Banking in 2020
By John William Gunn, executive chairman of SynerGIS | 14:58 Thursday 25th January 2018
Regarding technology, the old Bill Gates quote about overestimating its influence in the short term but underestimating in the long term holds true.
While we don't expect the recent Open Banking launch to change the specialist banking market environment overnight, we expect some traction in adoption by 2020.
As such, we believe the use of account information services (AIS) or payment initiation services (PIS) will likely become the new normal.
In terms of payment services, it will not be long before 'big-tech' companies such as Facebook and Amazon follow the lead of Tencent (WeChat), Alibaba (Alipay) and Baidu (Wallet) and offer payment service solutions for their users. The familiarity of these brands could help convince the general UK public to overcome any cynicism and embrace Open Banking.
Overcoming the data privacy and fraud concerns of the general public is why the industry's reaction to inevitable stories regarding attempted hacks of third-party-providers (TPPs) is important.
Increased public concern will undoubtedly hit any momentum that the Open Banking launch generates and debilitate fast-track changes in the specialist banking market.
The drive has been initiated by the Competition and Markets Authority (CMA) in response to their findings that large and established banks “do not have to compete hard enough” for customers, while effectively squeezing out new market entrants. We believe that the services that these new fintech entrants can provide can be beneficial to the consumer. Banks that use the right blend of internal and third-party products can create an optimal banking experience for their customers and, in that respect, maintain and intimate new customer loyalty.
Traditional banks will need to make a choice about whether they want to continue to offer their own limited range of products on a higher margin or relinquish the customer interface and host an app-style marketplace – such as Temenos MarketPlace – for TPPs which then clear through their bank accounts. Any resulting loss of margins may need to be funded by annual banking fees, which could be a difficult sell in the current market.
Several banks are already rising to the customer service challenge raised by market newcomers with their own apps – ING releasing Yolt, and HSBC releasing Beta – but other banks may simply purchase or consolidate with the best TPPs. Using the banks own app, in theory, reduces the risk of fraud.
The widespread adoption of robo-advice, powered by AI, is forecast to increase assets under management while it continues to take on the established practices of the wealth management industry. Robo-advice makes the construction and management of portfolios accessible to a wider range of people, at a lower cost.
The traditional mortgage application process will see gains in efficiency and a shortening of the cost and length of the underwriting process. Technology – enabled by Open Banking – to be incorporated into the mortgage-application process will use non-conventional variables, such as education data, big-data analytics, financial history and employment history to quickly review and approve loans.
This will replace the traditional requirement of three months of payslips, three months of statements to be scanned or emailed to the underwriter. We believe challenger and even traditional banks will use these data metrics by 2020 to offer better deals for retail and business customers who embrace Open Banking.
SIGN UP TO OUR NEWSLETTER TO RECEIVE MORE NEWS LIKE THIS STORY
British Business Bank UK Network aims to improve funding awareness across UK
The British Business Bank UK Network will help to improve awareness of funding options across the UK by directly approaching business finance professionals...
Building with confidence in challenging times
It is difficult to think of a time in the past three decades when the chasm between the interests of UK business and the Palace of Westminster has been more exposed than the Brexit debacle...
Real Property Finance passes £100m in deals with Cambridge & Counties Bank
Cambridge & Counties Bank has provided more than £100m of loans for the clients of Real Property Finance (RPF)...
Metro Bank reports 48% increase in lending
Metro Bank has reported that its lending increased by 48% in 2018 compared with 2017...
Metro Bank appoints Luke Lloyd-Davies to advisory board
Metro Bank has appointed Luke Lloyd-Davies to its advisory board...
OakNorth: how some of the entrepreneurs we’ve lent to first got started
For many, the new year brings with it new possibilities and the chance to explore new opportunities...
Hanley Economic BS to push self-build offering
Hanley Economic Building Society is set to commence an extensive 2019 self-build campaign as it aims to engage with growing numbers of self-builders...
NatWest offers Esme Loans directly to its SME customers
NatWest will now offer Esme Loans products directly to its existing SME customers...
OSB appoints new NED
OneSavings Bank has announced that it has appointed Sarah Hedger as a non-executive director, with effect from 1st February...
Tandem Bank reaches 500,000 customers
Tandem has announced that it has reached 500,000 customers one year on from being granted a full banking licence...
Bank Leumi UK appoints new head
Bank Leumi (UK) has appointed Sarah Ryman (pictured above) as its new head of premier banking and liabilities...