2018 has the potential to be a huge year for the banking industry. Major regulatory changes, including the introduction of the General Data Protection Regulations (GDPR) and rules around Open Banking have the potential to shake things up considerably.
Add in a fast-moving Fintech industry and a host of international players planning further expansion into the European and UK markets, and there is plenty for everyone to keep on top of. Here, our experts give their top predictions for 2018.
1. GDPR will be more of a headache than many expect
It’s not like we’ve not been warned, but banks and other companies haven’t prepared for the massive task of updating all of their data permissions by May 25th 2018.
“They massively don’t have it sorted,” warns Ian Hughes, chief executive of Consumer Intelligence. “They’ve turned this over to compliance departments, but I’m not seeing evidence that they’re on track to gain permission needed.
“The really sad thing is that this could be a huge opportunity, but not enough is being done to turn GDPR into a positive. Unless banks work to understand their consumers better, they’ll end up turning them off with their efforts.” For more on how to make the most of the GDPR rules, see Ian’s article here.
2. Face will fight voice
Thumbprints, voice recognition, iris scans — we’re all getting used to different forms of security, but it’s not yet clear which will win. Optical, face and voice recognition will be fighting to become the preferred security feature in digital,” says Consumer Intelligence expert Andy Buller. We know that tight security is important to consumers, but that invasive forms of ID checking — especially those that force people to remember many passwords — can be offputting, so getting this right could be a major win for banks.
3. At least one large payment technology provider will fail
Payment technology has come on in leaps and bounds in the last year, but with so many providers now in the space, it’s likely that some businesses won’t last the year.
“The difficulty with this is that they might take customers’ money with them, and then it would be a setback for the whole industry when it comes to consumer trust,” Ian Hughes says. The moral of this story? Ensure your customers are aware of all of the security that is in place around your payment technology.
4. Open Banking will be a damp squib
PSD2 — the new regulations surrounding Open Banking — have the potential to create huge waves in the market.
But not yet, warns Ian Hughes. “Customers aren’t yet ready for the potential of Open Banking. Even very early adopters are only now beginning to use Fintech apps on their phones.” Until banks realise what customers want and need, and can persuade them of the benefits, the potential of the PSD2 changes will not be realised.
5. FX rates will continue to fluctuate
As Brexit talks continue, FX volatility will become a fact of life. UK rates are likely to be impacted, with the Euro and Dollar being the major currencies, Andy Buller says.
6. Cryptocurrency will see a major correction
Bitcoin, and its fellow cryptocurrencies (known collectively as Altcoin) are seldom out of the headlines. But 2018 may be the year in which they crash to earth, at least for a while.
“It’s a bit like the dotcom bubble,” Ian Hughes says. “It’s not like there wasn’t any potential in the internet businesses, but that the valuations were wrong for the time. There is huge potential value in blockchain technology, but that is more likely to be seen later.”
7. Bricks and Mortar banking will continue to reduce
Nearly 800 bank branches closed this year, and there’s little sign of this trend going away.
“Banks and other financial institutions will continue to reduce their real estate holdings and invest in digital and automated services,” Andy Buller says. With mobile banking the fastest-growing channel, focusing on mobile offerings is key.
8. Borderless Accounts will become more prevalent across Europe
With the first ‘borderless account’ aimed at businesses already active, we can expect to see further innovation across Europe in this area, with similar accounts aimed at consumers who spend in different countries, says Andy Buller.
9. International payments will become more mobile and digital
Andy Buller predicts a continuation of the trend towards digital and mobile payments, particularly internationally.
“Digital will become prominent within the FX channel,” he says. Our surveys of customer behaviour show that, although the majority of UK travellers still rely on traditional forms of travel money, there is growing acceptance of digital and mobile solutions, particularly among younger customers.
10. UK banks will start to lose out as international players come in
UK banks have rested on their laurels when it comes to pricing, but the advent of new players means that they must become more competitive, or lose out altogether. The rise of Alipay, the Chinese payment system, will be one reason for this. “Alipay will make massive inroads into Europe either through acquisitions or partnerships,” Andy Buller says.
2018 will bring many challenges and we look forward to sharing more exciting insight to help you make the most of the opportunities these present.
From all of us here at Consumer Intelligence, have a happy holiday and here’s to a prosperous 2018.
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