With financial institutions scrambling to find new revenue streams, a new Aite report identifies the 10 trends that will help.
"Fed mandates and Regulation E are hurting banks' already depressed revenue streams," said Gwenn B?zard, Aite Group research director and co-author of "The Top 10 Trends in Retail Banking 2011" report. "To return to growth, banks will be forced to innovate; the dramatic pressures they currently face will help boost innovation in the long run."
The top 10 trends identified in the report are repricing checking account offerings; auto lending and short-term loan growth; cross selling credit cards to checking account customer base; focus on debit card fraud management; restructuring of rewards programs; increased focus on prepaid debit, payroll, student and second-chance cards; open-payments technology to spur innovation; convergence of commerce; payments networks at war and a focus on mobile payments as a way to re-engage with consumers.
According to the report, financial institutions will offer streamlined checking packages based on behaviors and balances where "customers will have to earn the right to waive fees with behaviors and balances." Consumers who maintain minimum balance levels will avoid fees as will those who open and actively use other products such as credit cards, mortgages, investment accounts and home equity loans.
In addition, there will be an investment in technology to attract new customers and improve existing processes to encourage lending among consumers.
According to the report, the greatest opportunities for increased revenue come from the convergence of commerce.
"Financial institutions are sitting on a trove of actual transactional and behavioral data that they make little use of today. In 2011, we believe the most sophisticated banks will focus their efforts not merely on deploying mobile banking on multiple platforms, but on designing ways to profit from the convergence of in-store commerce, e-commerce and mobile commerce," said B?zard. "Putting that data to use for merchants' and consumers' benefits could yield new revenue and higher engagement levels with their customers. Merchants-funded rewards are pointing in that direction."
B?zard added that financial institutions and card networks could also gain from enabling consumers to complete purchases when identifying better options on their mobile while they are in-store.
"It is a daunting task because price-shopping tools are not integrated in the back end of retailers, meaning there is no easy way for consumers to go from spotting a deal using RedLaser to completing a purchase," said B?zard. Financial institutions and card networks could focus more on developing a better wallet for consumers. Controlling the wallet would help FIs have greater influence over which funding method consumers use.