The Earnix team had a very exciting time in Phoenix attending the Consumer Bankers Association annual meeting, CBA LIVE 2016. The conference was full of energy with great speakers – particularly keynote speeches by General Stan McChrystal, Heather Cox (CEO, Fintech, Citi) and Amy Walter (National Editor, Cook Political Report).
Of course, there were many other interesting presentations across all facets of banking – deposits, consumer lending, home equity, payments, regulatory, social responsibility – but the content was as remarkable for what wasn’t included as for what was included.
First, the content highlights according to the Earnix team:
- Omnichannel is dead. Heather Cox made an elegant, compelling case that when it comes to channel development and prioritization, it should be “Mobile First” – and the desktop is dead and buried. For the past 10 years there is a clear trend moving basic transactions away from branches and call centers to all sorts of mobile devices – but the difference is that mobile capabilities are fast becoming the most important decision criteria for ever larger customer segments.
- FinTech is a significant threat. Or maybe not. A number of speakers expressed tremendous anxiety over the rise of startups aimed directly at banking and payments companies. FinTechs are feared because they are agile, focused, data-driven and not saddled with costly and inflexible legacy systems and processes. It seems that only the largest banks have a response – to buy startups or set up their own innovation labs in the hope of replicating a startup culture. Most banks have no response, perhaps believing that their business model is safe. The jury is out on both strategies.
- Regulatory environment is bad, but stabilizing. Every financial services conference for the past 5-7 years had a common theme – angst and more angst about regulators. While these concerns have not gone away, this year is perhaps an inflection. I wouldn’t call it optimism. But perhaps things are no longer getting worse.
- Rising rates will solve banks’ business problems. Across dozens of conversations with bankers, across lending and deposits, salvation is at hand if only the Fed would raise rates. In the meantime, the margin squeeze is putting extreme pressure on expenses and limiting banks’ strategic options to respond to competitive threats (such as FinTech startups).
No doubt, these are very real business problems that need to be solved. What I found just as interesting was that the following topics were not discussed at all or only received a passing mention:
- Big data. This has been the hottest topic at almost every other financial services conference I’ve been to in the last few years. Yet it didn’t come up at all in Phoenix. There are 2 likely reasons why: the business case for investing in big data has yet to be made or bankers that don’t deal directly with data analytics simply don’t understand the big data value proposition. My view is that bankers ignore the potential value of big data at their peril.
- Analytics as competitive advantage. Related to the previous point, there were few presentations about how banks can leverage 1st and 3rd party data analytics to provide a better customer experience, increase share of wallet and reduce attrition. When it comes to ROI, few investments have a better return than analytics.
- Banks can beat FinTech. I mentioned above that banks fear startups because they are agile, focused, data-driven and don’t have legacy investments to slow them down. These are ALL solvable problems! Of course, I’m not suggesting it will be easy, or free, but banks have the means and wherewithal to innovate faster, invest in data infrastructure and analytics talent and replace old, stodgy infrastructure and processes. I believe this is good news for bankers – empowering them to control their own destiny.
- Pricing can help alleviate margin pressure NOW. Margins are thin. Historically low. And even with another increase in the Fed Funds rate in the near future, banks will still have thin margins. However, by leveraging customer data and analytics, banks can increase margins NOW, without waiting on the Fed to act. Pricing optimization works and has demonstrable results with a relatively small investment.
Please share your thoughts and comments. Let us know if we missed anything at CBA.