Which technology and business developments will change the competitive environment in 2010? Which executives and public figures will grab headlines? What companies and organizations will be in the news? The BS&T editorial team offers some predictions for the coming year's bank technology newsmakers.
1. Lending: Back from the Brink?
With President Obama pressuring banks to step up lending, 2010 could see a more active market after five consecutive quarters of reduced lending. Perhaps partly responding to criticism from politicians and the public, large institutions such as Bank of America (which says it will increase small-business lending by $5 billion next year) and J.P. Morgan Chase (which has committed to an increase of $4 billion) have signaled their intentions to be more active lenders. Regional and community banks also are getting into the act. For example, Rosemont, Ill.-based Cole Taylor Bank recently established a residential mortgage origination line of business. Whatever the motivations, banks looking to manage the risks and costs of increased lending activity are going to depend on technology -- including more-sophisticated credit risk-modeling capabilities, enterprise content management capabilities, and transaction-tracking and analytics tools that help detect and prevent fraud -- to do so. According to TowerGroup's 2010 consumer lending forecast, "Financial services institutions will increase IT investment for integrated credit risk management, improved regulatory compliance management, and new loan collections and portfolio risk management solutions." -- Katherine Burger
1. Lending: Back from the Brink?
With President Obama pressuring banks to step up lending, 2010 could see a more active market after five consecutive quarters of reduced lending. Perhaps partly responding to criticism from politicians and the public, large institutions such as Bank of America (which says it will increase small-business lending by $5 billion next year) and J.P. Morgan Chase (which has committed to an increase of $4 billion) have signaled their intentions to be more active lenders. Regional and community banks also are getting into the act. For example, Rosemont, Ill.-based Cole Taylor Bank recently established a residential mortgage origination line of business. Whatever the motivations, banks looking to manage the risks and costs of increased lending activity are going to depend on technology -- including more-sophisticated credit risk-modeling capabilities, enterprise content management capabilities, and transaction-tracking and analytics tools that help detect and prevent fraud -- to do so. According to TowerGroup's 2010 consumer lending forecast, "Financial services institutions will increase IT investment for integrated credit risk management, improved regulatory compliance management, and new loan collections and portfolio risk management solutions." -- Katherine Burger
2. Banks Test Mobile Apps
If 2009 taught us anything, it's that people were willing to forget the last bizarre decade of Michael Jackson's life. But more important, it also taught us that people enjoy a good mobile app. In April, before the site even reached its first birthday, more than 1 billion applications had been downloaded from Apple's iPhone App Store. That number has since doubled. A small but growing percentage of those apps were developed by financial institutions. With institutions such as USAA leading the way with its mobile remote deposit capture app, the banking industry is beginning to recognize the importance of not just the mobile channel, but the mobile application channel specifically. And it's a good thing -- the iPhone has shown no signs of losing popularity, while recent offerings based on Google's Android mobile operating system promise to expand the mobile application development universe. As consumers become accustomed to mobile apps in their everyday lives, they'll demand similar functionality from their banks. -- Nathan Conz
3. Navigating the Emerging Markets
To successfully navigate today's troubled economy, banks need to be able to compete profitably in emerging markets. China is the fastest-growing major economy in the world. While the world's wealthiest have seen their savings evaporate recently, the number of millionaires in China is actually growing. By the end of 2009 the country will be home to 450,000 millionaires with a net worth estimated at US$1.73 trillion, UPI recently reported. But it's not just the wealthiest who are saving -- economists estimate that the average Chinese citizen saves between 30 and 40 percent of his or her disposable income, a rate that is at least twice as high as in the U.S. Now the country is looking for new investment vehicles as well as the technology infrastructure it needs to become a major player in the global financial markets -- creating opportunities for Western banks and technology providers. -- Melanie Rodier
4. A Regulatory Voice
As the issue of financial regulation has become more and more politicized, at least one public figure has managed to stay largely above the fray, with some admirers on both ends of the political spectrum. Congressional Oversight Panel (COP) chair Elizabeth Warren has been a critical voice in the regulatory debate, but she has avoided the kind of tired rhetoric or piling on that many politicians employ to score points in the media. "To restore some basic sanity to the financial system, we need two central changes: Fix broken consumer-credit markets and end guarantees for the big players that threaten our entire economic system," she recently told Newsweek. Warren's work was set to end in June 2010, but when Treasury Secretary Timothy Geithner extended TARP until next October, he also extended the life of the COP. -- N.C.
5. Fees Under Siege
If 2009 taught us anything, it's that people were willing to forget the last bizarre decade of Michael Jackson's life. But more important, it also taught us that people enjoy a good mobile app. In April, before the site even reached its first birthday, more than 1 billion applications had been downloaded from Apple's iPhone App Store. That number has since doubled. A small but growing percentage of those apps were developed by financial institutions. With institutions such as USAA leading the way with its mobile remote deposit capture app, the banking industry is beginning to recognize the importance of not just the mobile channel, but the mobile application channel specifically. And it's a good thing -- the iPhone has shown no signs of losing popularity, while recent offerings based on Google's Android mobile operating system promise to expand the mobile application development universe. As consumers become accustomed to mobile apps in their everyday lives, they'll demand similar functionality from their banks. -- Nathan Conz
3. Navigating the Emerging Markets
To successfully navigate today's troubled economy, banks need to be able to compete profitably in emerging markets. China is the fastest-growing major economy in the world. While the world's wealthiest have seen their savings evaporate recently, the number of millionaires in China is actually growing. By the end of 2009 the country will be home to 450,000 millionaires with a net worth estimated at US$1.73 trillion, UPI recently reported. But it's not just the wealthiest who are saving -- economists estimate that the average Chinese citizen saves between 30 and 40 percent of his or her disposable income, a rate that is at least twice as high as in the U.S. Now the country is looking for new investment vehicles as well as the technology infrastructure it needs to become a major player in the global financial markets -- creating opportunities for Western banks and technology providers. -- Melanie Rodier
4. A Regulatory Voice
As the issue of financial regulation has become more and more politicized, at least one public figure has managed to stay largely above the fray, with some admirers on both ends of the political spectrum. Congressional Oversight Panel (COP) chair Elizabeth Warren has been a critical voice in the regulatory debate, but she has avoided the kind of tired rhetoric or piling on that many politicians employ to score points in the media. "To restore some basic sanity to the financial system, we need two central changes: Fix broken consumer-credit markets and end guarantees for the big players that threaten our entire economic system," she recently told Newsweek. Warren's work was set to end in June 2010, but when Treasury Secretary Timothy Geithner extended TARP until next October, he also extended the life of the COP. -- N.C.
5. Fees Under Siege
Maybe it's because an overdraft fee is easier to understand than a credit default swap. Whatever the reason, challenges to bank fees for a variety of services are coming fast and furious as all aspects of the banking business are subject to scrutiny. The situation is unlikely to ease in 2010, with consumer financial protection likely to be a key feature of whatever financial services regulatory reform ultimately emerges from Congress. In a recent Bank Systems & Technology/Fiserv webcast, Mercator Advisory Group VP Bob Landry underscored the dilemma, noting that without overdraft fees, 45 percent of banks and credit unions would not have made money in 2008. "The [role of overdraft fees] in the overall ability of the industry to make money is pretty important," he said. But banks fight back on this issue at their peril, in terms of their already shaky reputations with the public. "It's a social issue," Landry noted during the webcast. Since the need to generate revenues is not ameliorated by social pressure, look for banks to revamp their offerings, he suggested -- charging for services such as minimum balances and options.
6. Attention Turns to P2P Payments
The big buzz at this year's BAI Retail Delivery Conference & Expo was around peer-to-peer (P2P) payments. Major players including S1 and FIS announced that they have teamed with PayPal to offer banks mobile or online P2P solutions. Meanwhile Fiserv has started to offer a new P2P personal payments service to the 3,000-plus financial institutions in its online payment network. In many ways the personal payments space is the last bastion of the personal check, but perhaps with these new developments, that will finally start to change. -- N.C.
7. Outsourcing Closer to Home
Seventy-two percent of North American bank technology executives expect their budgets to stay the same or decrease in 2010, according to a recent Aite Group report. As a result, banks seeking to improve efficiencies, reduce costs and free up capital are increasingly turning to outsourcing -- particularly in treasury management, wholesale lockbox, remote capture, disbursements, check processing and image exchange, according to reports. But outsourcing largely will remain on U.S. shores; only 4 percent of North American bank CIOs are considering moving operations overseas in the next two years, Aite notes. -- M.R.
8. Managing Finances Gets Social
Thanks to a combination of demographic trends, technology capabilities and uncertainty in the banking competitive arena, personal financial management (PFM) tools -- online resources geared toward helping consumers and small businesses manage their finances -- really took off in 2009 and are likely to present an even greater opportunity (or threat) to banks in 2010. PFM looks to be an ideal way for banks to improve customer experience and loyalty and to leverage their online banking platforms. Banks are in a prime position to help customers take more control over their finances. But PFM's growing popularity also raises the specter of disintermediation. The leading PFM players, including Mint (acquired recently by Intuit), Geezeo and Yodlee, are simultaneously potential partners and competitors to banks. -- K.B.
9. UnTARPed Banks
In December 2009 three high-profile banks -- Bank of America, Citigroup and Wells Fargo -- announced plans to repay tens of billions of dollars in federal bailout money. The question now becomes whether those moves came because the banks were dealing from a healthier balance sheet position or because they sought to get out from under the increased regulatory oversight imposed by TARP. In 2010 we'll learn if each bank's decision to repay bailout funds was the right one. In part, the future state of the economy could depend on those results. -- N.C.
10. HR's Moment in the Spotlight
When the Wall Street Journal reports that, "HR Executives Suddenly Get Hot," you know that things have changed in the business world. But it's not surprising that, with a wave of turnover in senior positions and reductions in workforces at companies of all sizes, corporate human resources departments are at the center of the action right now. It's no different in banking -- whether it's finding a new CEO at Bank of America, figuring out how to recruit millennial workers, or managing the countless layoffs that have occurred following mergers, restructurings or failures, human resources managers are playing a historic role in shaping the workforces that are going to lead the banking industry into 2010 and beyond. -- K.B.
