The new year marks the effective date for many Dodd-Frank rules, but banks seeking to outpace the competition will also have to confront challenges other than compliance.
The U.S. economy is on the mend, with the housing market showing continued evidence of recovery and a slow decline in unemployment. The European economy, however, shows continued weakening, despite recent stopgap measures intended to reverse the trend. Reduced economic output by world economies, and a related reduction in the demand for commodities, could prolong the recovery, Bank Systems & Technology reports.
American bankers will be forced to find revenue sources in a low interest-rate environment and, though loan demand has increased recently, many consumers are holding on tightly to their pocketbooks, an indication that consumer loan demand is unlikely to return in 2013.
Reduced margins and increased capital requirements have led many bank executives to examine and reassess their competitive strategies in order to meet the challenges of the coming year, according to Bank Systems & Technology.
In order to protect margins, some executives have focused heavily on cost reduction, though previous efforts to reduce costs may have eliminated many opportunities to do so. Continued consumer unhappiness with banks has also forced bank executives to reassess their approach to customer service, and bankers will likely attempt to address consumer unhappiness through the development of clear and concise disclosures, streamlined processes and development in sales training.
Banks will also attempt to bring compliance in as an everyday, “business as usual” activity rather than treat it as a separate regulatory response. Financial institutions may also continue to improve risk management capabilities with a focus on technology-based risk, Bank Systems & Technology reports.
Additionally, bankers will likely demonstrate continued interest in mobile payments as part of an effort to better meet the needs of customers and respond to consumer demand for certain services and products.
Many financial institutions have also spent the last 10 years acquiring other businesses, and the number of acquisitions is likely to have a significant effect on the competitive environment. Banks are also looking for opportunities to grow in their preferred strength areas, according to Bank Systems & Technology.