Regional Banks | Local Market fluctuations impact bank performance
Local market fluctuations affected all regional banks, even in North America and Australia, which has gone around three decades without a recession. The impact of the local economy was most pronounced in China because of slower expansion.
Regional banks also struggled with some of the same tensions as their global peers. The regionals are attempting to build their online presence to match the customer experience of start-up fintechs while, at the same time, they are attempting to control costs, reduce their physical footprint, and sustain customer trust.
Conversely, local market strength also helped lift some banks, particularly India’s HDFC Bank, which rose 9 percent to lead the regional banks in year-on-year value change. To better serve the needs of India’s rising middle class, particularly young people, HDFC Bank introduced new banking products, including smaller- size loans, and accelerated its move into digital banking.
HDFC Bank also continued to add several hundred branches annually to reach people throughout the country. The privately-owned bank, which operates around 5,000 branches throughout India, has consistently produced high margins, largely avoiding the problems encountered by other Indian banks because of non-performing loans.
Insight | Growth
New revenue streams promise additional profits
The regulatory environment has changed in the years since the global banking crisis, but the expectation for profitability probably has not. So, the banks need to find new areas to take risks in because risk is ultimately what lifts up margins. Banks like Goldman Sachs and Lloyds are looking for new revenue streams in places they have not worked in before. And most of the banks are offering financial dashboards that provide consumers with a complete picture of their finances across the banks where they are customers. Banks introduced dashboards to offer customers a new benefit following the Europe’s introduction of open banking regulations, early in 2018, and to defend against start-ups using dashboards to attract new customers.
André Bardy
Head of Strategy
Mirum
Insight | Literacy
Financial literacy can lift wellbeing of more people
BlackRock has talked about reframing the idea of wealth by showing how your relationship with your money impacts your well-being. Achieving this vision requires BlackRock to help society overcome a few obstacles. Making financial knowledge more accessible and easy to understand. Shaking the notion that investing is an activity reserved for the very rich. Helping people bring their finances into the here and now versus something that is dealt with in the future, at a later stage. Changing the behavior of financial services firms to relate to up-and-coming generations who are more skeptical of institutions, live on mobile, and may be less risk tolerant.
Grace Robbins
Director, Comms Planning
Mindshare
Grace.Robbins@mindshareworld.com
Insight | Fintechs
Fintechs change how people save and spend money
Fintech innovations continue to make inroads within the retail banking market in the US. In addition to major digital banks with little or no physical branch locations (Ally, Capital One, Discover), a number of new apps (Qapital, Acorns, Digit) are being marketed as easy-to-manage strategies for consumers to steer any cash they can afford, or even "spare change," into savings. But perhaps the fastest-growing innovation in consumer banking today is adoption of person-to-person payment tools like Venmo and Zelle. These tools allow consumers to instantly send cash directly from their checking account to the account of a family member or friend. Lightspeed's behavioral payments panel data shows that within the past year, use of both Venmo, now owned by PayPal, and Zelle have reached double-digits in the US. Venmo continues to lead the market, but Zelle has gained steadily since its launch in July 2017.
Greg Flemming
SVP, Financial Services Group, Profiles Division
Kantar
GFlemming@lightspeedresearch.com
Insight | Purpose
Consumer focus is critical factor in slow economy
The big banks have clear purpose statements relating to how they help people achieve their financial goals, but the decline or slow growth of brand value suggests that consumers do not recognize those brand purpose promises being delivered in the customer experience. That suggests that a lot of these businesses are not fundamentally consumer centric enough—they do not demonstrate they exist to serve the needs of their customers first. How many of these brands are genuinely focused on customer value creation in all aspects of how they behave? This is a fundamental question for the major bank brands. In a slower-growth world, lack of customer centricity presents a growing risk for their brand valuations.
Matt Woodhams
Partner, Brand Strategy
Kantar, Consulting Division
Matt.Woodhams@kantarconsulting.com
Insight | Experience
Better experience leads to increase in customer trust
Winning banks have been democratizing the banking experience and making it more of a two-way relationship. This is what people want from a modern banking experience. These findings are based on our recent Kantar CX+ rankings, looking into the banking experience in the US, UK, Spain, and the Netherlands. Smaller and specialized banks, more agile than the incumbents and more focused on meeting the particular needs of smaller audiences, top our rankings. While people still see the bigger banks as having caused the financial crisis, they are developing trust in smaller banks that are improving the banking relationship.
Mikayla Samuels
Content Strategist
Kantar
Insight | Fintechs
Transparency helps fintechs build trust
Fintech companies don’t have the luxury of a legacy and big name to ensure trust, making trust a key focus. Trust in fintech brands is developing. And trust should grow as the brands offer a more extensive range of services. Transparency is an important appeal of the fintechs. Their dashboards make clear exactly how you are spending your money. This transparency is especially appealing for cross-border transactions. People have been frustrated with how traditional banks handle these transactions because the cost and fees are not immediately clear. Fintechs provide instant notification of exchange rates and fees. You know immediately how much something will cost. In addition, fintech brands often have started by specializing in one particular product, and they are looking to diversify as they grow and take their customers on the journey through transparency and trust.
Olima Begum
Global Brand and Marketing Manager
Kantar
Olima.Begum@kantar
Insight | Consumers
Changed lifestyles require modern financial tools
There are endless reports about the future of banking. Yet if we’re keen as an industry to get it right, it starts with understanding how our lifestyles are changing. People don’t care about banking. They care about money. Banking is transactional. Money is budgeting, planning for holidays, saving for weddings. The way we deal with money is changing. People are increasingly seeking multiple streams of income, freelancing and setting up home offices. So, it’s more important to have a holistic picture of their financial lives. EU open banking regulations and financial dashboards are a start, but they only just reflect this shift. While consumers don’t know what’s yet possible, they do get excited when discussing the new possibilities of connecting all aspects of how they live, work, and plan. Finally, financial systems can keep up with us, rather than slow us down. It’s an exciting time to work in the category.
Omar El Gammal
Planning Director
Wunderman Thompson
Insight | Growth
Wealth managing draws renewed banking energy
We see interest in wealth management across banks. The arrival of a savings product from Goldman Sachs is a good indication of the trend. Called Marcus, the product pays a guaranteed one-and-a-half percent, which is clever, because it attracts people who are risk adverse. But their average deposit in the UK is 23,000 pounds ($30,000), which is significant. And, having secured those people, the bank can move them up into actual investing. That’s important because one of the problems across banks is the large number of people with money in savings accounts who would be better off—as would the bank—if they moved their money into some kind of investment vehicle. I expect that we’ll see renewed energy in the wealth management space.
Rosi McMurray
Planning Director, Financial Services & Technology
Kantar
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