Market Trends of US Retail Banking Industry
This section covers the major market trends shaping the US Retail Banking Market according to our research experts:
The Spending by Retail Banks for digital banking is increasing in US.
Fintechs were quicker to recognize that consumer lending niche improve the customer experience with pre-approvals and quicker funding of the loans. Digital lenders more than doubled the market share over the years, with consumers across the credit spectrum increasingly turning to digital-first providers. Investment and collaboration with fintechs are becoming the norm. Major US banks are investing heavily in their FinTech competitors to form strategic partnerships to use their technology and profit down the road if the investments take off. In general, banks can offer their core products but expand into other services using specialized FinTech APIs.
Two-and-a-half billion adults worldwide transact only in cash, according to the World Bank. However, with some digital banks and fintechs offering cheaper and faster services than incumbents, banking is becoming more accessible. For example, companies such as WeChat and Ant Financial have given millions of underbanked Chinese consumers, and small business owners access to secure payments and credit. Financial inclusion can benefit consumers and banks by reducing poverty and expanding the market. But opening banking through digital innovations can also introduce risk. Credit defaults could weigh heavily on fintechs' low margin operations. And financial regulations could introduce data privacy concerns stemming from greater network integration. Careful testing and contextualized consumer strategies are key to managing such risks and ensuring sustainable financial inclusion.
Despite the rise in new payment technologies, many US businesses still use paper checks. However, 55% of business professionals pointed to real-time payments as their top B2B payments priority. Access to these technologies - real-time payments, tap-and-go, and cryptocurrencies will be critical for engaging and retaining commercial customers in the future. Faster payments will enable improved liquidity management, quicker supplier invoice settlements, instant disbursements of insurance claims, and reduced fraud exposure. Improved commercial payment technologies allow banks to enhance customer experiences and grow profit through increased transactions and fees. But as more digital players enter the B2B payments space, incumbents will need to act quickly to avoid being left behind by more nimble competitors.
Open Banking in US is Showing low growth.
In the United States, open banking is expected to evolve as an industry-driven initiative, unlike other countries, where regulatory mandates are forcing many banks to adopt open banking. However, US banks can benefit from lessons learned in these regions, such as establishing technical and customer experience standards for data-sharing/APIs. If done well, open banking can help US banks achieve key strategic goals. Open banking can amplify and accelerate banks' digital transformation efforts and the emergence of new business models.
So far, attitudes toward open banking in the United States appear to be mixed. According to Consumer survey, revealed one in five consumers in the United States find open banking valuable, but the interest is higher among millennials and the Gen Z generation. This suggests US banks should target younger generations in their initial open banking initiatives. But consumers also expressed some concerns, especially about privacy and personal data security and use. This seems to point to a need for banks to educate consumers about the benefits of open banking.
