Economic Forecast: Pricing, digital delivery 2015 banking trends

Mike A. Turner

The local Delaware economies continue to gather strength, as is demonstrated in the positive national trend of employment numbers, housing activity and prices, broader coincident and leading indexes, and anecdotal evidence based on conversations with our customers and business colleagues.

Here are three trends that will impact the Delaware banking landscape in 2015.

Continued pressure on commercial pricing
As the local economy remains in this low-growth recovery period, overall loan demand continues to be relatively modest. Owners of small- to mid-size businesses say that they are still hesitant to make investments in their businesses without a very high probability of payback. This phenomenon is impacting overall loan demand. Therefore, Delaware’s banks are competing more aggressively on price to spur loan growth.

In addition, historically low short- and long-term interest rates have lowered the cost of funding these loans (via bank’s deposits), which has also brought down overall loan pricing. Lastly, banks that have lived off of the mortgage business over the past few years have seen the end of the refinance boom and will be looking to replace those lost loan balances with commercial loans.

Expedited deployment of digital delivery
The rapid increase of smartphone and tablet use across all demographics will be what continues to drive all banks to enhance their digital banking services. Local banks that make investments in digital technology will be at a distinct advantage to compete for wallet share in 2015.

As digital delivery continues to transform with the emergence of new technologies, local banks will adapt and extend beyond their current channels. Mobile and online banking enhancements—for instance, using your mobile phone to make payments at a store or person-to-person payments like, say, paying your babysitter at the end of the night—ATM upgrades, and channel synchronization are all things you will see from area banks in 2015.

Focus on security and authentication
Related to digital delivery is the rapidly evolving payments industry. The Apple Pay announcement energized this conversion, with other platforms expected to launch in 2015. Looking to stay competitive, Delaware’s banks will be evaluating their ability to offer safe and secure solutions to their customers.

The ongoing challenges with card breaches and other cybercrime will be at the forefront of banks’ risk-management departments, as well as regulatory agencies and the public at large. Therefore, there will be a continued focus on overall security, mitigating risk, and increasing more immediate customer communications when an occurrence is discovered.

From authenticating mobile identity to educating customers on how to be more vigilant in preventing fraud, to issuing a more secure EMV chip card, area banks will need to stay abreast of emerging technology to meet consumers’ changing preferences and provide a secure mobile experience.

What the future holds
We predict that 2015 will see increased economic momentum and increased investments in innovation and nontraditional partnerships, as local banks must start acting like disruptors and early adopters, instead of taking the wait-and-see approach, in order to stay relevant and competitive with their national and regional competitors.

(Mark Turner is president and CEO of WSFS Bank.)

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