Welcome To
The Bottom Line

Bitcoin has lost half of its value since reaching an all-time high mid-April. Although one might think this setback would cast a pall over a gathering of cryptocurrency enthusiasts, the overall tone of Coindesk’s Consensus conference in late May remained constructive and upbeat.

For those keeping their eyes on the prize, these two paths are not contradictory. Crypto’s long term value proposition hinges on its adoption as a means of exchange, not its volatile pricing as a speculative asset class. And there’s no sign of slowing down among large financial institutions and scrappy entrepreneurs creating trading and custody platforms and expanding payment capabilities for digital coins. These are the areas where banks and credit unions of all sizes need to take note.

Over the last year, chaotic disruptions have upended traditional operating models at financial institutions (FIs) worldwide, and many are only now stepping back from "fire drill" mode. As for the leaders of these institutions, their task is to now scale up and rebuild operating models - ones adapted to their current (and future) post-pandemic environment.

After a period of such intense disruption, here are three ways to check and double-check the blueprint when rebuilding an FI's business models.

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 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.

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.

Now that we’ve closed the book on 2020, we can count on a swift change to the financial services landscape, right? The answer is yes…and no.

With the ongoing vaccine distributions and a new administration in Washington, there’s even more reason to expect the new year to bring new behavior. On the other hand, conditions don’t turn on a dime simply because the calendar flipped to January.

With that in mind, SRM’s payments experts have identified several trends we expect to drive financial services dynamics in 2021. Although their full effect is unlikely to be visible early in the year, banks and credit unions must consider these trends in setting priorities for 2021 and beyond.

PayPal Holdings, Inc., recently announced enhancements that will enable its users to buy, hold, and sell cryptocurrencies within its app, and to pay for purchases with these crypto assets, as well. Most of the attention has naturally focused on Bitcoin - the household name of cryptocurrencies – and, by far, the largest. Not surprisingly, the price of Bitcoin quickly surged past $16,000, thanks to the associated visibility and implied credibility.

The annual budget process is usually an exercise in planning for uncertainty. Add to that, it’s challenging, time consuming, and complicated. Then, when finalized, all you know for sure, is that it is at best a pro forma. That’s because financial institutions (along with everyone else) operate in an environment with multiple variables they do not control…and that has become even more evident in 2020.