Amid rising regulatory costs, community banks look toward improved customer experience and additional investments in mobile banking, according to KMPG LLP’s annual Community Banking Outlook survey released Tuesday.
The survey, “Seeking Strategic Advantage,” included feedback from 100 CEOs and senior executives in the community banking sector.
With the goal of improving their customer experience, 27 percent of the bank executives said they plan to make “significant” investments in IT related to mobile banking over the next one to three years, the survey noted. What’s more, 22 percent said they plan to invest in “real-time posting,” while 16 percent said “leveraging data to optimize customer development,” and 13 percent said “social media.”
Asked what types of mobile banking services they plan to offer next year−that are not currently offered− 34 percent chose transferring money using cell phone number/email address; 30 percent said transferring money between personal accounts, and 29 percent said remote secure deposit.
“This is clearly an untapped opportunity for this sector,” John Depman, national leader for KPMG’s regional and community banking practice, said in the survey “There is great potential for community banks to seize growth opportunities, but first they must take stock of areas where operations and infrastructure need to be improved and enhanced.”
Of those surveyed, 32 percent said regulatory and legislative pressures will present the most significant growth barrier over the next 12 months, which is down from 42 percent in last year’s survey. More than a third (37%) said spending on regulation and control environment issues will continue to increase over the next 12 months. That is second only to increased spending for information technology, which was chosen by 46 percent of the executives polled.
Nearly 80 percent of those polled said regulatory compliance costs now comprise anywhere from 5 to 20 percent of their total operating costs.
“There is no question that rising regulatory compliance costs will continue to be a challenge for community banks, but now is the time for them to move beyond the compliance and risk management burdens that are stalling their growth plans,” Depman added. “It is critical for community banks to change their focus and to look for new methods, products and services to reach new customer segments to drive growth.”
One of the obstacles facing community banks’ growth is a changing customer base, the survey noted.
Asked which customer segments present the greatest growth opportunity, 22 percent said the under banked, 19 percent said consumers nearing retirement, and 16 percent said the top 10 percent of income earners.
“Rather than waiting too long to make IT infrastructure investments, the proper balance now will allow for more time to focus on growing their business,” Depman said.