Survey: Financial Executives Optimistic For 2014, But Regulations Temper Mood
The economy will continue on a steady path to recovery in 2014 – with lending a noticeable bright spot – but the mounting burden of compliance will challenge growth and innovation at financial institutions. That's the consensus from the 2014 Fiserv Boardroom Series Outlook Survey, a poll of Boardroom Series members that included responses from more than 900 senior level leaders at banks, credit unions and other financial institutions.
More than 46 percent of respondents were somewhat optimistic for the overall economy in 2014, with another 42 percent expecting the year to play out about the same as 2013. Only 9 percent were somewhat or very pessimistic, signaling that, in the opinions of a majority of surveyed financial professionals, the worst of the economic malaise is over.
Recurring macro themes in the survey comments provided by participants were focused on: dysfunction in Washington, D.C., persistent long-term unemployment, uncertainty from Fed policies and the potential for a stock market correction. However, many participants cited more positive fundamentals, such as strengthening home prices, and institution-specific metrics like increased mortgage and auto lending that have shown increased consumer confidence in their markets.
Virginia Heyburn, vice president for Insights and Advocacy at Fiserv, says these findings, together with broadly positive indicators from the FDIC Quarterly Banking Report and other sources, are confirmation that financial institutions are feeling better about prospects for the future.
"Much of the distress has worked its way out of the banking system, and [financial professionals] can finally look forward instead of in the rearview mirror," says Heyburn. "Banks and credit unions have done a remarkable job of cleaning up their balance sheets. Institutions are more nimble and efficient than they were six years ago when the crisis hit, so they're in a much more advantageous position to leap forward to start growing."
And where do financial services executives see opportunities for growth? It depends on asset size. For institutions with less than $1 billion in assets, Consumer Lending was rated highest, followed closely by Consumer Banking. For institutions with $1 billion or more in assets, corporate and small business customers are seen as most important to growth: Business / Corporate Lending was rated first, followed by Corporate / Small Business Banking.
With loan-to-deposit ratios still substantially off pre-crisis levels, Heyburn says it's no surprise that financial institutions are prioritizing lending. However, the data also indicate the need to grow across all categories.
"Financial institutions are saying they can't just rely on growth in any one area, they're going to have find growth across the entire span of their business," says Heyburn. "This is a challenge because they have to differentiate and specialize at the same time. That means practicing segmentation to target certain customers with certain products but also differentiating across all of their products and services to stand out. It's not about looking to be all things to all people, but practicing segmentation across all areas of the operating model."
In terms of technology investments, Lending, Compliance, and Mobile/Tablet and Online Channels were rated as the most anticipated for institutions. When segmented for asset size, Lending was slightly less important for larger institutions, while CRM and Integration / Technology Infrastructure were rated as higher priorities. For institutions with less than $1 billion in assets, Core Banking was a higher technology priority than at larger institutions.
Not surprisingly, financial professionals are worried about regulation and rated it highest among factors that would impact their institutions in 2014. The challenge of keeping pace with consumer technology adoption – driving demand for more, better and faster digital services – was second, while competition from other financial institutions was third. Although the headlines are often dominated by stories about new competitive threats from outside the industry, financial professionals think non-traditional financial providers will have less impact on their institutions than other factors in 2014.
To see the full survey results, view the presentation:
The survey was distributed in early Jan. 2014 to the Fiserv Boardroom Series, the 17,000 member-strong thought leadership community for Fiserv clients. Nine hundred senior level executives, ranging from community banks and credit unions to those at institutions with greater than $30 billion in assets, responded to the survey.