2015 – The Return of Optimism

 Author: Dave Foss, dfoss@jackhenry.com

It has been a long time since industry experts have described their outlooks as “optimistic” without any type of caveat. We have been working through levels of “cautious optimism” for several years, held there by threats of a fiscal cliff, government shutdown, an unprecedented number of bank closures and other challenges. Today, almost everyone in our industry seems optimistic about the New Year, and deservedly so. 

On December 23, the U.S. reported gross domestic product growth of 5 percent in the third quarter of 2014, our strongest quarter since 2003. In response, investors sent the Dow and S&P 500 to new record highs, increasing 9 percent and 13 percent for the year, respectively. The FDIC posted U.S. bank profits of $38.7 billion in the third quarter of 2014, representing the largest year-over-year revenue increase in five years. James Chessen, chief economist for the American Bankers Association, was even quoted calling the trend of banks relying on revenue rather than cutting loan-loss reserves “terrific.” 

Penny Crosman, editor-in-chief of American Banker, reinforced this positive standpoint recently by crediting optimism about business growth as one of the lead drivers for bank tech spending in 2015. One of the biggest areas of growth for IT spending predictions will be digital banking. According to research firm Ovum, mobile banking and online banking investments are expected to grow 7.5 percent and 7 percent, respectively in 2015. A couple of groundbreaking areas for these channels include:

• The opportunity to consistently engage customers and prospects with relevant, targeted communications; and
• The evolution of the branch. Several of our clients are moving in-branch operations work to a tablet environment. They have removed the teller line and mobilized service representatives with touch screen devices, allowing them to conduct business from anywhere in the branch or local business offices.

There is also a strong sense of optimism around Commercial and Industrial (C&I) loan growth, an area that has been reaching record highs. Strategies that many banks are investigating to further strengthen commercial lending in 2015 include:

• Becoming more creative with lending and alternative financing to keep strong ties with commercial customers. Lender networks and partnerships with qualified alternative lenders enable bankers to identify unique funding strategies for commercial borrowers while maintaining the rest of the relationship. It also positions banks for more traditional lines of credit down the road; and
• Offering online commercial lending capabilities to win new customers. Borrowers gravitate toward the online experience, automated prices and automated approvals offered by alternative lenders. The speed and convenience of getting a loan can have a stronger influence on decisions than pricing or relationships.

Regardless of how bright the digital, lending and overall banking outlook, we must be ever diligent in the fight against fraud. The rising sense of alarm for security breaches will continue to grow in 2015 as we see threats to private industry sectors heighten. Jacob Jegher, a research director at Celent, reported “massive” increases in security and fraud prevention spending. In response, many of our financial institutions are opting to move their IT infrastructures to Jack Henry & Associates' secure cloud computing environment, relieving the burden of management and support. That enables IT departments to focus on new initiatives that foster growth by improving channels, customer relationships and revenue generating services.

At Jack Henry & Associates, we share in the optimistic view of growth and success for bankers in 2015. Our solutions, consultants and support can be a catalyst for your accomplishments. Thank you for trusting us to power your profitability and drive our industry to new heights. May your New Year be bright, profitable, innovative, and full of cheer.