In a recent post, we discussed two trends we anticipate driving strategy discussions for bank and credit union leadership teams in 2022. Our first trend breakdown focused on operational items – including back-office automation, loan originations, branch footprints, and artificial intelligence.
This blog will look at evolving customer trends that financial institutions (FIs) should address to maintain their valuable status as financial services providers of choice.
Chipping Away at Payment Behavior
The pandemic and its related lockdowns accelerated several shopping trends that were already well underway – online spending, contactless card transactions, and digital wallets, among others. Even if the pace of change slows somewhat as we approach a new normal, it’s clear we won’t be returning to the payments environment of 2019 and prior.
These dynamics require multiple actions by issuers to ensure the payments products customers desire are in their hands when they want them. Many longstanding top-of-wallet rules have been upended, so banks and credit unions should revisit their positioning to defend wallet share. Certain cardholder segments may deemphasize cards that lack contactless capabilities. Others may have entered a limited set of credentials into digital wallets and e-commerce websites, leaving their other accounts out of sight and out of mind. At the same time, the value propositions of some rewards programs (i.e., airline miles) have lost their appeal for a significant number of people. Other factors may include Buy Now Pay Later (BNPL) offerings and a shift from credit cards to debit cards.
Few people associate the ongoing silicon chip shortage with banking, but as we explained in a November post, the implications for card issuance are significant. Card inventories could be jeopardized – FIs can’t afford to be unable to reissue lost or expiring cards or be prevented from issuing cards to new account holders. Any pending broad reissuance or rebranding programs should be revisited to confirm an adequate supply of card stock. This type of basic blocking and tackling probably didn’t require much thought before the pandemic but is now critical.
Don’t Let Crypto Remain Cryptic
Recent data shows that over 20% of Americans already have experience with cryptocurrency, and this cohort is rapidly expanding. The good news is that a solid majority of consumers (more than 70%, according to research from NYDIG) would prefer to manage crypto activities through their financial institution. The bad news is that most current activity flows through non-bank exchanges like Coinbase and FTX. With disruptors like PayPal and Venmo claiming first-mover advantage by adding crypto trading capabilities into their widely held wallets, banks and credit unions could lose the inside track if they idle.
The regulatory landscape is evolving rapidly in the crypto space, and third-party providers like NYDIG are actively partnering with FIs and processors to bring these capabilities to market. The NCUA recently issued guidance providing clarity for federally chartered credit unions interested in working with third parties on crypto products. SRM is finalizing a white paper detailing the crypto value proposition and steps banks and credit unions can take immediately to position themselves for this significant opportunity.
The Bottom Line
Some of the above trends – such as cryptocurrency, chip shortages, and BNPL – are likely new to leadership teams’ lists of top priorities. Others, such as shifting payment preferences and e-commerce expansion, have been on the radar for some time but have morphed in dynamics and urgency. In both cases, banks and credit unions need actionable plans to address these challenges and protect their roles as the financial service partners of choice. SRM welcomes the opportunity to provide insight and guidance for this process.