Examining future banking trends

Banking is going through a period of evolution right now, as banks have to adjust to new realities both from the pandemic and changing customer expectations.

As a result, banks have had to take a hard look at all of their strategies, such as how they utilize their branches, whether to use ATMs or ITMs and how to meet customer expectations regarding transaction speed.

While it may seem uncertain where banking is headed, we can make predictions based on what happened in banking in 2021.

ATM Marketplace spoke with Sue Laws, EVP of operations in the Americas, Temenos, a banking software company, to get her predictions on where banks are headed in 2022.

Q. The pandemic obviously had a big impact on banking and payments. What trends from COVID-19 do you see carrying over into the future?

A. The need for real-time transactions has never been clearer. Access to finances became more important than ever for people living paycheck-to-paycheck, or participating in the gig economy in order to make up for lost finances due to decreased hours or unemployment. When the difference of one to three days in processing a payment means a $35 overdraft fee for someone who already doesn't have cash, or missed bill payments which can impact a credit score, we have a real socioeconomic problem on our hands. The rollout of real-time payments rails like FedNow currently in development by the US Federal Reserve Banks, and Interac eTransfer in Canada will be game changers for the financial services industry.

Q.What role do you see branches playing in 2022?

A. According to research conducted by the Economist Intelligence Unit earlier this year, 65% of bankers now believe that the traditional branch-based banking model will be "dead" within five years, while 71% expect cash to represent less than 5% of all retail transactions globally by 2025. This will lead to an evolution in how we use branches. Consumers will visit their bank for advice and complex financial transactions like mortgages, versus account opening or cash withdrawal. Branches might be co-located with other banks, or co-located with retailers like Wal-Mart.

Q. On the self-service side, do you see banks deploying more ITMs or other self-service solutions in the future? Why or why not?

A. We've definitely seen a rise in the adoption of self-service solutions since the pandemic. I think the reason Interactive Teller Machine (or ITMs) are catching interest is because they balance the digital convenience with human connection by allowing customers to speak to a bank employee virtually. In a survey of 5,000 consumers earlier this year, 19% said they wish banks would make it easier to speak with a human representative, while 17% want it to be easier to complete banking tasks by themselves. There's a balanced demand for both.

We have our own self-service solution, Temenos Infinity Engage, which gives banking customers a personal digital communications channel to connect with a dedicated bank advisor. As banks were facing long-term impacts of COVID-19 on the way they conducted their business, we received so much interest in the product that we launched a streamlined proposition geared toward COVID-19 relief to allow our customers to quickly roll out the offering. At a time when many banking customers were financially vulnerable, Temenos Infinity Engage allowed customers to chat with an expert that fit their needs, and receive consistent, personalized yet digital support.

Q. What do you see as the biggest payments trends going into 2022?

A. Request to Pay has been increasing in adoption in Europe, and we anticipate demand for it in the US in the next few years. Essentially it's a secure messaging service framework that lays on top of existing payments infrastructure as a new flexible way to manage and settle bills for businesses and amongst friends. For consumers like you and me, Request to Pay brings the convenience and the flexibility of partial payments, paying in full, or requesting an extension — offering an increased level of financial control. For businesses, it can improve the speed of payments, and provide greater visibility into cashflow.