David Arnott, Chief Executive Officer
2018 will be the year of digitisation. We’ve only scratched the surface so far. This year the penny will drop that to get the full benefits of digital in terms of return on investment it means having a digital core. Banks already understand the potential and they will see the hard business case. It’s about getting the full picture of the customer to give them the best experience and being more effective and efficient. That means being digital front to back.
They’ll go one of two ways – core replacement or setting up a new challenger bank. Nordea has shown a big bank can successfully replace its core and Equitable Bank’s EQ Bank, Leumi’s Pepper and M-Shwari from Commercial Bank of Africa have all proved the new bank in bank challenger model. It works because it means banks can leverage the trust, customers and compliance knowledge they already have into a new vehicle and make it run really fast. It gives them a really strong digitally native business to compete with newcomers.
Once digital, banks will be able to fulfil their potential to become trusted advisors to their customers about their own products as well as third party partners. We will see ecosystems of referrals as banks monetize their data and match customers with the right products at the right time.
Max Chuard, Chief Financial Officer and Chief Operating Officer
The structural challenges facing banks are going to continue through out 2018. Even though interest rates are starting to rise and the Central Banks are easing off the quantitative easing, the benefits will be eroded by stronger competition. Banks pinning their hopes on the cyclical recovery lifting margins will be disappointed. If I were to identify one region that will have some respite it is the US. The big Trump tax cut will help banks and have second order effects on the economy as companies invest more, but the benefits will be short lived if the US banks don’t focus on the global structural trends. They still need to reform.
Carl Robertson, Chief Marketing Officer
Open banking is going to have a huge impact on marketing. There are lots of competitors waiting in the wings and banks are already shifting their focus to online and digital channels. It’s about offering what customers want when they want it in real time. This means lots of location based offers and personalization. Banks will start to understand how to monetize the contact they have with customers. The race is on.
This will lead to new partnerships and alliances. Digital banking and open banking are powerful forces and used well help banks hold on to and win customers. As the Payment Services Directive 2 opens up banking data to third parties, we’ll see a whole new eco system develop where banks offer third-party products and services, taking them into a new league. Europe’s PSD2 is the first; the rest of the world will follow.
Ben Robinson, Chief Strategy Officer
Fintechs will finally be recognized as delivering real value. We had the hype for a couple of years, then a bit of a reality check in 2017. Now we’re going to see fintech come into its own. I don’t think it’s about market share, it’s about cutting costs and improving customer experience. Think regtech, security, collaboration in digital engagement. Fintech has already made a huge difference in lowering fees to customers and improving banks’ efficiency and we’ll see much more of this.
I wouldn’t be surprised if we see a western bank close following a major security breach. The possibilities for hacking are growing all the time as open banking introduces more intermediaries into the value chain. Hackers are also getting more sophisticated and legacy IT systems have plenty of potential failure points. A big breach will shatter confidence to an unrecoverable extent forcing this bank to close and prompting all other banks to step up the cybersecurity spending. Trust remains banks’ biggest asset in the digital age.
Cryptocurrencies are here to stay, but 2018 will see a correction in the bitcoin price. I think in 2018 we’ll also see the launch a national cryptocurrency, offering all the advantages of a digital currency but with central bank backing. It will be interesting.
John Schlesinger, Chief Enterprise Architect
We’ll continue to see the adoption of cloud and artificial intelligence as part of banks’ strategy on compliance, fraud detection, regulation and improving customer experience. I also think intelligent agents will start to beat human advisors as they eliminate their well-known decision-making biases, reducing the need for human agents. And when it comes to virtual reality, I see augmented reality having more traction. It’s less creepy.
As payments go real time, banks will spend to eliminate bulk and invest in robotic process automation to go straight through. Open banking will also trigger investment in better security. Beyond settlement I don’t think we’ll see a breakout use for blockchain but as banks start to scale there will be a move to distributed databases for both distribution and manufacturing.
Dharmesh Mistry, Chief Digital Officer
The big themes for the next 12 months will be APIs and open banking. Open banking will drive external partnerships and APIs will be how third parties deliver services and products. The potential for growth coming from open banking is so huge that I think that we’ll see another region or country following Europe with PSD2 type legislation. This will push security up the agenda as banks open up their systems to third parties and scalability will also feature front of mind to accommodate this growth.
Chatbots won’t replace apps next year, but the market will move beyond the innovators to fast followers in terms of new bot launches and artificial intelligence will start to separate leaders from laggards through tangible returns. While voice banking remains experimental, we will also see innovators implement multi-modal UX for staff.