BOSTON (MainStreet) -- The past few years have been challenging for the banking industry, and 2012 looks to be filled with continued challenges.
"As we all know, growth is hard to find, revenue is under intense pressure and the cost of doing business continues to increase," says the 2012 Financial Services/Retail Banking Industry Perspective issued by Booz & Co., a global management consulting firm.
"Four forces are shaping this reality: the economic climate, with high levels of unemployment, low interest rates and a feeble housing market; consumers, who are borrowing less; regulators, who are both curbing fee-based income and increasing the cost of compliance; and technology, which is enabling nontraditional, low-priced competitors in areas such as payments," the report says. "Since the financial crisis, many in the industry have assumed or just hoped that these revenue challenges would be a cyclical phenomenon. But there is a creeping realization that this is not the case."
"It's our belief that a structural, secular shift is under way," it says. "The industry is transitioning from a high-margin business to a lower-margin one."
That makes it a good time for the industry -- from big players such as Bank of America (Stock Quote: BAC), Citigroup (Stock Quote: C), Chase (Stock Quote: JPM) and Wells Fargo (Stock Quote: WFC) to smaller community banks and credit unions -- to commit to 10 resolutions for the New Year.
1. We'll work to rebuild trust.
"Obviously the industry as a whole and most institutions need to rebuild trust with their consumers because right now it is very, very contentious relationship most of the time," says Corey Yulinsky, a partner in Booz & Co.'s Financial Services practice.
Marketing and advertising may help, he says, but are no substitutes for "what kind of customer experience you provide day to day" in-branch and online.
"At a very profound level, it is as simple as 'Are they doing what I am asking them to do quickly, transparently and for reasonable economics?'" he adds. "That day-to-day experience is where trust is either built or destroyed. At some level, consumers know that you have to pay for a value-added service. Suddenly being told you have to pay for services that have been free breaks trust."
There was a time banks didn't have to match revenues and costs directly, he adds. "There was a lot of cross-subsidizing going on, and that led to things like free checking, which then led consumers to go, 'Oh, they are giving it away for free, it can't be worth anything,' when, actually, being able to move my money to pay you something does actually have value. But banks have never really communicated even that basic service in a way that people can see that."
By not emphasizing their value, banks will continue a vicious circle.
"Unless you can really demonstrate what the tangible value is, so that people understand why they are paying, there is going to be this constant to-and-fro," he says.