What Will 2020 Hold For Banking And Financial Services?
via Forbes
It’s fair to say that over the last decade, the world of financial services has changed irreversibly. The after-effects of the financial crisis combined with the rise of technological innovation has created a whole new world of banking and finance: from enhanced regulatory pressure, with the likes of AML4/5, PSD2 and GDPR making their entrance, to neobanks disrupting the financial market – and traditional banks transforming their models to play catch up – to the rise of cryptocurrencies powered by blockchain, and the arrival of AI and automation into everyday financial life.
So as we enter the new decade with most of our feet firmly in the ‘new’ world of banking, the need for security, safety, and trust in online transactions is greater than ever before. 94% of consumerswant to complete transactions online, and 85% want to do it via websites that verify the identity of all users. As such, securing identities will be the critical differentiator for financial institutions not just in 2020 but throughout the next decade. Here’s some of the reasons why.
1. Governments and big banks will take concrete steps towards digital identities
By 2020, half of the world’s population will be online – with the other half expected to be connected by 2025. As we move towards a fully digital future where every transaction happens online, we need to adopt solutions that will enable us to navigate the online world seamlessly. One such solution is owning a digital identity. We have already seen digital identity verification systems in airports, and using mobile identity verification to open bank accounts on our mobiles is a growing trend.
In 2020, we will see the UK government step their efforts up, and laggard financial institutions who have not yet made the move to digital will begin to adopt identity verification technologies. This will ensure that both government and the big banks are ready for the decade of digital identities. Getting ahead of the curve will be crucial, especially as some countries are already moving towards these solutions. Being behind the pack isn’t a good look – so we can expect to several of Europe’s big banks making the move towards digital identity technologies in 2020.
2. Neobanks will branch out to emerging markets
The rapid expansion of neobanks across Europe in recent years has revolutionised the traditional banking infrastructure and disrupted the whole financial services landscape. Research from AT Kearney found that by 2023, these banks could have up to 85 million customers, 20% of the European population over the age of 14.
As emerging markets like Latin America and the Middle East focus on technological innovation in industries like oil and energy, the growth of innovation will trickle down into their banking landscape. In 2020, we can expect to see the global expansion of several major neobanks in emerging markets, as customers all over the world move to a digital-first way of life that they want to see reflected in the way they bank.
This will be accompanied by the growth of digital identity verification technologies that keep customers and banks secure. Without this, the neobanks won’t be able to comply with any stringent new regulations we can expect to see, and customers won’t trust the challengers.
3. Record branch closures will enable mass personalisation of banking
In 2020, the death of the high street will move beyond retail and into the banking sector. Across Europe, we are likely to see record numbers of bank branch closures as demand for mobile-only services increases and transactions shift online. This means that traditional banks will ramp up the number and sophistication of mobile and online services they offer their customers, and invest in new and exciting ways for people to bank digitally. We are likely to see some banks stumble while others fly – it all depends on the extent to which they are willing to invest in new technologies.
In response to the big banks stepping up, challenger banks, free of legacy systems and traditional infrastructures, will launch bigger and better features, in response to customer demands for speed and simplicity. Both traditional and neobanks will ramp up their focus on personalised services – from advanced chatbots that can respond to more complex queries and send push notifications to remind you to pay bills, to WhatsApp services that enable customers to bank like they’re talking to friends – 2020 is the year that personalised digital banking will hit the mainstream. Ironically, this will be just as in-person banking reaches its final curtain.
4. 100% of banks will make strong customer authentication a reality
As far as European financial regulation is concerned, 2019 will be remembered for being the year that the latest iteration of PSD2 – strong customer authentication (SCA) – went into hibernation. After a year of maybes, the deadline was finally extended in summer, after too many organisations failed to get their ducks in a row in order to comply.
In 2020, failure will no longer be an option. We will see 100% of banks, financial services providers, retailers, online marketplaces, and payments companies gearing up their strategy and their regtech investments to ensure that SCA becomes a reality. No longer will our financial institutions be kids struggling to get their homework in on time – they’ll now have the luxury of time to invest in the technologies that will secure the future of payments and transactions online.
With all of the above set to take shape sooner rather than later, the financial services sector needs to step up their game. This includes ensuring that the right investments are made in technologies that will ensure security, whilst enabling regulatory compliance, and keeping a laser focus on the needs of digital-first customers. Balancing these needs will be what it takes to thrive in the 2020s.
