Key 2019 Transformation Trends in Financial Services and Payments
With the rise of Apple Pay, competitor banks like Monzo and the unbundling of financial services, digital transformation is revolutionising the sector with many traditional FS companies franticly trying to keep up.
There is little sign today that this disruption is slowing – and rising consumer expectations increasingly make innovation a necessity for incumbents. An Econsultancy/Adobe poll found 28% of industry leaders identified optimising the customer experience as the single most exciting opportunity available (compared to 18% across all other fields).
“We’re no longer just competing with other financial firms for consumers’ attention and loyalty,” Tobin McDaniel, senior vice president of digital advice and innovation for Charles Schwab, told BizTech. “We’re competing with anyone who’s offering a positive experience, including consumer and technology brands.”
Below are some of the key trends driving change in 2019 and what they mean for the industry.
Automation is driving improved customer experience
The financial services sector has led the way for AI and presents opportunities for automation at almost every level (from synchronising records and triggering actions through to applying pattern-recognition in fraud detection). One of the most impressive applications from the consumer perspective, though, is the automation of wealth management.
Digital financial advisors can recommend investments, provide market forecasts and identify the best bank accounts and loan offers available – all at a fraction of the cost of traditional providers. The new Open Banking regulations provide rocket fuel for these systems by making users’ data both accessible and portable. Looking ahead, these platforms are predicted to have an impressive $2.5tr assets under management by 2023 – with annual growth rates in the double-digits.
While traditional wealth managers will likely integrate this technology into their operations, it will almost inevitably reduce staffing requirements in the field – with a parallel, but not equivalent, increase in demand for technical workers and AI specialists. At the same time, these services will drive increasing demand across FS for smarter interfaces that provide recommendations and proactively drive users to the best offers available.
Digital security continues to be paramount
Change can be frightening – and that’s particularly true in a heavily regulated field like FS, where breaches can have huge real-world consequences (and even more so now with the new GDPR stipulations).
Sylvia Jensen, VP EMEA Marketing of Acquia notes the catastrophic impact that such events can have on an institution’s reputation. “While consumers tend to be apathetic and won’t switch banks because of a single technological issue (no matter how big), the reputational damage alone may cost banks innumerable new customers in the future,” she writes in Digital Doughnut.
And the stakes at risk are potentially huge. The Bangladesh Bank robbery, for example, saw $101m successfully being stolen from the Federal Reserve Bank of New York – with the hackers attempting to make off with an additional $900m.
IT failures can be just as costly as theft, however. TSB’s 2018 IT meltdown, for example, cost a reported £300m – and, as of February 2019, the bank still had 23,000 open customer complaints stemming from the crisis (around 11% of the 204,000 issued).
Given this, security staffing is a critical priority for DevOps – as is having digital transformation managers who can ensure that systems are robust and that migrations can occur without failures.
“Cybersecurity training will continue to mature and certificates alone will no longer be enough to take the next step in a security professional’s career,” noted J.M. Porup in IDG’s CSO Online – pointing to demand for individuals with master’s degrees in cybersecurity.
Disruptors are accelerating FS change
Faced with a changing financial marketplace, FS incumbents are increasingly embracing change today. Getting ahead of disruption, RBS is launching a mobile bank (aiming to take on 1 million Natwest customers), while HSBC is planning its own digital-only startup.
At the same time more traditional institutions and fintech startups are working together, combining existing market share and regulatory knowhow with innovative technology and new consumer offerings. This is particularly true in relatively behind-the-curve fields like insurance.
Disruption doesn’t have to be a zero-sum game but can instead be a challenge for biz dev, embracing innovation and making use of new capabilities across the company’s offerings. This significantly expands the potential of innovators to bring products and services to market that deliver significant value but might be of limited interest to consumers.
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