In today’s banking industry, financial institutions (FIs) are faced with the herculean task of balancing consumer concerns while also providing ease of use and reliability in all things financial — a tough ask for any institution in this changing and uncertain economical landscape.

On one hand, consumers are stressed: Questions about the economy swirl in the wake of unprecedented modern-day bank runs, rising interest rates, and an inverted yield curve that has been a precursor of the past seven recessions. The combination of these factors and a multitude of other economic indicators can be dizzying for consumers to process.

On the other hand, regional and community financial institutions (RCFIs) are in a unique position to deliver unprecedented value to a country in economic uncertainty. These institutions have a history of offering competitive financial services to those they serve, and according to McKinsey, US regional banks join an elite cohort of financial institutions globally that have experienced both rapid growth and rising profitability.

Inflation and Consumer Perceptions

In our recently published research report, “The 2023 Alkami Data Telemetry Report: State of the IndustrySM Emerging Financial Institution Opportunities in an Uncertain Economy” we uncover several areas of opportunity for RCFIs in today’s high-tech, high-speed inflationary economy. With competition and consumer expectations at an all time high level, it is vital for RCFIs to empower consumers and differentiate themselves from megabanks and neobanks.

Everywhere they look, prices for everyday items have been climbing year over year. Food costs are expected to rise by 7.5 percent in 2023, as everything from gasoline to eggs comes with an inflated price tag. Electric bills are up too, increasing 11% on average from August 2021 to 2022 mercifully, there may be some relief coming in this area. 

Not only that, but more than eight in ten Americans cite inflation as a source of stress and nearly 60 percent are concerned about having money to pay for present necessities.

All of this results in downward pressure on deposit growth, and according to our telemetry data research, 16 percent of consumers have been withdrawing more money in the past 12 months to pay for “normal” expenses. Add that to the list of unsettling trends such as higher unemployment payments than pre-COVID, and a federal student loan situation that is in flux, it’s easy to see why consumers are concerned.

Yet, these same factors create opportunities for RCFIs to address consumer concerns: According to recent commissioned primary market research by Alkami*

• 56 percent of consumers would want their financial institution to know if they were under financial stress by monitoring the activity on their accounts and reach out to offer financial education, support, and options to help them become financially well.
• 57 percent of consumers in the Alkami study responded favorably to a bank or credit union offering a pre-approved loan based on transactional behavior
• 42 percent of consumers wish they had more analytical tools to track and manage their financial situation.

What RCFIs can do right now

1. Become a mentor and solid foundation for account holders who are concerned about their financial future. 
2. Explore financial wellness programs and similar initiatives to educate consumers, and help them get control and confidence in the short and long term. 
3. Additionally, act more familiarly with account holders, in ways such as analyzing their data for patterns of distress and proactively reaching out with new credit or deposit offers.

The financial landscape continues to evolve

Adding to the overarching financial uncertainty, the concept of money itself is changing rapidly with four main factors influencing the landscape: buy now pay later (BNPL), cryptocurrency, peer-to-peer payments, and earned wage access.

Account holders are faced with a multitude of choices in how to distribute and collect their money — and with choice comes a necessity for information. Be the place they go to learn about all things related to their money, not just the trend of the moment.

* Alkami’s Consumer Banking Trends Research, February 2023. 809 digital banking customers were surveyed to understand more about their banking priorities, experiences and beliefs. Data was collected January 23 – February 13, 2023.