Crystal balls. Groundhogs. The weatherman. Horoscopes.
Prognosticators abound. We crave advance notice of events, from rainy days to Kentucky Derby winners.
Sometimes we consult remote signs or coincidences for answers. For example, consider the “Redskins Rule,” touted by some as bellwether for election results given correlations between the victor of the last home football game for the Washington Redskins and outcomes of presidential elections.
When the Redskins won at home, so did the incumbent. When the Redskins lost, the opposition won.
These results were consistent in every presidential election from 1940-2000. Although the rule has been broken of late, the “predictor” still has a huge success rate.
This phenomenon is coincidence; better predictors exist.
Trend analysis, an examination of past circumstances to predict future outcomes, is an important tool for business strategists.
This week, a glimpse into banking’s crystal ball: See how some connect the dots between past events to draw conclusions about the future. Carefully consider your variables and odds for predictor accuracy as you plan.
‘Study the past if you would divine the future.’—Confucius
In looking back to look ahead, consider these hurdles cited by BankingTech.com in “Five Challenges for the Banking Industry in 2015.” Here are some lingering issues of 2014:
Know “3 Keys to the Bank of the Future,” per Bank Systems & Technology. A panel reveals competition in banking shifts with technology. Disruption is expected.
“We know the problems that we need to solve—providing personalization and contextual awareness in real-time… Whoever can provide that will win,” says a panel member.
Three trends changing relationships between consumers and financial providers include cyber security concerns, technologies to assist providers in understanding consumers, and competition that alters consumer expectations.
Partnerships leveraging “other organizations strengths in certain areas” will be required to provide “the best customer experience.”
“A new flight plan is in store,” says Deloitte in its 2015 Banking Outlook: Boosting Profitability Amidst New Challenges. This report makes seven predictions regarding growth, compliance, data management, cybersecurity, balance sheet efficiency, and mergers and acquisitions.
One revelation is that banks are focused on operational efficiencies, in part with branch closures: “The industry closed 1,614 branches [in 2014] …the largest decline in more than two decades.” Boosting profitability will be a 2015 priority.
‘It is always wise to look ahead, but difficult to look further than you can see.’—Winston Churchill
There are six priorities for the future, says PwC Banking in Retail Banking 2020: Evolution or Revolution? Despite “powerful forces... reshaping the banking industry,” like consumer expectations, regulations, and technology, “the traditional bank has a bright future—the fundamental concept of a trusted institution acting as a store of value.”
But providers must decide how to react.
“Staying the same is not an option,” so institutions must either help define the future, follow trends quickly, or “manage it defensively” by deferring change.
In response to change, consider a customer-centric business model, distribution, business simplification, finding an “information advantage,” allowing innovation, and risk management tactics.
Know “10 Big Ideas for Banking in 2015,” per American Banker. “Challenges banks face are absolutely daunting,” including the need to thwart hackers, win new customers, and make money.
“Get ready for a busy year,” the article says. Here’s how:
See also American Banker’s “Bold Banking Predictions for 2015.” In this financial forecast, common sense will reign regarding regulation as consumer access to credit becomes a concern.
Real estate prices will go up, credit standards will loosen, and “the real estate risk concentration of the banking system, already very high, will rise further.”
Mortgage lenders are smarter, however, and “banks that are thoughtful and analytic about mortgage underwriting” will write “more ‘make sense’ mortgage loans.”
Further, traditional banking practice is threatened by data breaches. Social media and partnering are two strategies to help combat this threat, says American Banker.
Also, the bank becomes a “personal shopper” as consumers use providers to help make financial decisions. Innovative financial products and services will include technology in their deployment, and “the financial services industry will take a cue from the health care system and begin to focus on customer outcomes.”
Finally, MarketResearch.com identifies “Projected Trends in the Banking Industry for 2015,” in Part 1 and Part 2. Discover trends like Apple Pay, Fed rate hikes, issues in global economies, “crypto-currencies” such as BitCoin, and “commodity-sensitive economies” will be impactful in 2015.
The New Year heralds opportunity for prognosticators to make predictions that inform, reassure, alert, assist, thwart—or perhaps even confuse those who consult their musings in planning efforts.
For certain, per Peter Drucker, “The only thing we know about the future is that it will be different.” Consideration of not only broader trends but local particulars will make for greater accuracy in your specific business forecast.
LORA BRAY is an information research analyst for CUNA’s economics and statistics department. Follow her on Twitter via@Bray_Lora and visit the CUNA blog, “The Research Roundup: Economic Perspectives.”