Pub. 9 2021 Issue 3

16 The Community Banker mibonline.org With the right tools, financial institutions can overcome new challenges. Financial institutions are facing margin pressure from continued low-interest rates, a decline in traditional fee income and increasing competition from new financial players. That has made diversifying revenue streams with noninterest-income sources even more important. In its 2021 Financial Institutions Finance and Technology Trends survey, Syntellis Performance Solutions found that more than half of respondents expected their financial institution's profitability to decline or remain flat in 2021. Banks are facing a variety of challenges that could be tempering expectations. Those challenges include: • Digital transformation — The COVID-19 pandemic shifted consumer expectations for purchasing methods and digital experiences, from food delivery to remote work. Consumers want the same personalized, convenient experience from their financial institutions. However, many banks aren't equipped with the data, analytics and artificial intelligence needed to deliver those experiences. • Interest rates — In 2020, financial institutions saw a dramatic plunge in interest rates, which affected loan yields and added significant margin pressure. Overall, U.S. bank profits fell 36.5% in 2020 compared to 2019. Revenue may not recover for two to four years, testing financial institutions' operational resilience. • Tightening regulations — Fee income was already in decline, but that dip has accelerated amid increasing regulatory scrutiny around penalty fees, including those for overdrafts. By Danny Baker, Vice President, Market Strategy, Fiserv and Brett Sturman, Senior Solutions Engineer, Syntellis Performance Solutions Finding Growth Opportunities in a Changing Landscape GUEST ARTICLE