The Beginning of a New Era??

 Author: Dave Foss, dfoss@profitstars.com

We can all breathe a sigh of relief now that the world did not end on 12/21 with the conclusion of the ancient Mayan calendar. Many experts hypothesized that the end of the calendar did not call for the end of the world, but rather the beginning of a new era. I think we can all agree that 2013 will be a new era, even if it encompasses a smaller spectrum than the tabloids suggested.

We now have the 2012 election behind us, and have finally put an end to the looming threat of the fiscal cliff.

The resulting political stability should bring a fresh level of confidence back to banks, businesses and individuals that encourages action and further strengthens our economy.

Despite continued international concerns, the Consumer Confidence Index rose to 73.7 last month, its highest level in nearly five years. As a seasonal tale, holiday shopping topped $38 billion as of Dec. 21^st, representing a 16 percent year over year increase.

The economic outlook for bankers corresponds with all this good news. In 2012, bank failures were down 45 percent from 2011, and are about one-third of what we saw in 2008 and 2009. Additionally, financial institutions gradually increased spending, and I anticipate that the trend will continue. Three areas to watch closely in 2013 include:

 1) Mobile banking – Consumer adoption of mobile banking is strong. Javelin Strategy & Research reported that one-third of mobile consumers were using mobile banking in 2012. That’s an additional 10 million U.S. adults joining, in direct correlation with smartphone adoption increasing to 52 percent and tablets surging to 21 percent. Looking forward, Aite states mobile banking users will triple between now and 2016, and that smartphones and tablets will each serve different banking functions as mobile expands. Since the proliferation of smart phones and tablets shows no signs of slowing down, I wouldn’t expect mobile banking adoption to slow either.

2) Online payments – Financial institutions are making significant progress in building mobile money movement capabilities for consumers and small businesses. As technology advances, expectations for convenient access to accounts and additional transaction capabilities grow. Online bill pay – if appropriately managed – can help institutions secure the primary banking relationship with profitable customers, and retain and attract younger ones who are more reliant on various payments technologies. It should be a strong focal point for institutions looking to build long-term relationships.

3) Compliance – IDC Financial Insights predicts that capital spending and operational expenses associated with risk and compliance will top $74 billion worldwide in 2013. It further states that this is a serious threat to profitability unless financial institutions address the risk and compliance strategies from an enterprise level. If addressed strategically, the ongoing compliance demands can be managed.

Last year, my message for the New Year was one promising change and the beginning of new growth. With that transition well underway, the banking industry is now poised to enter 2013 with increased stability and loan demand as well as a more solid financial picture for average consumers. It can be a year of solid growth and an era of profitability for financial institutions that choose to seize the opportunity.

Happy New Year and welcome to this new era.