2023 Review and 2024 Preview for Customer Communications in Financial Services
By Scott Draeger, SVP Product Marketing and Vertical Solutions
As we start a new year, it’s important to take time to reflect on lessons learned from the past year and anticipate the challenges and opportunities that we’ll face in 2024. As the SVP of Vertical Solutions at Smart Communications, I am responsible for positioning Smart Communications as a market leader of customer communications management (CCM) and forms automation technology in the financial services market.
In this blog, I will review 2023 and examine the challenges and opportunities that we may see in 2024 and beyond.
2023 Year in Review: A Tough Year in Financial Services
For macroeconomic context, let’s look at the highs and lows of 2023.
Interest Rates
The fed funds rate started the past year at 4.33% and closed at 5.33%. A November 2023 article from Bankrate found that high home prices and high mortgage rates continue to make this a challenging market for hopeful homebuyers. According to the U.S. Bureau of Labor Statistics’ (BLS) inflation calculator, consumer buying power increased by 3% during the year. We can’t forget about the headline-making regional bank collapses.
Unemployment Rates Pose Challenge
Unemployment started the year at 3.3% and looks to finish at about 3.7%, according to data from the BLS. Commercial real estate had a difficult year as RTO (Return to Office) initiatives met with mixed success. An article from JP Morgan highlighted that the market was up 24% in 2023, compared to being down 18.1% in 2022. That’s quite a year for financial services.
Growth Amid Changing Behaviors and Market Shifts
From a business perspective, Smart Communications was proud to achieve growth in both the CCM and forms automation markets, adding over 50 new customers in 2023. With SmartCOMM™, SmartIQ™, and SmartDX™ offerings leading their SaaS market segments, it’s no surprise Smart Communications appears on the top 100 list of IDC FinTech rankings for 2023. Smart Communications clients have been expanding by supporting their customers and employees with new use cases for Retail Banking, Commercial Banking, Lending, Credit Servicing, Wealth Management, Capital Markets, and Investment Banking.
I met several key clients face to face in my first quarter with Smart Communications, including DLL, The Bancorp, and the bank featured in our Total Economic Impact report from Forrester. I presented on the challenges faced by wealth managers who cannot meet the needs of multi-generational clients with their legacy technology at the Wealth Transformation Summit in London.
What Does This Mean for Customer Communications in Financial Institutions?
With 2023 behind us, let’s see what the experts think about 2024. According to Wayne Duggan and Michael Adams of Forbes, “the bond market is pricing in a nearly 80% chance the [Federal Open Market Committee] FOMC will pivot from rate hikes to rate cuts by May 2024.” An interesting Nasdaq article cites sources with similar predictions of decreasing interest rates with different impacts, but generally agreeing on direction and timing.
One thing is certain: digitally transformed organizations will be able to provide exceptional service when their front and back-office activities are ready for whatever the market brings in 2024.
Rate Decreases Require Front Office Optimization
If interest rates decrease by enough, consumers may want to refinance mortgages from the past few years, buy new items, or finance more durable goods. This will increase demand and require that your CCM and forms automation technology are ready for a spike in demand in front-office activities like loan applications without manual intervention, duplicated work, or expensive third-party integrations.
Rate Increases Create Back Office Problems
If rates increase, your most expensive transactions become more frequent as heavily regulated (Consumer Duty in the UK, ECOA Regulation B in the US, or others) transactions for loan modifications, rejections, and other extraordinary transactions become frequent enough to drive you to create efficiencies. Using forms automation technology like SmartIQ puts you in a position to turn complex processes into digitally transformed interactions that save time, reduce expenses, and retain customer relationships.
How Will Rate Changes Impact Your Organization?
The future is coming faster than you expect. The time to comply with regulations is compressing. Competitive pressure from banks, neobanks, and other differentiated offerings is intensifying. You’ll have less time than ever to respond to market pressure. If you’re not already using cloud-native technology, you’re already at a disadvantage regarding deployment times. On-prem and hybrid cloud offerings have set-up and provisioning burdens that may take six months, which is longer than your time to comply with some new regulations.
Looking For More Resources?
To get ahead, it’s important to listen to your customers. Smart Communications has been listening to your customers for you. Check out our latest Industry Benchmark Report that shows how your customers (and employees) feel about the communications your organization provides.
Whether rates go up or down, whether the market is for bears or bulls, whether unemployment rises or falls; We are here to help you digitally transform to meet the needs of your customers, prospects, and even regulators in 2024 and beyond.
About the Author
Scott Draeger is the SVP of Product Marketing and Vertical Solutions at Smart Communications. With a passion for collaboration, he focuses on how communications can be better for the recipient and perform better for the business. He started as a document designer using a collection of hardware and software technologies, before moving to the software side of the industry. His broad experience includes helping organizations improve heavily regulated customer communications all around the world.