A Turning Point for the Industry
By Kevin Tweddle
I tend to view prognostication articles as clickbait. They’re either too general or too far off to provide actionable intelligence. That said, keeping an eye on emerging technologies and their potential impact on the community bank sector can help ensure your strategic plan stays on track. Here are a few predictions for the rest of the year and beyond.
Partnerships between fintechs and banks will accelerate significantly. Fintechs are increasingly familiar with the intricacies of banking and regulation, while regulators are becoming more comfortable with fintech companies’ due diligence and vendor management practices. This is a positive step, especially for community banks, which can gain a competitive advantage through fintech partnerships while continuing to offer the customer service and market¬place knowledge that are central to the community bank business model.
We’ll finally see an actual blockchain use case in production. These use cases will likely focus on areas including know-your-customer requirements, loan-process efficiencies and international payments.
The cryptocurrency bubble will break. The market for cryptocurrencies has been overheated for some time. The lack of regulation and policing around cryptocurrency will likely pull the plug on the momentum of this 2017 phenomenon. Until a greater element of trust is built into its currency exchanges, this technology will never achieve mainstream adoption.
The transformation of the bank branch will continue. Community banks will spend significant dollars this year to redesign branches to take up less space and be more tech-friendly. While there will be no shortage of smart ATMs, we’ll also see more home-like atmospheres. There will be fewer branches overall, but the branches that remain will be an important part of the community bank branding and delivery strategy.
Talent wars will spike. As emerging technologies in the areas of AI, machine learning, and data and analytics continue to be refined, and use cases get developed and gain traction in 2018, there will be a greater need for the talent who can make this happen. Community banks will need to bring individuals with these skill sets on board, but it will be expensive and difficult given the current shortage of qualified candidates in the marketplace.
Open-source banking will continue to threaten “the establishment.” Legacy banking systems have been under attack from all directions, paving the way for additional investment in open-sourced banking systems. Community banks will continue to look to the fintech space for ways to create cheaper, more efficient and easily integrated banking applications, making way for true technology innovation. Look for up-and-coming fintechs to make significant inroads in this space. Think an iTunes store for banking applications that, over time, will become the way of the future.
Kevin Tweddle (kevin.tweddle@ icba.org) is ICBA’s group executive vice president, innovation & financial technology.