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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 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.

At SRM, we often receive questions about how our services can deliver cost savings without harming existing vendor relationships which have taken years to cultivate. Our answer is simple: We do not believe antagonistic, adversarial negotiations are in the best interest of anyone – be it the client, the vendor, or our firm. And we have validated this point of view with the thousands of contracts we’ve negotiated, while also adding over $3.6 billion of value to the financial institutions we have served. A recent engagement with 1^st Bank of Sea Isle City in New Jersey is an example of this conviction in action.

Top-of-wallet status is highly coveted because, once achieved, the incumbent – in this case the card issuer - has the advantage. Old habits die hard. Once a consumer develops a “go-to” card for certain types of purchases, they tend to repeat that pattern of behavior.

Those habits can be cultivated by offering benefits to the user via a rewards program. Sometimes the choice can be situational, with cardholders designating certain cards for specific types of purposes. This may extend to the type of card – e.g., debit or credit – and/or a workflow established by the merchant which makes it easier to use one card rather than another – e.g., Walgreens Express Pay.

Knowledge is power and most bankers have figured out that they’re sitting on a treasure trove of information about the consumers and businesses they serve.  However, using this information to empower their account holders and deliver services tailored to their needs has been a difficult goal for banks and credit unions to achieve. 

One of the many changes brought by COVID-19 was an acceleration in the participation of the delivery economy.  This level of participation is likely to continue to rise as more businesses develop viable online ordering and delivery offerings.  Companies such as Amazon, Google, and Apple have made personalization of offers and the anticipation of the consumers’ needs prerequisites to any successful online engagement.  So, as the delivery economy expands, successful offerings will need to reflect these same characteristics delivering the convenience and speed consumers now consider mandatory as a basis for loyalty.