January 23, 2024 — U.S. commercial banks in 2024 will look to a combination of shifting interest rates, emerging technologies and mergers & acquisitions to boost profitability and fend off competition from private lenders and fintech alternatives.
Sparks of optimism regarding a ‘soft landing’ for the economy may brighten the outlook for the U.S. banking sector in 2024. However, even if the U.S. economy avoids recession and reverts to a more favorable environment for business, commercial banks will still face a host of challenges, including a continued battle for corporate deposits, growing balance sheet pressure on smaller banks, and the rapid expansion of non-bank lenders.
“In 2024, smaller banks will be challenged to keep up with larger peers as providers of all sizes devote increasing resources to serving relationships and sustaining deposit growth,” says Chris McDonnell, Head of Community, Commercial and Digital Banking Analytics at Coalition Greenwich.
In a report released today, U.S. Commercial Banking: Top 5 Trends for 2024, Coalition Greenwich identifies the trends to watch in commercial banking amid a shifting economic environment, including:
- The Battle for Deposit Growth Enters its Next Phase: In 2024, U.S. companies will continue shifting their deposit balances across banks, fueling continued competition among providers. Smaller providers will be challenged to keep up with larger peers as banks of all sizes devote increasing resources to serving relationships and sustaining deposit growth.
- Bank Consolidation: Short-Term Pain for Long-Term Gain: A wave of bank consolidation and rising tech costs are intensifying balance-sheet pressure on community and regional banks. Banks that are able to effectively arm talented RMs with technology tools to mitigate the negative impact of integration friction will preserve client trust and satisfaction, minimize attrition and potentially win over dissatisfied clients from rivals.
- New Banking Coverage Models Take Shape: Banks are working to pair new AI-driven portfolio and client-management tools with traditional relationship management skills in what amounts to a new breed of coverage models. Over the next 12 months, banks able to execute on that combination will begin to radically enhance existing capabilities. But it’s not enough for banks to roll out new digital functionality. In the coming months, the providers that benefit most from innovation will be those that commit the human resources needed to market the value of new digital offerings to clients and prospects, and to walk clients through the process of adopting and implementing these powerful but complex tools.
Among the additional trends covered in U.S. Commercial Banking: Top 5 Trends for 2024 are lenders reaction to declining rates and digital solutions target traditional service “pain points.”