Lingering inflation, higher-than-desired interest rates and an upcoming election are just a few issues influencing the willingness of consumers to borrow money. On the other side of the coin, bankers are combatting epic proportions of fraud and navigating a commercial lending market that has been shaped by the pandemic.
Mark Vance, regional president and senior vice president at Carrollton Bank, 2135 Wabash Ave., said, “Clearly the most impactful trend in the banking industry in 2024 is unfortunately – fraud. Banks have always had some level of fraud to keep abreast of but it’s escalated significantly this year; it has been the worst I’ve seen it.”
Steve Keenan, senior vice president and Illinois market president for INB, 322 E. Capitol Ave., agreed with Vance that fraud is definitely ramping up.
While there are many types of fraud, the fraud Vance is speaking of is how people are finding ways to steal from others. He said, “It used to be a thing we talked about, but now it’s going to happen to you, it’s just a matter of when.”
Sadly, Keenan said so often it’s seniors who fall prey to fraud, especially email scams because the emails look like authentic bank communication. In actuality, both the consumer and the banker have to be on high alert. Vance said email hackers can identify a pattern of behavior between a person and their bank, and eventually the hacker emails the bank posing as the customer and requests money to be wired to the hacker’s account.
Keenan said, “It used to be that we could trust an email from a customer directing us to make a transaction, but now we must verbally verify with the customer that they are initiating the transaction.Â
Although banking institutions have guardrails, Vance said consumers should not rely 100% on their bank to look out for them. Each person needs to pay attention to their accounts and make sure all account activity is theirs.
Keenan said INB has enhanced its IT department to monitor for certain aspects of fraud. However, both veteran bankers recommend consumers look at their accounts frequently, because you have to act quickly if you find you’ve been a victim of fraud. Balancing your checkbook may be unfamiliar to some, but Vance said it is a good way to monitor your account.
Vance described the frequency of fraud as “insane” and noted that it affects businesses more often than individuals due to the amount of checks they write. Perpetrators are intercepting mail and stealing entire mail boxes looking for checks. Checks are white-washed or recreated and the payee name is changed so the perpetrator can cash the check.
Vance said, “It takes someone at the business to look at every check that clears to make sure it’s correct. We see this at least once a week, but it’s not just us, it’s every bank in the country.”
In terms of lending, Vance said banks are still comfortable making loans, but there are challenges for consumers and businesses.
“Home lending gets harder every year because of regulations,” he said. “It has become more onerous – although it is to protect consumers, it’s difficult. Commercial lending is still good, but inflation is hurting businesses.”
Keenan added, “Commercial lending is trending on a slower pace than in the last four years due to banks having lent out much of their cash since COVID-19. Rates were low post-pandemic, and suddenly in 2023 rates go up by double within the year, and that slowed things down. This year has been more of a holding pattern as people wait and see for rates to go down.”
Vance said, “Interest rates have come down slightly, but consumers are waiting for them to come down more. With some of the workforce working from home, office buildings have become a bad word, and there’s uncertainty with the upcoming election.”
He believes commercial lending – with the exception of the office sector – will remain strong, especially once the interest rates come down. “We believe that rates will probably come down another quarter point by the end of 2025,” Vance said.
“It’s important to make sure customers know why interest is what it is,” said Keenan. “Banks lend off of deposits, and the more money you have the more you can lend out until a certain percentage. Then you have to borrow from the Federal Reserve, and that’s another reason activity has slowed down. Interest rates to the customer are around 7.5%, and that tightens margins for the banks, which have to have a certain amount of spread so employees are paid.”
He said that working the balance sheet of the bank – actively managing the bank’s assets and liabilities to optimize its financial health – is a trend that began in late 2023 and carried into 2024.
“We’re hoping to see a break in 2025, but it’s coming slower than predicted,” Keenan said. .
This article appears in November SBJ 2024.