Predictably unpredictable – Crystal ball for financial services 2020
By Theodora Lau & Bradley Leimer, see more by them here.
As 2020 approaches, what does your crystal ball foresee for the world of financial services? How will China’s influence play out in Asia and beyond? What is the next iteration of the challenger bank model, super apps and platforms, and fintechs beyond payments and credit? Can broader societal challenges such as sustainability and the climate crisis finally make significant strides in how and where we invest? How will the financial needs of customers change in the new decade and how will banks react to all of this?
A Crystal ball for financial services in 2020
Here are some of our thoughts and predictions – just don’t hold us against it a year from now.
[1] The competition between China and India continues to heat up. Most recently Xiaomi joined a growing wave of fintech and big tech startups to offer credit to millions of users in India – via Mi Credit. BCG estimated the digital lending market to be worth up to $1 trillion dollars by 2023 in India – no wonder all the big tech firms from East to West are eyeing a piece of the pie. Heading into 2020, we expect to see these two most populous Asia rivalries continue to vie for tech supremacy and dominance in the region.
[2] The conversation around challenger banking continues to revolve around “number of users.” But is that a true reflection of “success,” we asked? It is now commonplace to have multiple financial relationships. The real impact of such challengers on incumbents should be focused on several indicators: Are consumers ditching their high street banks in favor of fintech startups? How many of these consumers consider their primary accounts to be with a challenger bank? Do they continue to use traditional financial institutions to conduct their most important transactions – such as securing a mortgage?
While challenger banks will likely continue their mega funding deals at least through the first half of 2020, we expect to see industry consolidation and business viability of some of these challenger banks being further scrutinized. After all, we need to start seeing profits at some point, and a venture capital crunch remains a distinct possibility.
[3] With Christine Lagarde at the helm of the European Central Bank (ECB), the organization may venture into areas such as climate change and inequality. According to Reuters, Lagarde has called the fight against climate change “mission critical” and says it will be part of the ECB policy review.
We do expect the topic to be one of the key defining features of Lagarde’s legacy as our society is placing more value on purpose and sustainability. But as with everything else, we would not be surprised if we see pushbacks from some policymakers and critical member states.
[4] Artificial intelligence (AI) is all the rage this year; headlines such as “Wall Street Braces for Impact of AI” may make you think the golden moment when AI hits critical mass is finally upon us. Unfortunately, we believe that much of the focus in 2020 will still be around efficiency gains and risk management instead of value creation for the customers. Change will come – slow.
[5] Data is the new oxygen, especially as financial institutions tap into wider demographics. Use of alternate data sources and algorithms to extend credit will become more commonplace. Expect more cases when fairness and transparency will be called into question as we relegate more decision making power to machines.
Do you agree or disagree? What do you think 2020 will hold for the world of financial services? What are the few areas that will drive the most change, cause the most concern, and hold the most promise? As we enter a new year, a new decade, we hold on to the hope that the financial services business model will continue to evolve to serve the needs of the many and not the few.
Tune in for a new episode of the Rhetoriq podcast – via iTunes and Spotify, where Aruns, Bradley, and Theo share their own predictions on what may make 2020 eventful – or not.
Security cannot be an afterthought in this API economy. #cybersecurity #digital #banking #finserv #fintech
cc @alissaknight @leimer @SimonCocking @Karunk https://t.co/06R4qISjkN via @Irish_TechNews pic.twitter.com/OLVgE1ktdR— Theo – ??? (@psb_dc) December 9, 2019
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