Identities at Risk –Online Bankers and Brands

May 7, 2015
/   Spotlight

*Disclosure: Banking.com is powered by Digital Insight Security has long been, and continues to be, a hot topic in the financial services industry. From new tech developments to hackers, security is top of mind...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions....

Small Business: Perception vs. Reality

November 21, 2012
/   Insights

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every...

Making Banking Fun: Gamification in Financial Services

August 5, 2013
/   Insights

Recently, the Banking.com team sat in on American Banker’s webinar, “Gamification in Financial Services: Five Proven Ways to Get an Edge,” which shared how leading brands in financial services have applied gamification to reach...

Financial Literacy Month: How are you celebrating?

March 22, 2013
/   Insights

With April approaching, it’s almost time to kick off Financial Literacy Month! Strongly supported by the United States Congress and the Financial Literacy and Education Commission, Financial Literacy Month aims to promote the importance...

Industry Perception, Optical Delusion

January 14, 2013
/   Insights

In Washington, they talk a lot about ‘optics.’ This has nothing to do with regulatory scrutiny, or government mandates on eyeglasses. It has to do with perception—how something looks, the way a particular story...

It may be tempting the fates to even ask, but here are some critical questions heading into 2015: Are we poised to enter an economic boom?  Could we even be hearkening back to the ’90s—a time of raging entrepreneurialism, virtually full employment and widespread investments? And is the banking industry set to be both the primary driver and a major beneficiary?

In a way, the very idea of pondering good times is the height of arrogance. The economy is certainly doing better than it has in a while, but that’s only because it’s been barely limping along for so long. The job picture has improved over time, but only recently have there been rising pay as well. It’s still an environment more for caution than optimism.

And yet. . .

Late in December, the federal government released figures that unquestionably reveal an economy growing rapidly. We saw 5% annualized growth in the third quarter of 2014, the best news of its kind since 2003 — and there’s plenty more. Consumer spending is up (by .07% in November), personal debt levels are falling fast, and oil prices have plummeted, leaving more money in the hands of individuals. November alone saw 321,000 new jobs. And as the best kind of punctuation mark, the stock market passed 18,000 for the first time, and the S&P 500 hit a record high too.

But does this mean we’re heading back to the halcyon days when the emergence of the Internet propelled a wave of disruptive startups, jump-starting e-commerce?

First, it helps to look overseas to see what’s happening elsewhere. Japan is officially in a recession, it’s fourth in only six years, and many parts of Europe are struggling mightily to stay on course, with varying levels of success. In particular, British Prime Minister David Cameron has repeatedly warned of another major global downturn. China’s real-estate bubble was always dubious at best, and those fears are coming true. Russia has been hurt by falling oil prices, and previous powerhouse Brazil is going through major troubles as well.

All this makes for a double whammy. The developed markets of Europe and Japan are lagging at best and suffering at worst, while the emerging markets that played such a key role in helping other regions out of the downturn of 2008 can’t be counted on to do the same this time.

This may be one reason by the Federal Reserve, the most important institutional beacon for the economy at large, isn’t popping balloons just yet. A rise in interest rates, however small, might send a signal of confidence, but the Fed is still talking patience. No one knows, of course, but conventional wisdom holds that interest rates won’t go up until at least mid-2015.

So where in the financial services industry in all this?

The big banks have definitely gotten over the hangover of the recent past. The four largest U.S. banks alone paid out $122.5 billion in crisis and mortgage-related settlements, yet there are strong profits across the board. Loan sales and trading income in the third quarter of 2014 producing the biggest year-over-year revenue growth since 2009, and mergers-and-acquisitions deals are rising sharply.

The uncomfortable reality is that in this go-around, the banking industry will have to do what it does under a harsh spotlight. In the ’90s, when we last saw real boom times, the symbiotic relationship between the financial services and technology industries propelled an economy on steroids; but so much has happened since then—from the dot-com bust of 2001 to the bailouts later in the decade—that there will be scrutiny at every turn.

Back then, Fed chairman Alan Greenspan famously used the words “irrational exuberance” to send the message that the market was potentially overvalued. In this environment, we’re not likely to hear such euphemisms. Financial services institutions will be under pressure to make the loans necessary to start and grow businesses. The good news—being cautious as well as optimistic—is that the economy finally looks like one in which those loans will do what they’re supposed to do.

 

 

 

 

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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp