So many trends, so little time.
It’s that time of the year again, folks! Everyone’s busy placing their bets on what the future holds for the financial services industry so let’s dive in! Read on for the top trends, technologies and tactics that will shape the industry in 2020 – and beyond.
1. “The future of banking is open”
This is how PwC has summed up the findings of a recent survey on how key players of the financial services ecosystem are responding to the idea of open banking. Here are some other noteworthy conclusions: the new banking paradigm will be embraced by 64% of adults and 71% of SMEs by 2022, creating revenue opportunities to the tune of £7 billion. As far as bright futures go, early adopters of the technology have it in the bag. Once they’ve figured out how to make the most of APIs, that is.
Or which API to make the most of, for that matter. “Expect to see a plethora of new tools emerge – solutions like personal financial management platforms that aggregate spend data across users’ various banks, loyalty programs and payment platforms in order to provide insightful investment and financial advice,” KPMG predicts. For pointers, look no further than the new kids on the block. “Fintech collaboration can play a key role in inspiring what’s possible and fueling efficiency, speed and value. It’s a win-win proposition in which each party focuses on what they do best,” Accenture’s Conrad Sheehan writes.
Which brings us to:
2. Teaming up with the competition
You know you work in a fast-paced industry when disruptors are getting disrupted. This is exactly what’s happening in banking these days. “Challenger banks such as Monzo and Starling, as well as Revolut and N26, are already seen by smaller rivals as incumbents that are too big to please every customer – which is why there’s a second wave of challenger banks with niche specialisms, such as sole traders, starting your own business, fixed savers accounts, and so on,” Wired reports.
How on earth will incumbent banks ever be able to compete with that? You might wonder. Well, why not team up to keep up? “The logic behind partnerships is simple,” CNBC explains: fintechs offer incumbents a shortcut to unlocking the technical capability of technology companies without pouring endless resources into building their own. JP Morgan Chase alone has partnered with online lender OnDeck to extend quick loans to small businesses, collaborated with Roostify to create a digital self-service mortgage platform and joined forces with TrueCar to roll out digital car-buying and financing services. Go figure.
3. This is getting personal
Banks have been sort of using segmentation and other data-based sorcery for a while, granted. But with lingo such as “bank of one”, “hyper-personalisation” and “segment-of-one” being casually thrown around these days, “sort of” won’t cut it anymore. Case in point: 62% of Americans would be happy to ditch traditional banks for big tech, Bain’s newly published annual retail banking report says, should Amazon, Facebook or Google wade into the realm of financial services.
Which, as we all know, they’re actively doing. Google has just signed a deal with Citigroup and Stanford Federal Credit Union to roll out smart current accounts. The news broke just months after Apple had launched its Apply Pay-integrated credit card with Goldman Sachs and Mastercard.
“We’re past the stage of wondering whether or not tech giants will move into financial services. The question is rather who will do it best. And of course, what all this will mean for traditional banks”
– József Nyíri, W.UP’s vice president of business development
4. Putting financial health first
Over the past 70 years, the basis of competition between banks has shifted from location (who has the best or most branch locations) to price (who has the best rates and fees) and then to convenience (who makes banking the easiest), Cornerstone Advisors’ Ron Shevlin has recently explained on Forbes.com. Then added: “The new basis will be financial health – who best helps consumers improve their financial health (or performance).”
Talk about a safe bet. Sixty-one percent of Europeans worry about not having enough money for retirement and nearly 30% of European and US households have no savings at all. Which might have something to do with the fact that 1 in 5 American adults spend more time planning their holidays than managing their finances. Nyíri reckons: “Money management and financial insights might just be what makes or breaks banking experience for customers in the (very near) future, such as helping them spot savings opportunities, set up and achieve smart saving goals or make the right choices when it comes to investments.”