Anand Subbaraman, General Manager, Retail Banking at Finastra, reflects on five key trends in banking he believes will be crucial in 2020 and beyond.
1. Fintech partnerships will become the norm
Banks face a choice as we enter the 2020s. They can either innovate and restructure business models, providing new services and products to improve their value chain or become commodity players, specialising in a particular area.
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Partnering with fintechs will be key going forward. The industry experience and trustworthiness of traditional banks combined with the agility and innovation of fintechs will allow banks to create more compelling customer experiences and remain relevant in the coming years.
2. Data intelligence will drive competitive advantage
Data intelligence will be a key competitive differentiator. This is evident not just in banking, but across other industries. For example, the recent acquisition of Fitbit by Google has given the tech-giant access to a huge source of anonymised health data.
Similarly, banks hold a wealth of customer financial data. The challenge is how best to use it effectively. While agile challenger banks and fintechs are already experimenting here, traditional banks remain behind the curve. Data intelligence will be a key focus as they aim to personalise their services and become more embedded in customers’ lives.
3. RegTech will take centre stage
The way large banks handle regulatory compliance is overly complex and costly. Many are hamstrung by legacy systems. In 2020 I expect to see a drive to deliver efficiencies in this area. Challenger banks are already partnering with cloud-based technology providers to handle KYC, customer verification and other regulatory requirements.
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By GlobalDataThis approach is critical in keeping costs low. Incumbents need to transform and simplify the myriad of systems they have in place to perform tasks like customer verification, and to agree on common standards. Only then can they can embrace RegTech and benefit from the associated efficiency savings.
4. Consolidation among challenger banks
It’s not sustainable for challenger banks to continue losing money in the pursuit of customer acquisition. The race is on. Incumbent banks are playing catch-up as they launch new digital services, while challenger banks will be looking to sell higher-margin loan or insurance products. Not all challenger banks will survive a downturn. I expect consolidation in the form of mergers and acquisitions over the coming year.
5. Use of hyper-connected devices will continue to grow
The uptake of smartphones, voice-activated assistants, Internet of Things and edge computing will continue to grow. BigTechs like Amazon and Google are working to roll out voice-activated devices across households as possible, making them a potential interface for all kinds of things in the future, including conversational banking. This may not yet happen in 2020, but phase one is just about getting users familiar with the technology and its capabilities.
