By Martijn Hohmann, CEO, Five Degrees
The rise of cognitive computing
According to forecasters at Gartner, the majority of traditional banks will be made irrelevant by 2030 due to changing customer behaviours and advancements in technology.
Banks will continue to adapt to customer changing needs in 2019 to ensure their survivalin the digital economy. They will do so by deploying cognitive computing technologies to better understand customer preferences, provisioning for the right mix of branches and digital offerings.
Through using cognitive computing systems, including real-time insights and information processing, banks can seize an opportunity that will grow revenues up to 30 percent by 2022.
Advancements in mobile banking and payments
Another trend that will dominate 2019 is advancements in mobile and real-time payments. These technologies will create an ‘Internet of Payments’ in the banking and finance market, from cross-border banking and eWallets, to the use of Blockchain and virtual currency.
Research by industry analyst CACI predicts that 35 million people globally will be using mobile banking as their preferred choice of platform by 2023. Banks will respond to this trend by deploying a mobile-first strategy when selling their products and services.
At the same time, we saw one of the first tangible banking use cases of Blockchain earlier in 2018, involving a cross-border funds transfer between Krungsri: Thailand’s fifth largest bank and Standard Chartered in Singapore facilitated by a Krungsri’s Blockchain Ledger. We’ll see banks harnessing the power of Blockchain in 2019 as it becomes another form of payment solution used on a regular basis.
Adoption of cloud and Quantum Computing
In recent years there has been resistance to cloud computing by traditional banks and financial institutions. However, with the need to become fully digitalised, secure, and regulatory compliant, we will see an uptake of cloud based solutions making it easier for banks to have access and visibility to all customer and business data on a single application.
A recent report by Accenture (2018), entitled ‘Cloud and Clear,’ shows that financial institutions understand the importance of building IT architecture on cloud platforms. However, banks lack a comprehensive cloud strategy that will enable the rapid migration to the cloud. In 2019, we’ll see banks begin to work more closely with technology specialists, to create and deploy an IT architecture that will provide consistency and efficiency to banking operations in a digital age.
We will also observe further testing and use cases of Quantum Computing technology, enabling financial institutions and corporations to deliver their products and services at greater speed to their customers. We’ve already witnessed experimentation by Barclays and JP Morgon Chase with IBM’s quantum technology. More banks will follow suit as they realise the potential of emerging technologies to transform operations and drive efficiencies.
Intensification of regulation
Regulation will be a theme which continues to take centre stage in the banking and financial community. With the introduction of GDPR and PSD2 earlier in 2018, banks will be required to be regulatory compliant.
Navigating regulatory challenges requires a robust strategy, operational and infrastructure change, a clear focus on assessing and managing risks, and meticulous execution.
For banks to stay compliant, they will embrace digital transformation across their entire business through the opening up of their APIs to third parties. This will provide an overview of all the customer data that they store, to manage and report it effectively.
At the same time, banks must train staff appropriately to handle data access requests. All new and existing staff will receive data protection and training as part of their induction, reinforced with written procedures to demonstrate that policies are in place.
For banks to ensure compliancy and avoid heavy fines, they should be ready and tested by no later than March 2019.
2019 will see the rise of smart collaboration: the increase in partnerships between FinTechs and corporates. 8 in 10 (82 per cent) of incumbents are expected to increase FinTech partnerships in the next three to five years, with a greater investment by corporates in FinTech collaborations rather than buying products. Indeed, smart collaboration is expected to impact up to 80 per cent of existing banking revenue pools by 2020.
At the same time, over the last year we saw severe disruption to the customer experience of leading traditional banks caused by outdated legacy IT systems. As a way of overcoming these problems, we’ll see banks form greater collaborations with FinTechs and third parties to deliver a consistent, seamless experience for end-users, and to provision for a wider array of services.
‘Open Banking:’ the opening up of financial institutions’ APIs, will reshape the future of the financial services market. We’ll see multiple partnerships between banks, fintech companies, and other professional service providers, such as accountants and lawyers – all operating in an ecosystem via interconnected APIs. The provision of services via ‘Open Banking’ in 2019 will become the norm, making it possible to integrate mobile wallets, blockchain, video chat, and data analytics with existing offerings viewable across one complete interface.