Five key trends in banking and finance

28 October, 2019Juno Baker

What will banking and finance look like in 2029? Natalie Ceeney CBE, Chair of Innovate Finance, set out these five key trends at the recent 23rd World Conference of Banking Institutes (WCBI). This is the first in a series of articles on the future of financial services.
Stack of coins balancing on building block tower

Disaggregation of banking services

“We’ve seen a huge disaggregation of traditional banking services over the past decade,” said Ceeney. She added that this trend can only increase. “Particularly as we see both fintechs and big tech offer solutions, which are much more conveniently integrated into your lives, your purchasing and your browsing.”

According to Accenture, new competitors have already grabbed 14% of the UK’s banking revenue and 63% of current financial services players didn’t exist a decade ago.

Ceeney said regulation would continue to support this and, by 2029, fintech will have driven up the standard of banking.

“Anyone offering banking services will have standard tools to help you manage your money better – set up flags or blocks for risk behaviour, like gambling and for over-spending – and give you choices about the way you manage your money.”

More effective use of data

“Data management will become a core capability,” said Ceeney. “The reality is most banks haven’t used data particularly effectively, particularly in the area of big tech and that’s changing.”

Ceeney said this wasn’t just because consumers will expect better levels of service, although “we’re not going to fill in long forms for a mortgage application when our data is [already] out there!”

But regulation, such as the EU Payments Services Directive (PSD2) on open banking, will require better use of data. “Who’s better at this? Big tech!”, she said.

Consumers with multiple relationships

Apathy around switching banks, Ceeney suggested, stemmed from incumbent banks looking “very much the same”.

“Challenger banks and wider fintech players have shaken that up and started to offer truly differentiated offers. And those who are moving [banks] are attractive segments.”

Indeed, according to Census Wise, over 28% of high earners – that’s earning over £75,000 a year – use challenger banks. In business and retail banking, more than 20% of customers use challenger banks now.

Ceeney predicts banks will need to pick which part they compete in. “And there will be new battle grounds emerging over what part of the customer journey adds most value.”

A shake-up of utilities

“One of the other big things banking is going to have to address is how do we bring everyone with us,” said Ceeney. She spoke about those on low incomes, in poverty or in rural areas where connectivity is an issue.

Her prediction?

“We’ll see more utility and consumer services, perhaps jointly owned by banks or even nationalised, to look at bringing everyone with us. That might be about universal ATM services or cash being protected, or utility services to protect rural communities.”

Payments – increasing role for big tech

Payments is an area where some of the biggest shake-ups in banking have happened and are likely to continue.

“The wallet, rather than the underlying account, is going to be the consumer driver of choice,” said Ceeney, pointing to Tencent and Alipay – two non-banks who dominate the Chinese payments market – and Swish in Northern Europe.

“We’ll be likely to see big tech taking an increasing role in payments, quasi banking services – leveraging their retail or community relationships. And we’re going to see new fintechs either dominating niche segments or partnering with incumbents to help them change more rapidly.”

Related content:

Can regulators stop data exploitation

What are the challenges of green finance?

See our Centre for Digital Banking and Finance