Opinion
In 1997, a Canadian bank opened a café while an online bookstore's IPO signaled a retail shift. Nearly 25 years later, technology has caught up with banking, and branches and retailers share similar challenges. Branches are costly but can be assets, especially as online-only neobanks seek physical presence. Closures are widespread, but customers still value branches; banks must adjust networks to meet specific needs. A hub-and-spoke approach, controlled testing, and customer journey mapping can guide digital-first remodeling. Physical branches, far from liabilities, are assets that online-only competitors lack. Not all branches need cafés, but technology must be tailored to customer preferences.
Alternative lenders face challenges in scaling their systems and processes to handle growth without increasing overhead. Jorge Sun, CEO of LendingFront, outlines three steps: examine opportunities in the small-business segment, commit to digital transformation, and choose a digital solution with multiplatform access, SMB-specific credit criteria, automation, and flexible product structure. By following these steps, lenders can meet demand and compete with digital-first players.
In this opinion piece, Charlie Knadler, president and CEO of EnerBank USA, challenges the traditional regulatory view of brokered deposits as risky. He notes that banking is increasingly online, making core deposits less sticky. Brokered CD deposits, with precise maturity dates, are actually stable and predictable, reducing liquidity risk. Knadler calls for removing the stigma associated with brokered deposits, which he argues would make the banking industry safer and more successful.
The COVID-19 pandemic has accelerated the shift toward digital-first consumer behavior, including in loyalty programs. Jamie Samaha, EVP of issuer loyalty at Mastercard, explains that redemption experience is crucial for cardholder engagement. He offers three tactics for issuers: simplify earning and burning rewards, leverage card-linked offers and partnerships, and enable instant, seamless redemption. Data shows cash-back redemptions rising toward 80%, e-gift cards growing, and consumers favoring instant rewards. By adopting a digital-first, frictionless redemption approach, issuers can drive loyalty and engagement.
Despite the pandemic accelerating digital banking, many traditional banks have not fully digitized. Customer demand for all-digital options is high, but banks struggle with compliance concerns, organizational resistance, scalability issues, and legacy IT systems. This article examines these obstacles and potential solutions, including advanced verification technologies, stakeholder buy-in, scalable tech solutions, and front-end upgrades alongside core system improvements.
The digital revolution is pushing U.S. banks to evolve their payment solutions, shifting from paper to digital processes with new real-time payments systems, overlay services, and modernized legacy rails. The ACH network's Same Day ACH feature and The Clearing House's RTP network are key developments, with the Federal Reserve's FedNow Service expected to launch in 2023 or 2024. Overlay services like Zelle help businesses migrate from checks to electronic payments. Security remains paramount, with fraud attempts rising; banks are using pre-validation tools and databases like Early Warning's National Shared Database to mitigate risk. The pandemic has accelerated digital adoption, and banks must balance new capabilities with traditional services while educating clients.
In this opinion piece, Haohan Xu, CEO of Apifiny, examines the barriers to instant international settlement faced by banks and remittance companies, including the lack of a global settlement network and outdated technology. He notes that the COVID-19 pandemic has exacerbated remittance declines, with the World Bank projecting a 20% drop in 2020. Xu suggests that blockchain technology, with its ability to tokenize assets and enable real-time peer-to-peer settlement, could provide a solution. He points to DTCC's exploration of distributed ledger technology as an example and calls for banks to adopt blockchain-based networks to improve speed, reduce costs, and enhance customer satisfaction.
In this opinion piece, Alden Seabolt, consumer banking lead at Blend, contends that the era of fighting for deposits is over. Banks should instead win customers' hearts by acting as trusted advisers, engaging customers as individuals rather than profiles, and providing fast, frictionless digital experiences with a human touch. Seabolt cites Apple, Netflix, and Amazon as models for customer-centric engagement and outlines three steps: obsess about understanding the customer, ensure operational teams have access to data, and seek intimate understanding to create lifelong relationships. He notes that even legendary banker Hugh McColl Jr. embraced servant leadership, suggesting other leaders can abandon war rhetoric too.
Community banks need liquidity to fund SBA loans for small businesses affected by the coronavirus pandemic. Moving collateralized funds into FDIC-insured reciprocal deposit programs can free up capital and improve liquidity ratios. Most states now allow local subdivisions to use reciprocal networks, and federal legislation treats reciprocal deposits as core deposits. Municipalities can also benefit by moving funds from collateralized programs to reciprocal deposit sweeps, increasing competition and options. Banks and municipalities should work together to ensure local businesses can access loans through community banks.
As the COVID-19 pandemic disrupts business operations, banks are rapidly adjusting to better leverage self-service and digital automation to bolster customer experience. With banking services classified as essential and critical infrastructure, many banks are reducing branch hours, requiring appointments, or closing branches to keep employees and customers safe. Consumers' ability to conduct in-person transactions declines, so banks rely on technology to fill the gaps. ATMs can be configured for various critical transactions beyond cash withdrawal, such as deposits, bill payments, fund transfers, and loan applications. Drive-up lanes are being reinstalled, and interactive ATMs or remote tellers allow round-the-clock service. Automated cash recycling reduces handling steps and boosts safety. Self-service technology is also mission-critical for grocery stores, fuel stations, and pharmacies. By keeping essential services operating and leveraging technology, banks can achieve stability to weather the crisis.