of building dumbed-down mobile versions of corporate websites."

David Gerbino, digital product, marketing and strategy manager at Provident Bank in New York agrees. As he stated in my recent post on bank marketer resolutions, "Bank need to rapidly say goodbye to the web. The web of decades past is dead. Today's web needs to be responsive and device agnostic with one website supporting all devices."

These changes will improve the customer experience as is mentioned by Jelmer de Jong, global head of marketing for Netherlands based Backbase and editor of the BANKNXT blog. "Banks have to focus on creating ONE unified superior customer experience, across devices, across channels. Multi-channel strategy and creating a cross channel journey will be key."

While some banks are just beginning to utilize digital channels for their marketing efforts, some have found the power of new strategies such as search engine optimization for digital ads and retargeting for reaching people who are ready to buy.

According to Lloyd Lee, SVP, Integrated Services for direct and digital agency New Control, "The benefit of retargeting is clear - among all offline and online channels, retargeting is often the most efficient acquisition strategy on a cost-per-approved account basis." Lee added, "In 2013, retargeting will become much more widely used by banks as it ensures that banks are capitalizing on all of the traffic being driven to a bank's site from both offline and online acquisition efforts. It will be at the core of the most progressive bank's digital strategies."

The technology will also allow lifecycle and multichannel marketing efforts to merge, providing bank marketers to know who should get what offer, in which channel, in addition to WHEN they should receive the offer according to Bill Secrest, director of Datamyx. "New data solutions are emerging that can add context around when to target a consumer for marketing treatments."

Many of the industry leaders emphasized that these new tools and strategies will be more important in 2013, as the industry moves further away from the industry meltdown of a few years ago and into a period where shifting market share will be needed to grow top line revenue.

J.P. Nicols, CEO of wealth management consultancy Clientific, was rather blunt when he said, "All of the popular buzzword talk of improving client experience, optimizing channel preference and engaging clients on social media is now being viewed through the filter of 'how quickly can we see the impact in our results?' In 2013, this emphasis will put additional pressure on marketers, vendors and partners to prioritize the right projects and the right products and features that will yield results quickly."

On a more fundamental level, Mark Arnold, President of Market Strategies in Dallas, sent me the following trends which will be required as marketers implement new customer-facing technologies:

Product and Segment Opportunities

With regard to which products and services will be most important in 2013, some leaders believe there are untapped opportunities that will emerge in 2013. "Business account acquisition will be – or should be – a top priority for most FIs in 2013 since hardly any bank has been aggressive in this space or made many positive product changes in response to the repeal of Reg Q" offered Mark Zmarzly, vice president of financial services for ACTON Marketing.

Salil Ravindran, lead solutions architect for Oracle in the Netherlands agrees, "Banks will start focusing more and more on servicing the business banking segment through digital channels. The extent of services required by this segment is largely an extension of retail banking and not as complex as those required by the higher end wholesale segment, and hence banks should be able to largely leverage existing digital channel infrastructure to extend these services."

Credit union leaders provided the following tweets regarding where financial organizations may focus in 2013:

Roger Conant, curator of the original credit union tweet tracker site out of Houston believes that focusing on the women's segment will move beyond a niche play in 2013, while Salil Ravindran and J.P. Nicols both believe banks will focus more than ever on the mass affluent market in 2013. In referencing trends in both the EU and US, Ravindran says, "I believe more banks will start offering financial planning services over digital channels, thereby scaling the scope of digital channels from simple products and services to much more complex ones."

New Entrants and Non-Bank Competition Increase

Competition in and beyond the payments marketplace will continue to grab headlines and customers in 2013, making it imperative for traditional banks to keep a watchful eye on both new entrants and new forms of competition. As Simple continues to grow by providing streamlined banking to a growing list of consumers standing in a virtual queuing line to open accounts, Movenbank will open their virtual doors in early 2013>

At the same time, Walmart continues to innovate, leveraging partnerships like those with American Express for Bluebird, focused initially on the middle class consumer. And there is no reason why Walmart should stop with a prepaid offer according to Emily McCormick from Bank Director Magazine. "If successful with Bluebird, I'd look at what Walmart's next move would be, especially if they can dodge the regulatory hurdles than encumber banks."

Of greater concern in the longer run could be those offerings that bypass traditional banking channels completely. The rise of alt-lending (p2p lending, crowdfunding) in both the consumer and small biz space could present interesting challenges according to Jim Breune, CEO and founder of the Online Banking Report and founder of The Finovate Group. "Lending Club's $600-million-year (in loan originations) shows that US investors are buying into the concept and the British Governments recent announcement that they will lend 10 mil (GBP) through Zopa and 22 mil (GBP) through Funding Circle demonstrates that at least one government understands the economic potential of alternative forms of banking."

Continued Focus on Compliance and Security

Viewpoints differ on whether banks have fully adjusted to the impact of increased compliance and the CFPB. On one hand, a mid-sized bank executive stated, "The CFPB will still be a factor in 2013 for retail bankers. The question is, will it help add transparency and customer choice to the market for financial services or will their actions end up stifling choice and innovation because banks will be afraid to try creative new approaches to products or processes for fear of criticism or fines?"

Steve Cocheo, executive editor of the ABA Banking Journal has a more positive perspective when offering, "I believe that bankers will get over their compliance shell-shock in 2013, understandable as it is. While the regulations they face are often overwhelming, many will figure out new ways to meet their regulatory obligations with creativity and some fresh ideas. Not every institution will follow this path, but I believe more will than some think."

Management consultant Steven Ramirez from Beyond The Arc Consultancy sees potential for banks that embrace the context of the CFPB when he said, "Banks that expand the scope of their Voice of the Customer efforts will see an added benefit: mitigation of regulatory risk."

The impact of regulations is not just being felt in the U.S. Of particular concern for banks in the U.K., and potentially the rest of the EU, are proposed 'ringfencing' proposals that are focused on separating a banks' day-to-day retail banking arms from riskier investment bank activities. With the intention of protecting taxpayers from the potential of bailing out banks, these pending rules impact larger banks more significantly and will cause additional distractions similar to what has occurred in the U.S.

While the impact of the CFPB may be stabilizing and many banks are prepared for the impact of ringfencing, the same can't be said for the preparation for cyber attacks. This disturbing trend, which is impacting banks worldwide, may define issues ranging from consumer trust in banks to channel usage in 2013.

Mary Beth Sullivan, managing partner of Capital Performance Group, LLC stated, "I believe the cyber security threat will continue to increase, and retail banking organizations across the country will need to adopt more sophisticated security protocols and educate customers about it much more in 2013."

Bryan Yurcan, associate editor of Bank Systems and Technology agrees with his rather pessimistic post:

Change is Inevitable . . . Or Is It?

As mentioned by Bryan Clagett from Geezeo in development of this post, "Those in traditional retail banking need to realize that banking, as we know it, is evolving largely due to new disrupters in the space. I say, embrace the inevitable and look from within and outward at ways to build better, more efficient experiences."

Jeff Marsico, banking consultant and publisher of his own industry blog, referenced a sentiment similar to Jelmer de Jong's 'Just Do It' resolution for 2013 regarding the hopeful trend regarding the way bankers should look at the future:

Alternatively, maybe we could all step back and hope that Chris Skinner's slightly cynical prediction could become a reality.

Are there any trends you believe will be significant in 2013?

Additional Resources:

Financial Services Analyst Firm Announces Top Ten Trends in Banking, Payments, Mobile and Security for 2013: Javelin Strategy and Research, January 3, 2013

Top Trends in Retail Banking 2012: Celent Research, December 2012