The 2021 Outlook | Will Banking Return to Normal, Without Returning to the Past?

Posted by Ben Mrva on Jan 25, 2021 9:00:00 AM



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.

Anytime, Anywhere? Absolutely.

In 2020, digital investments paid off in a big way for those financial institutions with the foresight to have laid the groundwork pre-pandemic. The task is far from complete, however. More institutions will realize that digital banking extends well beyond the selection of online and mobile solution providers and will continue to prioritize their digital strategies even in the current challenging environment.

Customers increasingly expect access to their finances anytime and anywhere. Because of this, features like single sign-on and biometric authentication will become key to enabling 24/7 access. Services such as predictive analytics to anticipate likely needs will play a growing role in the digital banking ecosystem, with open banking and API integration playing important roles in embedding such features into apps.

More institutions will also strike fintech partnerships to both leverage and neutralize big tech’s incursion. Witness the growing roster of banks and credit unions of all sizes joining Google’s co-branded digital initiative, Google Pay-linked checking accounts. Alliances with such behemoths carry obvious risks, but could also generate the agility needed to defend their turf against startups like Chime, which is gaining traction by providing early access payroll. Chime recently scored a coup by being the first to credit the latest round of stimulus payments- the type of perk that should be in a nimble bank’s domain.

Recalibrating to the Post-Pandemic Consumer

The pace of decline in branch locations can be expected to accelerate in 2021 and beyond. Throughout most of 2020, account holders have been recalibrating their banking habits towards digital channels, and their financial institutions have begun to factor in these pandemic-related preferences in their budgets and strategic planning. Many institutions have already applied the past year’s lessons to operate more efficiently with less reliance on their physical footprints. For example, many have adopted “by appointment only” models for their brick-and-mortar locations, channeling most of the traditional transactional activity to the drive-through window and remote apps.

How the Branch is Evolving

This does not imply that the branch will vanish entirely, however. European banks have already made solid strides in their reinvention, recasting branches as service, sales, and advice centers. With overseas markets less reliant on physical cash and paper checks - two primary drivers of branch activity - it’s logical for their institutions to be further along in the transition.

Similar trends have been underway in the US for some time, and the pandemic has accelerated many digital transformation plans. Financial service providers are likely proceeding toward a similar endgame.

Envision a “doctor’s office” model for the branch of the future- whether or not by appointment, customers will visit less frequently but with more complex cases (or perhaps requesting an “annual checkup”) requiring more thorough consultation.

The Bottom Line

The past year has brought about some big changes for financial services, and we will continue to see the evolution of those changes moving into 2021. Digital investments will continue to be a top priority and the role of the branch will continue to evolve to better meet the demands of the community they serve.

You’ll find more of SRM’s analysis of these trends here.

In a future post, we’ll explore more dynamics to consider in the coming year, including evolving payments preferences, adapting to new economic realities, and changes in the regulatory climate.


Topics: Vendor Contract Negotiation, Bank Vendor Management, Credit Union Vendor Management

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