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Bitcoin’s value - which has doubled in 2021 - continues to generate headlines but, behind the scenes, something even more significant for banking, as we know it, is happening. Central bank digital currencies are now emerging from experimental trials, disrupting the norm, to take a leading role on the global payments stage.

As for banks and credit unions, we recommend researching and rehearsing your crypto lines (of business) for showtime.

With vaccinations ramping up and most businesses reopening this spring, it’s getting easier to envision a return to normalcy later in 2021. Even so, neither Main Street entrepreneurs nor bankers are quite ready to heave a sigh of relief.

As has been seen...and experienced, some need more assistance than others, and some have proven adaptable to new conditions, whatever comes next.

The business world is awash in trade groups and industry associations, but a new player's recent formation deserves special attention. The creation of the Payments Leadership Council (PLC) marks a significant milestone, one with the potential to shift the dynamic in the ongoing tug-of-war impacting card payments systems regulation.

The PLC brings together the CEOs of the four major card networks (Mastercard, Visa, American Express, and Discover) as well as those of the "Big Three" payment processors (FIS, Fiserv, and Global Payments). Equally notable is the PLC's appointment of Raj Date as its Founding Director. Date's past experience as Deputy Director of the Consumer Financial Protection Bureau – where he played a central role in the agency's launch – is a clear signal of the PLC's intent to engage more deeply in legislative corridors. Recent events demonstrate why this is a savvy move.

Bankers may need little convincing to see that we’re dealing with highly unusual market conditions, but the data certainly helps put the situation into perspective.

In 2020, the number of new checking households dropped by half compared to a typical year of account openings, however the average checking account balance grew by an astonishing $1,833. Indeed, many experienced a meaningful increase in liquidity, though not all higher checking balances reflect greater wealth. There have been unusually high shifts of expiring CD balances to more liquid savings vehicles, as well as an influx of government economic relief funds. On the other hand, fewer are opening new accounts. This could have dire consequences for individual institutions if it becomes a long-term trend since household growth is the lifeblood of community financial institutions (FIs).

The winds have shifted since 2020 made game-changing waves in debit card usage on multiple fronts, including:

• In-person versus online spending
• Categories of merchants patronized
• Contactless/mobile app adoption

Each of these factors carries implications for banks, credit unions, and other card issuers and their existing revenue models. Below are a few opportunities and recalibrations to consider for your next PIN network vendor negotiation.

In two previous blogs, SRM detailed the top trends we see driving 2021’s financial services landscape. In this final Trends post, we turn our attention to an emerging one we have observed on both sides of the Atlantic, Open Banking.

We are now living through a highly unusual economic scenario.

Dubbed a K-shaped recovery by some, a severe economic downturn has arrived hand-in-hand with a sudden and significant inflow of consumer deposits.

The reasons behind this phenomenon are debatable. The broad-brush US approach to government stimulus/relief certainly plays a role, but no bank or credit union leaders saw this coming as PPP funding scenarios began to unfold. The result is a bizarre banking dynamic that’s a far cry from the challenges of recent years. Gone are the days of fighting to grow deposits by more than low single digits per annum. In 2020, it was not unusual for institutions to have registered checking balance growth of 15-25%. One client we’re aware of saw deposits grow unexpectedly by $1 billion.

From a bank or credit union’s perspective, a historic, pandemic-grade deposit influx may be the proverbial good problem to have, but it’s a problem nonetheless.

Raise your hand if you miss in-person conferences.

SRM has attended hundreds of state, regional, and national events over the years. Still, last year’s GAC (Government Affairs Conference hosted by CUNA) was especially memorable because it was the last major destination event we attended before social-distancing measures went into effect.

Since then, the credit union conference scene and SRM’s participation has had to adapt to the virtual world.

In a recent blog post, we elaborated on several trends that our payments experts expect will impact the banking industry in 2021 - including trends regarding digital banking investments and the branch’s evolving role with consumers.

Let’s continue that conversation by exploring additional factors directly related to the retail banking industry’s current environment, specifically:

• The ongoing shifts in payments preferences
• Battening down for the next economic wave
• Changes in the regulatory climate

My colleague, Patrick Goodwin, recently wrote about the challenges of budgeting amid the uncertainty of a pandemic. Given the circumstances, it’s understandable some might be seeking a “hall pass,” to excuse themselves from long-range planning. Unfortunately, the hyper-competitive financial services marketplace doesn’t allow for such luxury.

Strategic planning is laced with uncertainty. Much of its value is derived from the team-based exercise of thinking through contingencies and gaming out some of the inevitable course corrections. In that sense, the effort may be more important than ever for the 2021-23 horizon.