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Business Strategy

Half Over or Half Remaining? Summer Reflection Points to Ponder.

Jennifer Geis
Jun 27, 2023

Summer is here!

Memorial Day has come and gone, and we eagerly enter July and mid-summer celebrations. Mid-summer also means mid-year. Half of 2023 has passed us as we prepare for the second half. Oftentimes, the second half of the year, or really the second half of anything, is a time for reflection. Whether for personal or business goals, the second half brings refreshed and renewed opportunities.

For financial institutions, there’s a lot to reflect on when planning for the remainder of 2023 and beyond. Meeting financial goals, maintaining and acquiring new accountholders, and staying competitive in the market are just a few.

Jack Henry™ recently published our fifth annual Strategic Priorities Benchmark Study, which evaluated the specific goals, innovation concerns, and future plans for the next two years of bank and credit union CEOs. This study is a treasure trove of information to help financial institutions of all sizes and demographics plan and prepare for their near- and long-term futures.

A few key takeaways from the study include:

  • Growing deposits and improving operational efficiency are top priorities for all financial institutions in 2023 and 2024. Banks, however, are keenly focused on growing loans, while credit unions are focused on leveraging data, improving accountholder experience, and acquiring new accountholders.
  • 79% of all financial institutions plan to increase technology spend over the next two years. Most (35%) plan to increase investments between 6% and 10%.
  • Digital banking, fraud/security, and data analytics are the top three tech investments planned over the next two years. Relative to banks, credit unions give outsized priority to investments in artificial intelligence (AI).
  • Beyond a shared fear of deposit attrition and displacement, banks and credit unions differ in their top concerns. Banks’ top concerns include talent retention, NIM compression, and regulatory changes, while credit unions’ chief concern is an economic slowdown and an attendant rise in delinquencies.
  • 90% of all financial institutions plan to embed fintech into their digital banking experiences with 65% planning to embed payments fintechs. Credit unions are also looking to embed digital marketing and consumer financial health fintechs while banks are looking to fintechs for help with data collection and analysis.
  • While fintechs remain financial institutions’ top competitive threat for the third year in a row, that fear has diminished significantly since 2021. Banks consider other community financial institutions the second biggest threat, while credit unions point to big banks as theirs. Banks also named wealth techs and brokerage firms as important competitive threats in this year’s survey.
  • With downward pressure on retail revenues, serving small and medium-sized businesses (SMBs) is a key priority for most financial institutions, with 65% planning to expand SMB services. Commercial lending tops the list of SMB services banks and credit unions are planning to add.
  • 95% of all financial institutions plan to enhance their lending capabilities, but priorities diverge sharply and predictably between banks and credit unions given their differences in commercial versus consumer focus. For banks, digitizing loan applications and a single, end-to-end loan platform for commercial/retail lending take precedence. For credit unions, automated decisioning/funding and cross-selling are key, as is levering AI for underwriting.
  • Banks and credit unions are expanding their types of lending across the board. While most financial institutions (67%) are planning to expand small business lending, banks are prioritizing mortgages (68%) and commercial loans (CRE and C&I). Credit unions are focusing on home equity lines of credit (61%) as well as direct (70%) and indirect (39%) auto lending.
  • 90% of banks and credit unions plan to add new payments services over the next two years. Adding FedNowSM Service (66%) and a person-to-person (P2P) alternative to Zelle® (46%) are the top two payments priorities with one-third of financial institutions also planning to offer Payments-as-a-Service (PaaS) to third parties.
  • Phishing attacks and data breaches are considered the top fraud/security threats by all financial institutions over the next two years. However, credit unions (69%) are even more concerned about real-time payments fraud, while banks (60%) remain vigilant about ransomware.

Mapping strategic direction is critical to remaining relevant and capitalizing upon new opportunities as they emerge.

Consistent and continuous evaluation, in addition to understanding your peers’ plans and priorities, allows you to innovate faster, close strategic gaps, and capture market share. Shifting and reprioritizing your goals based on market or technological changes is also important.

As you savor the last half of summer, sip some sweet tea, and dangle your toes in the pool, we encourage you to reflect on the upcoming second half of 2023 with renewed anticipation.

Read our complete 2023 Strategic Priorities Benchmark Study here.

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