Since 2008, the banking sector has suffered considerably and has had to adapt to a rather hostile global environment that has forced all players in the sector to undertake radical and sometimes painful changes. At the same time, it gave ideas to a few irreducible companies who started thinking about new models, such as FinTech’s business model.
Faced with the fast and massive adhesion of consumers to the offers proposed by FinTech companies, banks are gradually beginning to become aware of the changing uses and expectations of their customers.
And 2018 will undoubtedly be a year of transition for the sector, driven by new regulations, innovations and customer expectations. Here are the key topics that should attract the attention of players in the sector in 2018:
More and more partnerships between banks and FinTech
FinTech and banks are often opposed, yet they are not so different. They share the same need but from different perspectives and often borrow their methods from each other. Thus, some companies started their activity 100% on the Internet then finally returned to a more traditional model by opening physical agencies.
And if banks allow FinTech to benefit from infrastructures, institutional relations and customer base, FinTech, in exchange, bring their digital expertise through a new distribution model: a winning strategy for both sides!
RegTech: giving banks back their agility
RegTech is considered a technology designed to facilitate regulatory risk management. The effective implementation of many regulations should accelerate the adoption of technological solutions capable of managing complex, data intensive rules.
Some solutions are thus beginning to gain popularity for managing MIFID II pre-trade and post-trade transparency rules within CIBs. However they do not have to be opposed to FinTech they are complementary and FinTech are sometimes also RegTech without claiming it.
A payment system that automatically updates itself according to the evolution of European legislation helps its customers to be in compliance in this matter.
Open Banking and APIs: the new rule to which industry players must comply
The arrival of Open Banking is a revolution in the sector in the meaning that it challenges the old rules of conduct of financial institutions that were governed by impermeability and closure.
The data concerned by this opening to other financial services are first of all information that does not relate to individuals. The players in the sector are currently implementing a directive, the PSD 2 (European Payment Services Directive), which came into force in January. This European law provides for the establishment of interfaces – known as APIs – between banks and FinTech by September 2019 to increase data security.
That is to say, banks will be obliged to share information with FinTech and integrate it into the payments market. This will enable FinTech to compete with them and challenge the traditional banking model, which will ultimately benefit customers.
Finding the right balance between consumer data protection and product innovation is essential and remains a challenge for companies in the sector, both FinTech and banks, some too flexible and others too rigid.
The indispensable AI against cybercriminal threats against the banking sector
Cybercriminals are gaining skills and banks remain the priority target of sophisticated attacks. Market players are racing for innovation to offer their customers better protection against fraud.
In online payment, new scoring algorithms are emerging to tackle fraud in conjunction with 3-D Secure, to protect transactions is considered at risk by accurate scoring and based on different data sources. A way to maximize conversion rates while protecting e-commerce merchants from fraud. For players in the banking sector, the use of AI is becoming essential.
The AI, the learning machine, and chatbots: using data to improve the business
Artificial Intelligence is a real source of renewal for the banking sector. Together with other cognitive technologies, such as machine learning and chatbots, it will play a key role in the evolution of the financial sector.
Whether it is to improve advice to customers by offering products adapted to their consumption habits, analyze account activity to predict a departure, or even qualify a need thanks to chatbots, the AI has passed the experimental stage and opens the doors to many improvements in the business.
A new customer relationship model
The customer relationship has changed drastically in recent years, bank agencies are paying the price of digitizing the bank less and less visited by the customer. We can talk about the disruption of the banking relationship which is now being built via digital communication channels.
New banks are shaking up the codes and some well-established institutions are starting a drastic redesign of their customer paths in order to build a good experience.
100% online exchanges are among the new standards of customer relations, adapted to new lifestyles.This is one of the reasons for the success of new online payment and money transfer solutions.
24/7 customer service, expert advisors in their field and features that take into account the new challenges of these companies, such as online fraud. Thus, their success is due more to their service offering than to their products.
Blockchain and cryptocurrency invade the banking landscape
The blockchain is a major innovation in the financial sector for financial transactions, banks and the economy in general. FinTech was the first to take over Blockchain technology, which has recently begun to be tested by banks.
2018 seems to be the year of its maturity with the migration of major players such as the Australian stock exchange towards this technology or the implementation of a regulatory framework in France for unlisted securities.