As the focus shifts from balance sheet protection to revenue generation, will you be ready?
In December, McKinsey & Company’s Global Banking Annual Review observed that the coming challenges to the banking industry due to COVID will be presented in two stages. In the first stage, banks and credit unions will have to work through credit losses related to business failures and consumer bankruptcies. While this will be challenging, the banking system in the U.S. is well capitalized and Congress has shown their willingness to act.
In the second stage, the focus will be on revenue as the recovery takes hold. Whether that begins in Q2 or Q4, and is rapid or gradual, is a matter of which economist you favor. At the same time, deposits are at record levels – with apparently more to come – and credit quality remains a key focus area. What’s a financial institution to do?
With credit quality of particular concern, secured lending – mortgage, home equity, auto – will be an important area for banks and credit unions this year. “Home” is now more important than ever, and millennials are joining the home ownership ranks as lower interest rates make owning more affordable. Refinancing will pick up further as qualification requirements are eased and return to more normal pre-pandemic levels; home improvement will continue to surge. On the automotive front, industry analysts are forecasting new car sales to grow from between 7.6% to 10.3% in 2021.
Savings and Investing
Consumers are looking to better understand their investing and savings options now more than ever before. The timing is right for a discussion with customers about IRAs, 529 Plans, and their options for putting all of those deposits to work at rates higher than 0.05%, the current average interest rate on savings accounts. Indeed, we have seen traffic to relevant areas of our platform jump: investing (+250%), savings and budgeting (+50%), college planning (+30%) are of particular importance as your customers seek guidance and higher rates of return. Today’s first-time contributor to an IRA or college savings plan is tomorrow’s private banking or wealth management client, and providing savings and investment guidance creates long-term, loyal customers.
The ensuing competition for qualified borrowers and valuable long-term relationships will be fierce. And, because customer behavior has shifted permanently to digital as the primary servicing and selling channel, a robust digital engagement strategy is an imperative. Leadfusion has been on the forefront of the digital evolution in banking for over two decades, and we’re ready to help you compete. Let us know how we can help you; the time to start is now.