What does 2020 have in store for banks?
Laura Crozier, senior director of industry solutions and financial services at Software AG | 12:00 Monday 23rd December 2019 | 2
With 2020 just around the corner, I decided to explore the role of integration and automation projects, the drive to the cloud, smart banks and commercial risk prevention.
1) Clouds on the horizon and lipstick on a pig
Banks have always over-hired and then overfired as the economy rolls through its cycles. Again, today we read of layoffs taking place in all corners of the world — but this time it will be different. The majority of the positions that are being cut will not come back.
A potent combination of flattening yield curves and negative interest rates, trade wars, the election year in the US, Brexit and fear of economic slowdown, will propel integration and automation projects across the mid- and back-office to reduce costs and increase accuracy permanently. Companies of all sizes have come to the realisation that a good customer experience needs end-to-end digitalisation, otherwise it’s just “lipstick on a pig.”
2) Be afraid, be very afraid
Banks will accelerate moving to the cloud and taking on value-add partnerships in response to the Asian titans Alibaba and Tencent. The world’s largest retailer Alibaba owns Ant Financial and Alipay, while gaming company Tencent owns WeChat. They are leading the world in financial services and payments products and have discovered the secret sauce for creating value out of data: cloud for scalability and AI for perishable insights.
Separately, neither big tech nor banks have this capability. But together, they do — and the west is taking note. Witness the recent announcement of the Citi and Google partnership. And Facebook’s faceplant with virtual currency Libra, saw big tech get a painful lesson in jumping through banking regulatory hoops.
3) Your bank account will have a brain
With the firehose speed of 5G data transmission, and the ever increasing sophistication and effectiveness of AI, banks will cease to interact with their retail or commercial clients in a reactive fashion. By analysing cash flows, behaviours and trends, banks will step forward as partners in financial management. They will proactively assess if, for example, your utility bill that will be automatically paid is appropriate given your historical consumption and the weather patterns, and either pay it or flag it accordingly. For commercial clients, banks will proactively offer up credit lines given an analysis of their working capital history versus current requirements.
Banks will also have to sacrifice overdraft fees (forfeiting around $2bn in annual revenue globally) because it will promote stickiness, and because technology will never allow overdrafts to happen.
4) Better to prevent an accident than pay for one
Rather than shell out for risk events after the fact, insurers will double down as partners in risk prevention and control, particularly with business clients. Commercial customers are much more willing than retail clients to share data, knowing that it can help improve risk control and prevention.
For instance, while an individual might be reluctant to use a wearable to share biometric information with a health insurer, companies will have less qualms insisting that their fishery, construction or steel workers wear wearables to prevent injuries in high-risk situations.
SIGN UP TO OUR NEWSLETTER TO RECEIVE MORE NEWS LIKE THIS STORY
Rigour builds resilience
There is a relentless flow of new technologies and development methodologies unfolding on many fronts in the financial services arena...
Enhancing offerings to SMEs with the use of technology
Small- and medium-sized enterprises (SMEs) make up a significant proportion of British businesses...
New digital bank Vive receives banking licence
New digital bank Vive has received its UK banking licence with restrictions from the Bank of England...
Aldermore names Damian Thompson as new group MD for retail finance
Aldermore has named Damian Thompson (pictured above) as its new group managing director for retail finance, subject to regulatory approval...
Tink closes €90m investment round
Tink has completed a €90m (approximately £76.8m) investment round — its largest funding to date — to support its European expansion...
Step back from the hype: what can AI realistically deliver in 2020?
While talk of artificial intelligence (AI) in financial services generates great excitement, it’s important not to get too carried away and caught up in overly ambitious uses of the technology...
Temenos launches microservices architecture tool for large banks
Banking software company Temenos has launched Temenos Transact — a microservices-based architecture tool designed for large banks...
Starling Bank enhances product offering for SMEs
Starling Bank has enhanced its product offering for businesses and sole traders with a range of new features...
2020 vision: Open Banking is open for business
Last year was a major one for Open Banking. September’s PSD2 deadline encouraged banks to accelerate their efforts to become compliant, and while the nuts and bolts of the technology did pose a challenge, the opportunity for both banks and third-party providers (TPPs) has finally come to light...
FCA calls for easy access cash savings reform
The FCA has proposed to reform the easy access cash savings market...
HTB launches new 30-year, interest-only loans
Hampshire Trust Bank (HTB) specialist mortgages division has launched 30-year, interest-only loans...