Mobile banking will surpass 60% of households; and branch use will contract slightly, but remain steady among consumers. Those are two 2018 forecasts from Lombard, Ill.-based Raddon, a Fiserv company.
Research and analytics firm Raddon in its economic and industry predictions for 2018 also believes:
- GDP will continue to grow.
- Auto sales will decline.
- The Fed rate will increase.
- Real estate values will appreciate, but not as much as last year.
- CD portfolio growth will accelerate.
- Home equity lending isn’t going anywhere, even with the tax bill.
Bill Handel, VP at Raddon, and author of the report, said. “Growth accelerated in the second and third quarters of 2017 and this trend should continue into 2018, although there will be growing concerns.”
Online banking continues to be the dominant delivery channel used by consumers on a monthly basis, followed by the branch. “Currently 57% of consumer households use mobile banking monthly. We expect this to exceed 60% in 2018.” Handel mentioned mobile banking will continue to be particularly important to younger generations – 85% of millennials use mobile banking monthly. “More importantly, an increasing number of consumers will be mobile-centric financial consumers, most particularly millennials and especially the up-and-coming Gen Zers.”
The Raddon report also observed bank and credit union branch growth outstripped population growth every year for the last 60 years – until 2010. “Since 2012 we have seen an approximate 7% decline in financial institution branches. In that period the big banks have been more aggressive in closing branches, with Citibank, Bank of America and PNC leading the way in closing domestic locations. But this reduction is simply an adjustment for massive branch overbuilding that occurred between 2003 and 2008. “In the long-term branches remain critical to the delivery infrastructure; however, branches will continue to evolve in role and function. Your branch design and staffing plans need to evolve accordingly,” Handel maintained.
Even with the changes in the tax code and the elimination of the tax advantage of equity lines and loans, Raddon anticipates this category of lending still remaining viable. First, existing lines and loans will be more difficult to refinance into the first with the rise in interest rates. Second, equity lending may still offer a better rate for consumer borrowing needs than other lending vehicles due to the secured nature of the loan. “This product does not go away but it does have to evolve,” Handel suggested.
One concern is the decline in new auto sales in 2017, which dropped by approximately 1.5%, following seven consecutive annual increases since 2009. Prior to this, the longest uninterrupted run of annual increases in auto sales was a five-year period from 1996 to 2000. Raddon predicted another 2% decline in auto sales in 2018.
Another worry: three rate increases by the Federal Reserve in 2017 – a trend which is likely to continue. “From an industry perspective, a concern should be the lack of significant improvement in margins in the face of these three rate increases.” Also, Handel noted approximately midway through 2018 this recovery will officially become the second longest recovery on record, and every recovery does ultimately end.
“However, count as a tailwind the recently-passed tax cuts,” Handel said. The reduction in corporate tax rates has already contributed to the highest level of small business optimism ever recorded, and that tends to bode well for the economy. “All in all, we expect the economy to grow at just less than 3% in 2018. However, we could see some softness creep in late in 2018.”
By Roy Urrico
