The times, they’re a changin’! That the banking industry is going through an enormous technological and behavioural shift is a fact well established. Never before has the banking and financial services industry found itself at the epicentre of the digital era.
As we move towards increasingly automated, innovation driven and channel agnostic banking, what are going to be the big imperatives for banks? How big a role are macroeconomic factors like Brexit going to play in defining banks’ strategies? And will banks collaborate or compete with fintech players? Find out the answers in my five-point list.
- Return on equity (ROE): With the upward movement of interest rates in the US, one could expect the momentum across US, Canada and UK. When it comes to European banks, they are in a structural straddle, so they need more than a positive movement of interest rates. I expect European banks to be more moderate in this regard.
- Spend more to cut more: What this means essentially, is that the need to take out operating expenses (opex) costs is bringing the capital expenditure (capex) investments back with a vengeance. For the first time since 2008, banks are open to look at investments over a three-to-five-year period. This will translate into more cloud adoption, application consolidation and rationalization, infrastructure simplifications and not to forget the most important robotics process automation (RPA).
- Fintech and beyond (FAB) – go fab!: This is my personal favourite as banks globally are striving to take the best of what fintechs have to offer. Be it digital experiences, security or new products and services, FAB is all over the place. I expect a few unicorns this year and I also expect a few utilities to come out of FAB.
- Employees and social ecosystem: Though many would expect this somewhere in the middle of the pack, I feel it’s about time the industry looks again at its employees and the ecosystem they operate in. While new experiences like selling through Facebook and Instagram are in their infancy, it would be naïve to not expect more. On these platforms, interactions take another dimension, as every employee becomes both the brand ambassador and a risk manager. I think this area will become very interesting in the next few years, especially in the context of FAB.
- Markets, Markets, Markets!: In a post-Brexit and post-Trump era, this point is going to be dominating this list for a few quarters. Be it passport rules, entering new markets and associated tax impacts, all these will change the way banks deal with compliance issues. According to me, this asks for another look at the way banks have been working on their home/host market strategies. This is a good time to redraw a three-to-five-year plan based on geopolitical as well as market conditions.
When it comes to the relationship between Europe and Britain – uniformity isn’t a word that currently springs to mind. And that’s not just a reference to Brexit. Whilst the Europe and Britain do find themselves in the midst of a political break-up – their monetary policies are also showing signs of divergence.
Europe’s introduction of the General Data Protection Regulation (GDPR) next May will have implications for businesses around the world and US corporates should start getting ready if they haven’t already done so.
The recent NotPetya cyberattack underlined the need for organisations to address their exposure and how to mitigate the risk.
For companies to survive the intense competition, the only way is to make better use of information gathered from the business process.