By Anurag Bhatia, Senior Vice President and Head of Europe at Mphasis

In the past few years, the UK fintech market has scaled considerably, attracting $4.9 billion of capital in 2019 compared with $3.3 billion in 2018. As I write this, however, the landscape – and the future growth of fintech – faces an unprecedented challenge. The pandemic crisis has triggered the need for businesses to urgently reinvent their operating models by integrating smart technologies. Innovation is vital to navigating the economic repercussions but also to set the scene for post-pandemic growth, where only those who have learned to disrupt will become leaders.

Read on for the key fintech trends that we’ll see evolving in 2020…

• Digital banking will take over

Going digital is already a leading topic in banking but the pandemic will spur incumbents to release more digital offerings to stay competitive. Since global lockdowns began, deVere Group estimates that, in Europe, the use of financial apps has jumped by 72% in one week. We’ll see a continued influx of digitally native challengers whose operations are entirely mobile based. Starling Bank is a great case in point, giving access to a full gamut of banking services via one app. Through DevOps, continuous integration and continuous delivery, the bank is nimble enough to scale according to its needs and detect threats within its code before they impact end users. 

• Modernisation of legacy through disruption

Technology is advancing faster than financial services organisations are absorbing it. However, the pandemic has triggered the need for an unprecedented level of virtualisation, making modernisation a non-negotiable for survival. Every crisis holds an opportunity – if businesses seize the possibilities brought by technology, the result will be accelerated digital transformation across Europe. We’ll see a greater push from traditional providers to shed legacy systems through the adoption of cloud and intelligent cognitive technologies. This trend is already gathering speed; last year saw Deutsche Bank committing around €13 billion to digitalise and overcome the roadblocks posed by outdated IT.

• Cloud migration supporting ‘Banking as a Service’ 

With the hike in telecommuting, cloud has come into its own during the current crisis, and business continuity is now reliant on cloud-based infrastructure. In 2020 we will see increased adoption of multi and hybrid cloud in financial services. As mentioned above, Deutsche Bank is looking to optimise its systems – and harnessing the public cloud is one of its top strategies to achieve this. Migrating data and workloads to multi or hybrid cloud brings economies of scale and efficiency benefits. It fosters the application of advanced AI, machine learning and deep learning tools to unearth valuable insights from data. Further, it allows companies to embrace SaaS to provide on-demand, cheaper tools that facilitate seamless ‘Banking-as-a-Service’ and a faster route to market.

• The growing prominence of data and AI

Part and parcel of getting rid of legacy is the ability to minimise technical debt and data silos. In 2020, data and AI will be central to any successful financial services business strategy. The pandemic will kick-start the more mainstream introduction of AI, bringing higher accuracy, faster problem resolution, reduced human error and lower costs. Deeper tech, such as advanced data analytics and machine learning, will help to deliver more organisation-wide visibility and data-led decision making. Adopting a digital attitude involves working in bite-sized steps to achieve business goals, addressing problems one by one. By leaning more on data, companies can address specific pain points, identify opportunities and manage risks.

• The customer experience will reach new heights 

Consumer behaviour and demands will keep evolving, with the expectation of real-time insights, instant response times and convenience through digital platforms. Today, and in the post-pandemic world, customer service is paramount as a differentiator for financial services companies. By mining historical data, and leveraging predictive analytics, providers will create increasingly customised services and experiences based on individual requirements, leading to hyper-personalisation on an unparalleled scale. The personalisation seen in retail banking will also flow into B2B transactions.

• Progress with intelligent automation & RPA 

Strides in automation and robotics will enable more businesses to mechanise a wider variety of time-consuming, manual processes, giving them the space to attend to more pressing business priorities. This will bolster performance and streamline budgets at a time when it is most essential. AI-backed interfaces will mean that chatbots and robot-advisory services will grow their presence across financial services, tapping into self-learning natural language processing to deliver advice and engagement. 

• More avenues for sector collaboration 

The financial ecosystem consists of fintechs, big banks who are trying to modernise fast, and ‘techfins’ (the major tech leaders and FAANGs, who already have the customer bases and technology to enter new verticals). The lines have blurred between the three groups and the market has never been more fiercely competitive. In 2020, there will be greater industry collaboration, such as Google’s partnership with Citigroup to launch a personal account service. Partnerships with tech-savvy players who have the necessary technology and data horsepower will empower banks to innovate quicker and reach larger audiences.

• Blockchain for business 

Blockchain technology brings efficiency, transparency and security advantages to complex transactions. Through smart contracts, the immutable nature of blockchain can authenticate identities and produce traceable supply chains. We’re only scratching the surface of what blockchain can do for financial services, and this year will see its capabilities extend into additional use cases, including cross-border B2B payments, digital currencies and wallets. As announced in the Budget, the UK government is exploring how digital currencies can be incorporated more widely into banking to support growth. Cybersecurity, too, will be an important area of blockchain development.

•  Regulation will adapt to the new age in fintech 

Regulators are prioritising market safeguarding measures to ensure resilience during this challenging time. Apart from government relief schemes to help with solvency (including aid for start-ups in several European countries), in the UK the FCA is working closely with companies to assess their contingency plans. Going forward, with the adoption of next-gen technologies and more tech firms disrupting the financial arena, regulation will also change, to protect consumers and instil ethical practices in areas like AI and crypto. With more access to data and the prevalence of open banking APIs, there’ll be more stringent obligations alongside regulations like the GDPR and the PSD2 Strong Customer Authentication.

• Talent recruitment and R&D growth 

Last year, UK recruiters reported a 51% increase in AI hires. There were already concerns regarding a skills shortage due to the EU referendum affecting the number of European graduates but in a post-pandemic world, the call for talent will heat up exponentially. The present huge demand for technology has led businesses to recognise the need for candidates with niche expertise. I think that we’ll also see more R&D effort into how digital technologies can benefit sub-sectors such as wealth management, foreign exchange, compliance, accounting and peer-to-peer lending. In fact, the Chancellor has dedicated an extra £22 billion for public sector investment into tech research. He also launched a review into UK fintech, testament to the macro-economic clout of the industry in maintaining the country’s leading position in innovation.