As banks and fintechs continue to converge, it’s critical to understand the top banking trends of 2019. Will collaboration continue as digital transformation becomes a top priority?
It’s an interesting time for the banking industry. While there is a certain degree of uncertainty in the financial markets and disruption continues to shake up the space, the regulatory climate is favorable and digital transformation technologies hold a lot of opportunities. Overall, US banks are healthy, with total assets in the United States at a peak of $17.5 trillion.
Regulating bodies seem to be encouraging innovation to improve security and the customer experience. Financial institutions (FIs) that dedicate resources to and prioritize digital transformation will be positioned to do well under competitive pressures.
There are two major trends to expect in 2019, including increased collaboration between banks and technology companies. This trend feeds into the second trend, which involves the digital transformation of banks. As FIs must dynamically change to keep up with disruption, they will continue to partner with organizations that will help them create more agile and scalable frameworks for managing data and leveraging that data to better serve customers.
The relationship between banks and fintechs continues to evolve. What started as a seeming rivalry has eased into a collaborative framework with fintechs and banks working together. While some of this collaboration may still err on the guarded side, incumbents are increasingly partnering with fintech and bigtech to push digital transformation as well as more customer-centric products and services. This has been a boon for technology companies as well, as FIs serve as a large revenue source.
There were several interesting bank/fintech partnerships forged in 2018, nodding at the possibility that this trend will continue through 2019:
The transformation of the banking industry relies on collaboration with technology organizations, and C-level executives at banks agree; more than half (53%) of the C-level executives at mid-size banks and credit unions ($500m to $50b assets) say that fintech partnerships will be important in 2019. These partnerships will help drive the movement toward modernization and away from legacy processes and technologies.
Digital transformation is a large agenda item for FIs, though this type of transformation must be strategic to make an impact. Digital transformation must be prioritized as a holistic process meant to pave the path of success for the next five to 10 years and to be a foundation for improved customer experience built on the emerging technologies that will facilitate that goal.
Digital devices have fundamentally changed the way people bank, forcing FIs to evolve to better meet consumer expectations and keep up with technology trends. The sheer amount of data that is collected and analyzed means traditionally siloed systems are poorly-suited to keep up. In order to remain agile and scalable, FIs must leverage cloud technologies, AI and machine learning, and advanced analytics to stay current in the digital age.
Complacency with technology must be avoided. FIs should embrace digital transformation as the regulatory climate supports it and as the technologies become more accessible, easier to implement, and economically feasible.
Of note is the fact that this is the first time in the survey’s history that improving the customer experience was not at the top of the prediction list. Data and advanced analytics reigns supreme in the world of banking as the bedrock to all other initiatives, including an improved customer experience.
The element of data management and analysis becomes especially important as measures like PSD2 open up data to third parties and as GDPR strengthens security measures around customer data. Data integrity and protection are paramount but also require a fine balance to eliminate priority conflicts.
Deloitte posits that the cloud will play a major role in some of the biggest transformation priorities, including AI-backed analytics and decisioning, core modernization, and data management. In turn, cloud providers will continue to develop increasingly sophisticated offerings that make transformation and more seamless process.