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Banking is one of the fastest changing industries in the world at present. The traditional incumbents are implementing many new innovations as new startup brands launch a bid for market share. I have often mentioned how the new bank brands can design and mould their services exactly to customer needs, but what are the other key trends to watch for this year?
FinExtra published their list and from that I would draw out three key trends that I think are really going to change banking this year:
Open Banking is a result of a European Union directive known as PSD2 – Payment Services Directive 2. That doesn’t sound very exciting, but it is a major change in how banks operate. Every bank needs to use a standard gateway (called an API) for their data. If a customer gives permission to a bank or financial service company to access their personal information then other organisations can tap into your bank and extract information.
The most common immediate use for this is to connect together the various financial products that customers are using so a consolidated report can be constructed – putting information on your loans, credit cards, mortgage, and savings all in one place even if they are managed across several different banks. However, I expect many new companies to think of great ideas on how to help people manage their money – especially to watch for trends or alerts in your spending. Many new apps will soon be launched as people get more familiar with Open Banking.
Cyber threats are on the increase and this is an important topic for 2018 because of another European Union directive called GDPR – the General Directive on Data Protection. In summary, GDPR gives customers much more control over how companies use their data. The old days of companies being able to use your personal data because you ticked a consent form that was not even read are over. Companies must be transparent about how they are using your data and all customers have the right to have their data erased. Enforcement of the new rules will start in May 2018 and the penalties are severe – fines can be a percentage of company revenue.
The big traditional banks face an existential threat from Financial Technologies – Fintech. Completely new banks can be launched using apps and those companies don’t need to manage old legacy IT-systems that run overnight batches to serve an enormous branch network. They can design apps that work exactly how the customer wants. It’s no surprise that some of the big players are now deciding that they either need to launch their own spin-off app-based bank or acquire one that is already in the market.
That’s three really big challenges to the banking industry and I expect we will see a lot of news about them in the coming year. What would you suggest as another change or trend to watch in 2018? Leave a comment below, or get in touch on LinkedIn and let me know.
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