5. Security increasingly is A Moving Target
Mobile devices are becoming nearly ubiquitous. Many industry experts and talking heads already have proclaimed the "death of the PC" as consumers increasingly spend their time on their smartphones and tablets, including for their banking needs. But as more people conduct their banking on mobile devices, these devices also will become the growing focus of hackers and fraudsters, who are always on the hunt for ripe targets.
Meanwhile, some experts say mobile devices are more prone to security breaches since they are a relatively nascent technology; plus, many people don't think of them as the little computers they are, and don't exercise the security precautions they would with, say, their laptop computers. An Ernst & Young report released in November 2011 on the current state of security threats noted that consumers who access sensitive data, such as banking information, on mobile devices at wi-fi hotspots are more susceptible to hacks.
E&Y also pointed out that businesses face another threat as more employees bring their own technology to work, part of the trend commonly known as the "consumerization of IT." Banks especially should have firm policies in place for employees who use tablet computers or other mobile devices with work information on them, and they should be educated on using the proper security precautions, the advisory firm stressed.
Meanwhile, fraudsters are launching a new front in the security war as they begin to focus on a new target: community banks and credit unions. In an interview for BS&T's December 2011 digital issue on e-banking, Aite Group analyst Julie Conroy McNelley emphasized that fraudsters have taken note of the shift in public sentiment toward smaller banks as an opportunity to uncover new targets. "I guarantee the bad guys were aware of Bank Transfer Day and that there were fraudulent applications made that they hoped would not get noticed and fall through the cracks," she said. With an increased profile, Conroy McNelley added, credit unions likely will be targeted more frequently and thus need to be duly prepared.
6. Integrating Toward a Brave, New Post-Channel World
The days when a customer would walk into a branch to fulfill all of his or her banking needs are long gone. If a customer starts a loan application online and doesn't have time to complete it, that customer then expects to be able to come into a branch on the way home from work to finish it. However, in too many cases the same customer often will be asked to start the process all over again in the branch, due to a lack of channel integration. Banks will need to better manage the seamless integration of online, offline and mobile channels in 2012 and beyond.
But banks thus far have gotten away with a low level of channel integration, according to SunGard's Hamilton. "The banks' business should traverse delivery channels, and that's a big issue with their current channel architecture," he says.
Many industry experts say we are moving to a post-channel world where the customer is the central and sole channel. Umpqua Bank's Colin Eccles echoed that sentiment at BS&T's Executive Summit in October, noting that channels aren't important to consumers, at least not in the way banks have defined them. Customers must now be at the center of IT strategies, instead of a core platform or any specific channel technology, he said.
"Infrastructure is becoming a tapestry of decentralized delivery services," Eccles told the audience during a presentation at the Executive Summit. "The channel isn't important anymore; it's all about the customer and thinking about how the customer is coming to you." Seamless channel integration is critical, Eccles continued, and Umpqua and every other bank should be striving for it.
7. Pushing Self-Service Products to Generate Revenue
Perhaps the biggest banking story in 2011 was the decision by numerous banks to institute a fee for debit card usage -- led by Bank of America's announced $5-per-month fee -- and the subsequent consumer backlash that forced BofA and others to rescind that fee before widespread implementation. BofA, like other banks that floated similar plans for debit fees, said the fees were a direct result of the Durbin Amendment to the Dodd-Frank financial reform bill that caps the amount banks can charge retailers for debit card purchases. The cap limits the fee to an average of 24 cents per transaction instead of the previous industry average of 44 cents. BofA estimated it would lose about $2 billion per year due to the provision, and the debit card fee was a way to offset those losses.
Sans debit fees, at least for now, banks will put the focus on self-service to grow the bottom line by encouraging customers to embrace cost-saving practices, such e-statements and online bill pay, according to Celent's Jegher, who believes that banks will begin, if they haven't already, to offer consumers rewards for embracing self-service channels. For example, if customers elect to move to electronic statements, the bank may allow them to view their check images for free.
"They can offer me an incentive to do something that doesn't cost them money," Jegher says. "It's all about looking for self-service opportunities to generate revenue and cut down cost. Anything moving to electronic is a great way to cut costs."
8. Reaching the Next Level of Mobile Evolution
Mobile banking and payments saw major growth in 2011 -- from tech companies and financial institutions launching mobile wallets to consumers utilizing a mobile application to buy a cup of coffee. But 2012 will be the year in which mobile finance gains strategic direction, and banks will introduce next-generation mobile initiatives to drive balance sheet impacts, says Carl Tsukahara, chief marketing officer and VP of product for mobile banking and payment solutions provider ClairMail (Novato, Calif.).
According to Tsukahara, mobile remote deposit capture (RDC), still in its nascent stages, will become "a staple competitive feature for mobile account management." However, he also notes that new security concerns created by widespread use of mobile RDC will create tension between risk and product management teams.
Tsukahara also expects banks to monetize mobile even more. According to a Forrester report commissioned by ClairMail, banks see two areas with the most potential for reducing costs or creating new revenue within the mobile channel: fraud prevention and marketing to customers. Surveyed banks reported that mobile banking already is playing a role in reducing fraud in a variety of ways -- ranging from simple transaction and security alerts to mobile authentication for bank transfers.
"Still in its early stages, banks also report seeing mobile phones as a powerful marketing channel letting them make offers directly to individual customers at a particular time and place," Tsukahara says. But the challenges here are similar to the challenges banks face overall, he suggests. "Banks realize, though, that in order to achieve this they must integrate mobile banking with CRM systems, earn customers' trust and address privacy issues."