Caught between demanding consumer expectations and the increasingly rapid pace of regulatory change, 2017 was a pivotal moment for the European retail banking industry.
Conservative and cautious by their very nature, retail banks have seen traditional processes challenged as regulators have sought to build greater stability into the sector, while offering consumers a fairer and more transparent deal.
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Alongside this, technology-enabled new entrants to the marketplace have continued to win over customers. With the introduction of regulations such as the General Data Protection Regulation (GDPR) and the Second Payments Services Directive (PSD2), 2018 will see both regulatory and technology factors change the world of banking faster than ever.
Against this backdrop of increased competition, technological transformation and regulatory scrutiny, the ability to manage risk whilst increasing sales will become even more critical. With that in mind, here are my predictions for 2018:
- PSD2 will create a more intense landscape to own the customer, with user experience playing a pivotal role in customer acquisition and retention. According to EY’s 2017 fintech Adoption Index, 42% of UK consumers have adopted fintech services, and 4/5 of the reasons why UK customers would use a non-bank provider relate to improved UX. As customers demand a faster, more accessible and seamless experience, processes that involve slow, manual elements will become unacceptable, and banks will have to catch up;
- As non-sector-specific technologies such as basic eSignature become increasingly widespread, they may be tested more frequently in court. Indeed, 2018 could see an increase in disputes that challenge the enforceability of electronically created agreements. Financial services firms need to ensure that their processes are fair and compliant and create agreements that are enforceable in court, not just legal in principle;
- More than ever, retail banks will need to develop technology solutions that drive down operating costs and improve the customer experience. However, this must be matched with managing risk. As the Bank for International Settlements pointed out in a paper from its Basel Committee on Banking Supervision: “such a balanced approach would promote the safety and soundness of banks, financial stability, consumer protection and compliance… without unnecessarily hampering beneficial innovations in financial services.”
Banks that manage to develop a deeply digital end-to-end business, while meeting regulatory requirements and mitigating legal, compliance, fraud and enforceability risks will gain a competitive advantage.
The banking sector will, like other industries, be required to do more with less. Continued competition from new providers not burdened with legacy IT systems will put serious pressure on banks to attract and retain customers.
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By GlobalDataBanks will need to adopt technology solutions that enable them to reduce operating costs, drive down the cost of sale, maximise revenue, and keep their customers happy.
Abe Smith, Founder and CEO at Dealflo
