What does 2019 have in store for UK Banking?

The turn of the year offers a perfect opportunity to review the past 12 months and to anticipate what might happen in the next 12. So, how was the past year for the UK banking and payments sector and what lies ahead of us in 2019?

The year open banking arrived

2018 will be remembered as the year in which open banking became a reality in the UK. However, the pace at which banks and other financial institutions are exploiting these opportunities varies greatly. Some are merely putting a toe in the waters of open banking, taking a 'wait and see' approach. Meanwhile, others are taking the bull by the horns, recognising open banking as a new and profitable way of doing business. Each financial institution has its own mindset and risk appetite, and that will dictate their approach to service innovation in the years ahead.

For those that embrace open banking, we can look forward to a new level of interconnectivity between brands and platforms; and the resulting partner ecosystems will create opportunities for a more holistic approach to banking and payments. To date, we have only seen some tactical examples of this, but in 2019 we can look forward to a market acceleration around strategy-led open banking plays.

Putting the customer first

As open banking partnerships take fruit, we anticipate a new range of customer-centric, digital-first services to be launched by incumbent banks. It's absolutely critical they do so, as they're currently being out-competed by new market entrants. In fact, our 2018 Performance Against Customer Expectations (PACE) report has found that new, digital-first direct banks have outperformed the world's top 50 banks this year across key customer service metrics, including privacy, security, problem solving and real-time payments.

To meet this challenge, we believe an increasing number of incumbents will partner with challenger banks in 2019. The resulting platform banking propositions will offer next-level customer experiences that leverage emerging technologies such as Artificial Intelligence (AI) – think new banking 'skills' for Amazon Echo or Google Home that allow customers to 'talk' to their bank through voice-enabled apps, for instance.

Open, but controlled

As these partnerships emerge, the commercial frameworks that underpin them will prove every bit as important as the APIs. This is because banks will need to ensure they're covered if anything goes wrong with their new services. After all, consumers embrace innovation and digital convenience so long as everything works and there are no data breaches. As soon as something goes wrong, they will look for someone to blame – and that blame will most likely fall on the incumbent bank. In 2019, we expect to see firms focus on building robust control frameworks to ensure they can progress with open banking initiatives while at the same time protecting their brands.

Looking specifically at payments services, 2019 will be marked by both divergence and convergence. Divergence will come through service differentiation enabled by digital disruption and open banking partnerships. Convergence, however, will occur through technology integration. We've already seen this through mobile payments where mobile phone, banking and telecommunications systems have converged around the customer experience. Next up will be real-time payments at the point of sale, where organisations will give consumers greater choice over how to pay. This will require context-rich front-ends to payments platforms that can differentiate between debit, credit and real-time payments; as well as closely integrated back-end infrastructures that enable easy and low-cost payments switching.

All to play for

If 2018 was about putting in place the regulatory foundations for open banking, 2019 will be about exploiting the opportunities on offer. Partnerships will be key, both in creating exceptional customer experiences and ensuring banking services remain compliant and secure. A year hence, I expect to be looking back on a banking industry that's more customer-centric and innovative than ever.