Connect with us

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. .

Banking

BANKING IN 2018: PLUS ÇA CHANGE

BANKING IN 2018: PLUS ÇA CHANGE

Alex Kwiatkowski, Senior Industry Consultant, Global Banking Practice, SAS UK

Another year’s over, a new one’s just begun. And it’s time to answer that most crucial of questions: ‘What does 2018 hold in-store for EMEA banking?’. Unless I’m missing something obvious, all the signs point to the coming 12 months being characterised by the usual ‘evolution not revolution’, and anybody hankering for radical change between now and December 31st had best prepare to feel the cold hand of disappointment. I’ll stop short of saying that banking is boringly predictable, but with its overall course having been set some years earlier – characterised by the drive to digital transformation in an era of macroprudential regulation – there’s nothing either on or over the horizon which is going to act as a seismic force. There’ll be disturbances and distractions as the year unfolds, but no disruptions. Sorry.

Taking this into account, and having given my crystal ball a thorough polish, the following trends are going to manifest themselves in the EMEA banking industry over the coming 12 months.

Digitalisation of corporate banking

Corporate banks finally get hip to digital, as the general murmurings of service dissatisfaction among national and multinational companies prove impossible to ignore. There’s already been some digitalisation of the back office (e.g. cash management), but in 2018 progress will extend through the middle office (where new banking products are created) and into the front office (where relationship managers get their hands on the digital tools to make a) their job easier and b) their client(s) happier).

Platformification efforts accelerate

‘Platformification’ is a truly dreadful word. Hard to pronounce. Sounds like ‘fornication’. Vague. And yet it’s one of the most significant developments in banking. For the uninitiated, platformification is “the bundling together of multiple services onto one online platform, and provides an efficient, automated and integrated customer experience” (source: Forbes). At the risk of stating the obvious, those three outcomes are highly desirable for banks, as in combination they drive improved financial and operational performance. Platformification also puts banks on a similar plane to other industry sectors (e.g. retail), although any CEO who thinks his or her firm is about to become the Amazon of banking needs to lower their expectations.

Technology innovation boosts financial inclusion

Connecting – and reconnecting – people to the financial system remains a priority across EMEA (and the rest of the world) in 2018. While improvements have been made in recent years to close the gap between those who can access to banking services and those who can’t, progress needs to go at a faster pace. This necessitates national governments, financial service providers (traditional and non-traditional), telcos and technology vendors (device manufacturers, ISVs, app developers etc.) working collaboratively. An impossible dream? Nope.

Growth of fintech and regtech in emerging markets

During the last quarter of 2017 I’ve seen ample evidence that fintech and regtech is beginning to proliferate in EMEA’s emerging markets. This will continue during the next 12 months (and beyond), with new firms entering the competitive environment. It doesn’t take a genius to deduce that it’s trend intrinsically linked with improving levels of financial inclusiveness. Exciting times are ahead.

Understanding EU-wide stress tests in an era of IFRS 9

The latest round of EU-wide stress testing commences in January. We’ll need to wait until November 2nd to see the results, but extra significance is assumed as this is the first assessment undertaken in the era of IFRS 9 – the standard which specifies how an entity should classify and measure financial assets, financial liabilities, and some contracts to buy or sell non-financial items. I’m not expecting shocks, but there might be a surprise or two to make things interesting.

Blockchain in lending and trade finance

Blah-blah-blah-blockchain. I’m bored of talking about it. What I really want to see is blockchain technology taking root in areas other than the frankly insane world of cryptocurrencies. Blockchain has been slower to come out of the lab and into the live environment that I anticipated a couple of years ago, but my senses tell me that this will change in 2018. Lending and trade finance are two obvious areas where blockchain can disturb the status quo by reducing the need for paper-based processes (and sounding the death knell of the fax machine). And then there’s the blockchain analytics angle to explore too. We’ve already started. Catch us if you can.

Extension of open banking standard(s)

Within the more advanced economies of EMEA, the concept of open banking – which is where banks make the transition to be marketplaces for financial services (see ‘Platformification’ above) – has taken the industry by storm. To weather a storm, protection in the form of an umbrella is required. In this instance, the umbrella takes the form of an open banking standard, which uniformly prescribes the steps which firms must take. Developments such as PSD2 have hastened standardisation, but there’s still a huge amount of scope for further improvement. In Europe, a collaborative effort is being made by AIB Group, Bank of Ireland, Barclays, Danske, HSBC Group, Lloyds Banking Group, Nationwide, RBS Group and Santander to create an open API standard. I expect to see more ‘groupthink’ examples emerge as the year unfolds.

Beginning the preparations for regulatory adjustments

2018 will witness some major regulatory developments. There’s the go-live for PSD2 and GDPR in Europe, while at a global level Basel IV begins to take a firmer shape. And although the rollback of Dodd-Frank is going to hit US banks hardest, the ripples caused by this development will scurry across the Atlantic to affect firms in EMEA (i.e. those who maintain operations in Trump-land) to varying degrees too. As every boy scout knows, success hinges on being prepared.

M&A activity is back on the agenda in the search for growth

Several EMEA banks have recently installed new CEOs, and they’re sure to be seeking ways to deliver sustainable revenue growth to keep their shareholders happy. This stimulates renewed interest in M&A activity, and while the era of the mega-merger is behind us, don’t be surprised if 2018 witnesses some unlikely unions. And with Chinese companies sitting on huge cash piles, who’s to say they won’t make a series of strategic investments to gain, or strengthen, a position of potential power.

AI-fever takes hold, but some banks will lose their grip on reality

What’s that deafening sound? Oh yes, it’s the wall of noise associated with Artificial Intelligence. There’s no denying that AI – and it’s ‘extended’ features, namely machine learning and deep learning – is going to transform not just banking but the entire world as we know it. However, I’ll just inject a healthy dose of reality. AI isn’t a magic wand. It needs to be handled carefully, and that means striking the right balance between humans and computers. Let’s use AI responsibly. There’s been enough recklessness in the world prior to AI bursting forth.

Wildcard

Finally, there’s my perennial wildcard. This is a low probability event, but one that would have a significant impact on banking overall. Previous wildcards include President-elect Trump repealing Dodd-Frank* (2017); Apple obtaining a banking license by partnering with an existing institution (2016; an established peer-to-peer lender being acquired by a big bank (2015); and Google using its long-held banking license in the Netherlands to launch a digital-only service (2014). For 2018, I’m going to stick my neck out and say that during 2018 the UK will halt the Brexit process, having come to the sensible conclusion that any benefits are massively outweighed by the drawbacks. Sadly, I’m 99 percent certain this won’t happen, so it’s said more in hope than expectation.

For brevity, I’ve provided short thumbnail sketches as to the 2018 trends in this blog. If you want the unexpurgated version, join me for a webinar on January 25th at 4 pm (UK time) which goes deeper into the details: SAS SPEED Webinar Series for Banking

Happy New Year!

*I made this prediction prior to the Presidential election.

Global Banking & Finance Review

 

Why waste money on news and opinions when you can access them for free?

Take advantage of our newsletter subscription and stay informed on the go!


By submitting this form, you are consenting to receive marketing emails from: Global Banking & Finance Review │ Banking │ Finance │ Technology. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Post