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Why optimism from financial decision-makers like JPMorgan Chase’s Jamie Dimon will only go so far unless other traditional institutions embrace change.
“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” said JPMorgan Chase CEO Jamie Dimon. “This boom could easily run into 2023.” The banking decision-makeriA decision-maker is the person within a company who is charged with being the final say as key decisions are being made. It's important in sales, for example, to understand who the ultimate decision-maker is so that efforts are targeted to the key person who has the authority to implement change, approve buying decisions, etc. and thought-leader’s annual letter to shareholders was, given the devastating year the financial industry went through in 2020, surprisingly optimistic. If strong consumer savings, an expanded vaccine distribution plan, and the Biden administration’s proposed $2.3 trillion infrastructure plan all proceed accordingly, it could lead to what he dubbed a “Goldilocks moment.” But that scenario will only pan out if banks and credit unions actively embrace the right new tools and opportunities at their disposal.
Dimon’s outlook a year ago was apropos of the fear and uncertainty of the pandemic, cautioning readers to brace for a “bad recession” that could have forced the U.S. gross domestic product to fall by up to 35 percent. Obviously, the leader of America’s biggest bank was wrong. So, it’s understandable why some may be at least a little bit skeptical this time about the still-battered U.S. economy emerging from the pandemic into a full fledged boom in 2023. For one thing, the COVID-19 pandemic even threw other top decision-makers for a loop, so we can’t necessarily blame him. If you dig a little deeper, it becomes more clear that the overall outlook — and the promised boom — isn’t completely rosy for banks and credit unions in particular.
“Banks already compete against a large and powerful shadow banking system. And they are facing extensive competition from Silicon Valley, both in the form of fintechs and big tech companies (Amazon, Apple, Facebook, Google and now Walmart), that is here to stay,” Dimon wrote. “As the importance of cloud, AIiHave you ever asked Siri what time it is? Or called out to Alexa across the kitchen to see if your Amazon package has arrived yet? Then you have utilized artificial intelligence, or AI as it is commonly referred. By definition, AI is the use of computers to simulate human intelligence. Siri and Alexa aren't real people, rather computer programs that know how to answer cert... Read More and digital platforms grows, this competition will become even more formidable. As a result, banks are playing an increasingly smaller role in the financial system.”
The traditional financial industry will continue to face significant challenges on the road ahead despite the potential boom on the horizon. The threat of fintech and other new players in the space will simply build the market shareiMarket share is the percent of total sales in a particular industry generated by one company. For example, if the global athletic footwear market is a $98 million business and Nike does 50% of those sales, they have a 50% market share in that industry. Market share is a standard measurement used to compare the size of a business in relation to its overall market and compet... Read More and take advantage of undefined regulations that push digitization forward while leaving banks and credit unions behind to continue on with outdated business models. No boom for them.
Digital transformation is a frequent buzzword and, seemingly, a miracle cure in these situations. Dimon’s recommendation is enough to make the head of any traditional financial institution to want to reevaluate fundamental technological, marketing, and software perspectives. It’s another challenge to actually make progress and deploy those types of transformative efforts based on complex business realities and objectives.
“While we will argue for a level playing field, both in terms of how products and services are treated by regulators and possibly how competition should be treated across platforms, we are not relying on much to change,” Dimon said with regard to a legislative answer that most likely will never come. “So we will simply have to contend with the hand we are dealt and adjust our strategies as appropriate.”
Perhaps more rapidly than ever before, customer expectations changed, competition increased, and the need to evolve became more than just a potential future investment. So, what new tools can forward-thinking, but operationally strapped traditional financial institutions adopt at this opportunistic crossroads?
The solution is for them to both think like the consumer and adopt the use of data analyticsiAnalytics is the analysis of raw data to extract meaningful patterns or information. In the marketing world, analytics tell us a lot about consumer behaviors, which can affect how we market to those consumers. If analytics show a consumer only eats healthy food based on their online shopping and searching history, they are probably not the best target for communication fro... Read More and artificial intelligence. This requires an orchestrated, personalized, and thoughtful experience delivered across channels. It may sound easier said than done, but partnering with a company that provides deep, intelligent consumer insights, that can connect behavior-based signals to deliver personalized experiences at the right time with the right message, is the key to attract and grow profitable customer relationships. The tools to help foster these sorts of customer-centric methods change the way traditional financial institutions look to engage with customers, and expands the scope of the services provided to those much-needed consumers.
COVID-19 effectively negated most forecasts for 2020, rendering carefully predicted expectations essentially null and void. The non-medical shockwaves of the pandemic will continue to reverberate this year into next, with shutdowns and closures all but guaranteed to continue until a vaccine is widely available. The only thing certain is to expect more uncertainties. But the future is bright for those proactive banks and credit unions. Predictions like Dimon’s means there is room to be optimistic. But banks and credit unions must meet this new year, and new challenges, with new tools.