NEEDHAM, Mass. (1/17/08)--The subprime mortgage crisis has forced the retail banking industry to enter 2008 in a reactive mode, according to new research from Needham, Mass.-based TowerGroup. Credit unions may want to monitor several trends. Retail financial institutions are anxious about two fronts--the unseen threats that may not yet have surfaced in their credit portfolios and how their institutions can compete in the volatile days ahead, said Towergroup. They will return to proactively approaching their markets only after the extent and expected duration of the credit crisis is understood, said the report. Although many institutions have reallocated some management and technical resources, they continue to focus on longer-term business drivers and technology investments, such as the re-engineering of payments processing. "The key issue for retail banks will be managing growth and profitability while adapting to an ever-changing economic climate," said Kathleen Khirallah, TowerGroup managing director and practice leader of Retail Banking. In 2008, financial institutions will focus information technology (IT) spending on initiatives to reduce risks as concerns over consumer data disclosure and attempted fraud force them to pay more attention to information security and fraud prevention. "Many banks have embarked on multi-year strategic technology initiatives that are already well under way," said Robert Hunt, research director of TowerGroup's Retail Banking practice and co-author of the report. "In many cases, it would simply not be economical or strategically sound to put these large-scale projects on hiatus." Other findings of the research:
* Sustaining organic growth (not related to mergers or acquisitions) will continue as a top challenge for most retail financial institutions. * Concerns over disclosure of consumers' information will lead management to focus on creating enterprise centers of excellence for information security. * As electronic payments volume increases and institutions introduce new delivery channels, they won't be able to afford operational silos for each type of payment. This pressure will help drive a continued focus on streamlining payments processing. * Heightened consumer awareness of Internet fraud and ID theft will motivate institutions to develop new offerings that combine conventional products with ID theft and fraud protection services.