By Jason Aird, Partner, Airwalk Reply
Over the last 24 months all financial services organisations have had to adapt to the COVID-19 pandemic through increasing efforts to support remote workforces and digital enablement for customers. In the post-pandemic world, we expect this to continue as consumer expectations and behaviours evolve, modern ways of working take a front seat and regulators re-focus attention away from the pandemic and back towards their core mission.
Evolution of the regulation landscape
In 2022, financial service organisations can expect the regulatory focus to swing further back towards protecting consumers and the continued strengthening of financial services. As a component of this, the operational resilience agenda will come to the fore. With the March deadline looming, we will see a last-minute push from companies to finalise their positions and an upturn in testing and reporting of risks. This means companies can expect to see the first moves towards enforcement and remediation actions from the regulators where others fall short.
Financial crime will remain high on the agenda, as pressure mounts to address known vulnerabilities such as Authorised Push Payment (APP) fraud within the payments ecosystem. Sharing and analysis of data across financial institutions will be critical in addressing these vulnerabilities, and we expect to see some discussions around changes to regulations which curtail this type of data sharing from taking place.
Putting the customer first with innovation
The long running work to modernise the central payments systems (New Payments Architecture) will continue. However, despite increasing involvement and clarity from regulators around their expectations, it is likely that the industry as a whole will remain undecided on the best way to approach modernisation. This is not the only place modernisation and standardisation will be seen. Work to standardise critical aspects of the currently fragmented global digital regulatory landscape will continue, for example with the DORA legislation / regulation attempting to lead the way.
Banks will increasingly have to put the customer first by focusing on providing “banking my way” with more consumers opting to select banking providers that offer flexibility on when, how and what they use it for. Open banking giving way to open finance will be a key driver in this area and there will be more influence from older generations, who have had to understand and rely more on technology through pandemic lockdowns. Because of this we will see continued introduction of key services being offered by banks through their web and mobile banking platforms, reducing the need for ‘in person’ engagement and branch visits. As a part of this, automated support services, such as chatbots, will continue to play an important role and we expect the growth that has been seen over the past few years to continue albeit at a slower pace than before.
Closing the gap on the fintechs
Much of this increased focus on innovation and the customer can be attributed to that there will continue to be more digital-only fintech and challenger banks applying for and being awarded banking licences. This will put more pressure on the large more established organisations to address their legacy technology constraints to keep pace and protect market share. For this reason, traditional financial institutions will look to invest more in the acceleration of their modernisation agenda and cloud adoption, to support new products and services demanded by the consumers and stave off the flow of their customers to new entrants to the market.
There will also be a greater focus on environmental credentials within Financial Services, with more eco-friendly products being made available for consumers. Financial institutions and their suppliers will come under more scrutiny in relation to their environmental footprint. There will be increased focus on understanding and controlling supply chains within organisations to ensure environmental alignment.
Product and service innovation will be more consumer driven than it has been historically meaning organisations with modern technology and ways of working will be best placed to leverage this in the short to medium term. Next, the gap between traditional banks and fintechs will begin to narrow as investment in modernisation increases to reclaim lost ground. And finally, the regulatory landscape will continue to evolve along the key paths of regulatory harmonisation and resilience. 2022 is going to be a big year for banking and it is on those in the financial services sector to put plans in place now to prepare for it.
Airwalk Reply is the Reply group company specialised in the design and delivery of cloud-based services and solutions, driving technology-led transformational change in complex, regulated industries such as Financial Services, Government and the Public Sector. We bring a unique combination of deep technical subject matter expertise across technology strategy, architecture, service design, engineering and security, alongside business domain expertise and a heavyweight delivery capability. www.airwalkreply.com