UK Banking & Finance: Embracing Evolution and Transformation

Recent years have seen the steady rise of FinTechs, digital start-ups and major tech players disrupt the banking industry. Indeed, an Accenture study reported that FinTechs account for 33% of global financial services revenue. While non-traditional companies are driving innovation, what does the future hold for banking?

The need for evolution, and transformation, is clear. Deloitte report a good phase for banking; “economic fundamentals are strong, the regulatory climate is favourable, and innovative technologies are more readily accessible, powerful, and economical than ever before”. Of course in the UK, Brexit is still an unknown factor. But banks have prepared for worst-case ‘no-deal’ scenarios, and now it is a waiting game. 

Key banking trends

As a result of market disruption, the banking industry is adopting characteristics similar to the disruptors themselves. They are embracing the customer journey, digital and mobile processes, and the use of data and analytics. Innovation, at a faster pace, is essential to survive.

Despite ongoing economic uncertainty, regulation is encouraging new technologies and opportunities. Banking organisations understand the importance of improving customer experiences, and what’s more, how to achieve it. Competitive pressures are driving transformation like never before. 

The 2019 Retail Banking Trends Report identified these top three trends and predictions:

    >>   Intelligent data integration through the use of AI and advanced analytics (54%)

    >>    Customer-centric perspective and streamlining of the customer journey (50%)

    >>    Use of APIs for the transformation to an open banking platform (37%)

These complement the top three 2018 trends, which centred on simplifying the customer journey, improving data analytics and insights, and improving integration of delivery channels. 

As more of us complete transactions on digital platforms, more data is available to provide customer insight. The traditional reality, of siloed data streams for transactions, savings and loans, does not work. A complete customer view, enabling evolution and agility is called for.

The emergence of data insight and analytics is clearly the most important trend in the industry. It is a consistent and persistent trend; acting as a foundation for market-wide innovation.

Open banking, costs and revenue

Banks are evolving in order to deliver on their customer-centric ambitions. In particular, the emergence of open banking enables new thinking about costs and revenue.

For example, open banking technologies like AI can help to reduce costs by 30-40% (McKinsey). Effective for low-return activities, this will change strategies for customer-facing and back office tasks.

Investment banking is another area that can utilise AI. Traditionally a face-to-face process built on relationships, artificial intelligence (AI) is starting to break through. ‘Robo-advisors’ use predicative analytics to help customers to make wiser and more profitable decisions. AI can also use analytics to help confirm an investment banker’s theory, leading to more informed judgments.

For forward-thinking organisations, the opportunities of open banking and APIs will unlock additional revenue streams.

Strategic priorities

The combination of technology and consumer expectations is crucial to identifying strategic priorities. The top strategic priorities of Financial Services Leaders complement the wider trends, as you may expect;

  •         >>    Improve digital experience for consumers (84%)
  •         >>    Enhance data analytics capabilities (42%)
  •         >>    Reduce operating costs (32%)

This represents a significant increase to improving the customer experience. Yet regarding data analytics, the figure decreased from the previous year. This is at odds with the key trends, unless the industry feels that it is making incremental progress.

Reducing operating costs remains a key priority, at the same figure for 2018 and 2019. To achieve this, further transformation initiatives are needed. Applying transformative approaches across operating areas will enable banks to maximise efficiency and reduce costs.

To compete in today’s disrupted market, banks need to invest. As we have seen, technology, automation and data processes are essential, as well as optimising legacy systems. This puts operating budgets under pressure and creates an appetite for smarter spending.

How we can help

The rise of digital disruptors, technology and data analytics are bringing fundamental changes to the sector. Customers are seeking a better experience, with streamlined, multi-channel efficiency.

Against a backdrop of innovation and transformation, smarter working is in demand. Working strategically in a ‘business partner’ relationship can deliver savings across your business; including improved processes and efficient supply chains.

Find out more: to discuss your business needs, contact us today.

References

https://fintechnews.ch/fintech/fintech-disruption-banks-at-risk/23072/

https://www2.deloitte.com/uk/en/pages/financial-services/articles/banking-industry-outlook.html

https://biztechmagazine.com/article/2019/06/top-5-retail-banking-technology-trends-2019-so-far-perfcon

https://www.businessinsider.com/banking-industry-trends?r=US&IR=T​

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