Top 10 Retail Banking Trends and Predictions for 2014

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The Top 10 Retail Banking Trends and Predictions for 2014 are compiled from more than 60 global financial services leaders including bankers, credit union executives, industry analysts, advisors, publishers and editors, bloggers and fintech followers.

This year's list runs the gamut from a continuation of past trends to the introduction of new trends in delivery, payments, competition, operations, customer experience and marketing. Prioritization of these trends may differ by institution, but none should be ignored.

For the third year in a row, I have reached out to global leaders in the financial services industry to ask for their thoughts around upcoming banking and credit union trends and predictions. As in the past, the response was overwhelming, with more than 60 responses. The emphasis of this compilation is mostly North America, but most of the trends are global thanks to responders from the U.K. and the Asia Pacific region.

While everyone had their 'favorite' trend, and some provided a personal top 10 list, I consolidated their thoughts and came up with trends that were considered the most important. Two significant trends that are not listed, but impact virtually every trend discussed, are the omnipresence of previous and upcoming regulations as well as the continued investment in new technologies to make this year's trends a reality. Two trends that may prove important, but got less than expected mentions were the underbanked and alternative currencies like BitCoin.

This year's Top 10 Retail Banking Trends and Predictions are:


All of the contributors did concur, however, that a guaranteed prediction for 2014 is that disruption will continue at an unprecedented pace and that the industry will look different this time next year.

• Drive-to-Digital: Impacting delivery, marketing and service usage
• Payment Disruption: New players, technologies and innovations
• Increased Competition: Neobanks and non-traditional player pressures
• Branch Optimization: Maybe not branchless, but certainly less branches
• Focus on Customer 3.0: Digitally astute, social and yearning for insight
• Breaking Down Silos: Product and data silos begin to crumble
• Simplifying Engagement: Removal of friction and steps to engage
• Improving Contextual Experiences: Leveraging data for improved service
• Differentiating Brands: Avoiding commoditization in a digital world
• Global Innovation Perspective: Expanding view of tomorrow's innovations

The following infographic is a graphical representation of top trend and prediction terms provided by the contributors to this year's report. The size of each word represents the prominence of terms from the industry leader submissions.

Loop: A Mobile Wallet Game Changer

Loop is an exciting new mobile wallet solution that has achieved near ubiquitous acceptance with more than 90% of POS terminals without any infrastructure change by the merchant, the acquirer, or the issuers. 

While other mobile wallet players are talking about NFC, EMV, barcodes, BLE and the cloud, Boston-based start-up Loop has invented an incredible mobile solution that intelligently communicates with the existing retail mag stripe reader interface today – without another plastic card and without the merchant needing to change anything!

Compared to the recently announced Coin solution that captured the hearts and more than 7M YouTube sets of eyes of consumers and the fintech world a few weeks ago (see Bank Marketing Strategy post on Coin), Loop has been amazingly under the payments 'next shiny object' radar during its funding process. There was a wave of fintech buzz in October, including several articles and a presentation at Money2020, but not much since.

In an exclusive interview with Will Graylin, CEO of LoopPay, Inc, he said, "Loop has been focused on product development and our soft launch which will take place in about 3 weeks. We did a small PR effort at the time of our Kickstarter campaign, but we did not want to blow a lot of hot air before we had our product ready for market and had happy users." He continued, "Many have overhyped their solution and have failed. We are more interested in the long run and are building solid a foundation for our future with solid partners."

Given that Loop is delivering a solution that automatically transforms virtually every existing POS terminal mag stripe reader into a contactless payment receiver, I don't expect Loop to be in the shadows much longer.

That's right, unlike other solutions that require merchant terminal conversion or a programmable card with limited security, memory, card or battery capacity, Loop integrates the highest level of Payment Card Industry (PCI) security and can store hundreds of payment, gift, loyalty, reward or ID cards into a smartphone.

To 'trick' the mag stripe reader into thinking a physical card is being swiped, the consumer will need one of several add on devices available from Loop to emulate the card swipe including a Fob (being sent to 2,000 pre-order customers and Kickstarter backers this month), smartphone charging cases (available for iPhone 5 and 5s in early 2014 and other devices shortly thereafter) and eventually wearable devices.

Once cards are 'swiped' into the LoopWallet app using the Square like device, the user can select the card they want to use at payments. While the process initially will use additional consumer hardware, ultimately, Loop would prefer that their Magnetic Secure Transmission (MST) technology be directly embedded into the mobile device itself, eliminating the need to carry any additional hardware.

Watch the video below and see if you agree with me that this is an ingenious new mobile payments innovation.

9 Strategies for Building a Great Mobile Banking App

There is no doubt that strategies around mobile banking are in the top five priorities for any financial institution. Even with this focus, many bankers have a difficult time making the paradigm shift that is required to build a great mobile banking application.

As a result, I asked Scott Bales, who is currently working on a new book entitled 'Mobile Ready' to share his thoughts on the keys to mobile app development success. 

Guest Post by Scott Bales, Regional Director for strategic advisory firm User Strategy

The following thoughts come from the development of my new book, Mobile Ready and are provided to assist banks in driving greater success through the mobile platform. These come with a catch, however. To truly understand mobile, you have to accept that mobile is not the answer. Instead, there are real 'human' factors that create the foundation for mobile as a viable delivery tool for banks. 

What I am saying is that you should never embark on your mobile development for the sake of being on mobile. Doing so will only invite doubt, uncertainty and a constant struggle with the ROI of mobile. Instead, you need to view the interactions, engagement and loyalty that mobile can provide.

My list below is not intended to cover the technology aspects of mobile banking, like operating systems, security, transaction or payment capabilities. Instead, I have focused on preparing your mindset, so you can build a better mobile banking application from the perspective of your customer. 

After that, the technology components become much easier.

1. Get Out of the Building

Let's face it, banking interactions don't happen at your desk. Trying to craft an experience inside the office, you'll struggle to develop the necessary empathy for the customer, their context and their goals. The best mobile banking applications can't be built in an innovation lab. They need to be built with the input of real people who can validate your design assumptions and engagement potential in the real world.

You need to understand where and why people choose to engage your mobile application. Is it because they want to pay bills on their daily commute, do they need to check how much they have to spend before they go shopping.

Actively engage people in the context in which they need to engage your service, learn through open ended questions the behavioral, psychological and contextual needs of those moments. Only by connecting to the real world can you create truly delightful experiences.

2. Enlist Partners

So you think you know everything about building on mobile, or you're apprehensive to engage service providers. This is typical for most banks. The challenge for most banks is mobile banking applications built by bankers will look like banking on a phone . . . which can be boring, uninspiring and lacking creative thinking of new perspectives.

Engage open application designers, partners and thought leaders early in your journey to help leverage the successes from other industries to build a truly delightful mobile banking experience. Remind your teams that what you build will determine the consumer opinion of your brand over the coming year.

Digitally engaged consumers take experiences as material grounds for evaluating brands, and are less likely to be effected by your advertising messages. So make the effort to include a strong and diverse set of creative inputs into your creation process.

Bank Customer Service Still Stinks

Banks and credit unions realize that there is a strong correlation between customer satisfaction, portfolio growth and financial results, yet recent studies of customer satisfaction indicate there is still a major gap in performance between the financial services industry and other verticals. 

Where are financial institutions falling short in their quest to become customer-centric and how can banks and credit unions begin to exceed customer service expectations? 

According to findings from a new Carlisle & Gallagher Consulting Group study, 65 percent of consumers say their primary financial institution is not as good as (47%), or much worse than (18%) leading customer service companies. This is despite increased investment in customer experience initiatives by the financial services industry. (A SlideShare presentation entitled, Are Two Calls Too Many in the Eyes of the Customer? is available for download)

The key findings of the report include:

• Customer culture drives great customer service
• Customer experience is defined by first problem resolution
• Most complaints involve core banking products (checking, debit card, credit card, mortgage)
• Banks are not listening to their customers
• There is a correlation between complaint handling, satisfaction, loyalty and new business potential

These findings correlate with the just released ForeSee Experience Index that found that the financial services industry had the lowest aggregate score of any industry, including the lowest scores in retention, upsell and referral potential. In addition, financial services as a category had the largest gap between the highest and lowest scoring brands (American Express is 82 and Santander is 65), suggesting that there is much work to be done in offering the experience that customers expect from companies in this category.

Quick Problem Resolution Provides Challenge and Opportunity

One of the impediments to customer satisfaction is that more than a third of consumers surveyed by Carlisle & Gallagher did not believe their problem* was completely resolved. Of the complaints resolved, a whopping 72 percent of the problems required two or more interactions, with close to 30 percent requiring 3 or more interactions. This is certainly not a path to success.

Source: Carlisle & Gallagher (2013)

From an opportunity perspective, more than half of the customers surveyed said they felt like a valued customer when their issue was resolved with a single interaction and that their confidence in the financial institution increased by 38 percent. Conversely, confidence dropped to 17 percent and trust dropped to 10 percent when a problem required two or more interactions to be resolved.

While some complaints may be complex and require further research, this insight shows the power of resolving a problem quickly and completely. In fact, several studies done in the past have illustrated that a customer who has had a problem resolved satisfactorily can be more loyal than one that has never had a problem.

Source: Carlisle & Gallagher (2013)