As one year ends and another begins, financial institutions (FIs) will be looking ahead and wondering what challenges and opportunities lie on the horizon.
If the past decade or so has taught us anything about the financial services industry, it’s to expect the unexpected, but that shouldn’t stop us from making some educated guesses about what 2017 could bring. Here are a few trends to keep an eye on over the coming year.
Self-service reinvention and modernization
With technology giving consumers more freedom and control than ever before, there will be growing expectations for banks to provide new ways for customers to manage their financial affairs.
Mobile and online banking will, of course, have a huge part to play and can be expected to become even more important to consumers in 2017. But traditional channels like the ATM and branch network are just as significant if FIs want to deliver coherent, consistent omnichannel banking at as many self-service channels as possible.
Continual investment in the development and modernization of self-service networks will ensure that customers see the benefits of innovation across all channels.
Cash isn’t going anywhere
We often hear that the society of the future will be cashless, but there’s no denying that cash will remain a critical part of the global financial system in 2017 and for many years to come.
Even in Sweden – often held up as the shining example of a soon-to-be cashless society – the central Riksbank last year said banks should be subject to a legal requirement to provide cash service as a basic feature of payment accounts. ATM Industry Association chief executive Mike Lee called it “a victory for common sense“.
Many other developments – such as the use of ATMs to improve wider financial inclusion in India and the ongoing reliance on traditional payment methods in the US – have shown that the world is nowhere near ready to say goodbye to cash.
Collaboration and evolution in payments
The payments industry will likely become even more dynamic and competitive in 2017. The businesses most likely to succeed in this rapidly changing sector are those that view change as an opportunity, rather than a threat. Being able to choose between cash, card and digital payments – rather than simply having a single electronic payment method – will remain important to consumers.
Speaking to Finextra, Dean Henry, head of global high-volume payments at Bank of America Merrill Lynch, recently said there is currently a big focus on partnerships. “Fintechs want to partner with banks, banks want to partner with fintechs, and I think there is a new realization that when you put both of us together, we create better products, better experiences and better solutions for our customers.”
It will also be fascinating to chart the progress of the Single Euro Payments Area Instant Credit Transfer scheme – an optional initiative due to launch in November 2017 – and ongoing work towards the implementation of PSD2.
New fraud threats
With new technologies and consumer behaviors come new fraud threats. Mitigating against risk and ensuring secure and reliable customer access funds will rightly remain of paramount importance. Towards the end of 2016, we saw the likes of Google suffer major security breaches, so cybersecurity is likely to become more important than ever in 2017.
Biometric authentication is on course to become a more prominent part of the payments industry, with both Visa and Mastercard getting behind the technology, but could it raise some unique security concerns of its own? What happens if a customer’s biometric data is stolen or compromised, for example?
The ATM channel will continue to face the dual threats of physical and logical attacks, making it crucial for banks to protect their assets and their customer data with the latest software, security measures and fraud solutions.
The financial technology industry will continue to evolve in 2017 and beyond, especially as consumer demands and expectations continue to evolve. The omnichannel experience will likely remain a key trend for consumers and small businesses, with FIs looking to areas like self-service reinvention, branch transformation, digital banking and channel management to meet these needs. Macroeconomic forces may begin to have greater influence such as regulatory, economic, consumer or technological changes. For FIs, growing revenue, reducing cost, managing risk and enhancing the consumer experience will also remain key.