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The 2020 Outlook for Financial Services

By Rene Hendrikse, EMEA MD, Mitek

The world of financial services has changed immensely over the last decade. With the after-effects of the financial crisis coupled with the rise of technological innovation, we have witnessed enhanced regulatory pressure including AML4/5, PSD2, to neobanks disrupting the financial market. 

As we enter the new decade, the need for security, safety, and trust in online transactions is greater than ever before. 94% of consumers want 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 throughout the next decade. Here are some of the reasons why. 

  • Taking 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 20251. 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 being used in airports and using mobile identity verification to open bank accounts on our mobiles devices is becoming commonplace. 

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”. 

  • 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, we’ll expect to see this growth in their banking landscape too. 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. 

  • Enabling mass personalisation of banking

Across Europe, we are likely to see record numbers of bank branch closures as demand for mobile-only services increases and transactions shift online. 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. 

Challenger banks 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 to WhatsApp services that enable customers to bank like they’re talking to friends – 2020 is the year that personalised digital banking becomes the norm. 

  • Making 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. 

In 2020, failure will no longer be an option. We will see all the banks, financial services providers, retailers, and payments companies gearing up their strategy and their regtech investments to ensure that SCA becomes a reality. 

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”.

Author

  • Editorial Director of the The Fintech Times

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