5 Most Critical Issues for Banks in 2022

Welcome to the inaugural edition of Digital Banking: WIP, where I will explore what banking tech means to banking businesses.

Today, we spotlight five key issues global banks are battling with this year. In the next few editions of this newsletter, I’ll share what I found to be most interesting about each issue.

Let’s dive in.

1. Going from the Worst to Better on Customer Experience

Banks are becoming increasingly customer centric.

It pains me to say it, but that’s quite a reversal since pre-pandemic days. CustomerGauge’s “The State of B2B Account Experience” report determined that, from 2019 to 2020, the lowest-ranked fintechs were better than the highest-ranked banks.

The same report stated, “The good news for consumers is that in 2021, 75% of banks [invested] in a business model that places the customer at the center. However, the reality of execution lags behind.”

“From now on, the focus of banks’ digital innovation will be less on enhancement— becoming the best possible digital version of their old selves—and more on invention,”

Source: Accenture Banking’s “Top 10 Trends for 2022: Setting Course Beyond the Watershed”.

2. Learning to be Clingy

Even in the most favourable times– this isn’t one of them– banks compete not only with each other, but with all manner of digital-native companies for IT talent.

Banking isn’t the destination industry it once was. Sure, the money is still good, but new workers have lower needs and expectations in that regard.

“Banks by and large are succeeding in recruiting young talent, but are failing to retain them,” Accenture reports. “They are investing in skills acquisition, but this makes them a prime hunting ground for employers in other sectors.”

IT departments are victims of their own success. An Accenture survey about the future of work revealed that 87% of bank employees felt their output increased when working remotely. It’s unlikely that executives will allow productivity to dissipate as they call workers back to the office.

By all accounts, functions outside of IT in marketing, sales, and customer care, for instance, are seeing this trend too.

3. It’s the (Macro-)Economy, Stupid!

The global economy, battered by the pandemic, is on a rocky (thank you, Vladimir) path to recovery. This is expected to be uneven across regions. The U.S. is leading the recovery march with Europe in the next row, while many developing economies may fall behind.

In a Deloitte survey of banking executives across nine major markets, 88% of respondents expect banks’ top-line revenue to improve in 2022. This is hoping that non-interest income from higher trading revenues and fee-based businesses will cushion the suppressed interest income/net interest margins (NIM).

#Pro-tip: Better cost management may give banks the best shot at improving efficiency ratios. So, bank tech shouldn’t be focused only on customer experience.

4. Time to Decrypt Crypto

The younger you are, the more likely you are to invest in cryptocurrencies. That includes most individuals under 40. The Deloitte Center for Financial Services reported in its “2022 Banking and Capital Markets Outlook” that this same cohort – 28% of Millennials and 20% of Gen Z – are most likely to switch primary banks.

And yet, most banks still have no plans for cryptocurrency: to trade it, to hold it in investment portfolios, to accept it as collateral, to provide any kind of custodial service – nothing.

5. You Shall Not Pass!

Cybersecurity can’t be a layer; it must be an ingredient, seamlessly entwined with DevOps (engineering processes that improve how quickly and smoothly applications and services are delivered). Your digital infrastructure and apps which run on it must be secure by design, which means getting the security experts involved in the earliest stages of any project.

The consequences of ignoring the growing importance of cybersecurity are dire. The FBI recently announced that, from 2020 to 2021, reported ransomware incidents increased by 62%. Digitisation, to be clear, involves opening your bank’s systems to third-party vendors, which adds to the urgency that already exists from its exposure to customers and employees.

Did I get the order right? What other critical issues do you think should be prioritized ahead of these? Would love to know!