It’s official: Our industry is back with a vengeance.
For the first time since credit debacles entered the headlines toward the end of the last decade, financial services companies are seeing the fastest earnings growth in the S&P 500, and potentially preparing to become the market’s biggest vertical industry. (For the record, according to Bloomberg, the technology sector still leads with 17.6% over 16.8%.) But guess who’s got the momentum.
That’s what’s happening at the top of the ladder. Further down, it’s a slightly different story. Every company and every professional working in it is acutely aware that huge changes are taking place, the whispers of unease are getting louder. Some of the concerns got publicly expressed at the American Banker and Bank Technology News’ seventh annual Mobile Banking & Commerce Summit earlier this summer.
To be clear, the industry as a whole has reason to take pride in its accomplishments thus far: exceptions notwithstanding, financial services institutions have been in the forefront of adopting innovations ranging from documents imaging to social media integration. Yet there remain some uncomfortable questions: Do even the sweeping changes go far enough? And are some institutions being left behind not through any lack of desire but because they don’t have the resources to overhaul their infrastructure?
A new report from Javelin Strategy & Research provides a startling view of the scope of the changes taking place, and the breadth of the adjustments needed to keep up. We all know that digital interaction has radically transformed banking practices, but the numbers still come as a surprise: Javelin says “88.5 million Americans attempted to open an account online or with a mobile device in the past 12 months,” but emphasizes that the full market potential remains mostly untapped.
It’s not just about the technology, of course. The truth is that the ubiquity of digital apps, both mobile and otherwise, is fundamental redefining what we know as ‘personal banking,’ and this revolution-as-evolution still has the market ahead of the industry. In other words, the changes may run deep, but not deep enough.
Take mobile, by most accounts the single greatest area of change. Despite the staggering numbers cited by Javelin, it’s also estimated that there’s a glass ceiling of 15% to 20% for mobile adoption among online banking customers. This isn’t because not enough customers have smartphones, or don’t wasn’t to use them—as with many other uses, there’s an initial resistance (particularly when there’s money involved) followed by an inevitable shift. Instead, it’s at least partly because at least some institutions, even those that may have devoted considerable resources to the effort, haven’t done their part.
In this context, “Consumers and Mobile Financial Services 2013,” the study released this spring by the Federal Reserve, is worth another look for gauging where we are in the move to mobile. There, too, we see a similarly substantial gap between adoption and practice.
Again, the industry seems to be doing fine—in particular, banks, brokers and insurance companies are posting much better numbers than they have in a while. But putting the broad brush aside for a minute, it’s also clear that the market is moving faster than some of us are, and in the long run that could be a huge problem for everyone.