Considering the first-quarter 2015 earnings of the six largest banks in U.S., the numbers are indeed mind-boggling. There might be some financially intensive factors behind these numbers, but we believe there’s more to it than just that. Many revolutionary initiatives in the world of banking result in massive growth. First, let's quickly see how the top banks have fared so far (source: WSJ):
The bank’s revenue crossed the $24 billion mark thanks to some strong trading results. The bank witnessed rising profits from all of its major business units. Strong growth rates were observed in merger advisory revenue and markets-related revenue.
The bank earned more than $21 billion in the quarter. The bank has been the fourth largest bank by assets and is indeed receiving high returns on these.
Bank of America
The bank’s revenue reached more than $21 billion in this quarter. The bank has bounced back after recovering from huge legal bills in the past.
The bank’s revenue was just shy of $20 billion for the quarter. The bank has been successfully working on disposal of peripheral business units and resolution of legal matters.
The bank achieved revenues over $10 billion and has taken advantage of a volatile market environment in the right manner. The bank gained revenues from mergers and also from trading in both equities.
The bank’s earnings were just shy of $10 billion. The bank has benefited from a strong environment for deals and trading. The bank has shifted its focus away from unpredictable businesses to consistent ones such as wealth management.
The numbers presented do indeed show a progressive picture for banks. We are observing that the digital transformation in banking may be playing a far greater role than we ever thought. Digital and mobile banking initiatives might be aiding in painting a positive picture from the financial perspective. There is no denying that banks are concerned with fintech startups that are coming up in the payments space. These startups are creating solutions that compete directly with the core services of our financial institutions. Banks want to keep up and have redirected their focus towards areas such as locating new revenue opportunities and maintaining massive quarter-on-quarter results. Here are some use cases in this regard to highlight initiatives by banks:
Bank of America
The bank has filed new patents in order to come up with next generation solutions. One of the patents discusses enabling live video feeds to connect consumers to bank tellers at ATMs. Another patent mentions a system that allows a consumer to utilize funds associated with multiple gift cards using a single payment method through an associated user account.
Citigroup is searching for developers and designers who can bring the next level of innovation to the company and help change the way the world banks. Citigroup’s goal is to find new innovative FinTech solutions, using the power of Citi’s digital platforms. To achieve this goal, the company has come up with the Citi Mobile Challenge to seek out innovative FinTech developers.
The bank recently acquired Spring Studio as a step towards leading in digital banking amid the rapidly changing landscape of financial services. These changes seem to be marked by new customer demands and the entrance of digital-only players. Spring Studio will operate as an independent company, focusing on BBVA’s digital banking projects. The bank has also entered into an agreement to open its technology platform to payments innovator Dwolla, allowing customers of the bank to use Dwolla’s real-time network to make money transfers.
Banks, especially those with a relatively high amount of influence on the market, should be inspired by such use cases and take the cue to focus more on where the next revolution lies. From a financial perspective, investments in new projects would provide more returns in the form of new revenue opportunities. Banks need to focus on faster, lower-cost payment mechanisms and mobile-focused financial tools. There are two major suggestions that banks should seriously consider:
Real time payments: If you seek a pattern in recent financial service innovations, one very noticeable one is the offering of real-time money transfers. If new startups can develop such real-time systems from scratch, then why can’t these banks, who have vast technological resources at their disposal, actually do so? Even if banks just make proper upgrades to their existing wire and ACH systems, that can make a huge difference.
Mobile-only banking: Considering the examples of Simple and Moven, we see that this concept can indeed boost revenues for banks. The idea of heading to your nearby branch for banking services is becoming a thing of the past. With large scale digitization and the wide presence of mobility, banks should change the way customers can access banking services. Banks need to come up with new concepts to replace their old brick-and-mortar physical branches. Banks like Barclays, TD Bank, and PNC Bank have already incorporated the use of self-service stations at branches, featuring iPads that can help perform all kinds of banking operations.