As millions of consumers raced online, COVID accelerated the urgency for digital banking. And there, they’ll stay, says
Bain in a study that found 95% won’t go analogue again. Beyond banking, the pandemic triggered unexpected pockets of opportunity, so here are my predictions for the retail banking road ahead.
Continued Disruption in Payments
As the
Economist said, the acceleration in digitisation is most visible in payments. Physical payments gave way to P2P and account-based payments, both online and via mobile wallets, during lockdowns. An unexpected growth area that followed was that of ‘buy-now-pay-later’
or other pay-by-instalment models, as consumers applied more scrutiny on their spending. A recent Fintech Analysis Report by
FT Partners echoes this; evidenced by the huge price/earnings growth figures for companies like Afterpay, Sezzle and Splitit and driving mega-funding rounds for companies like Klarna and Affirm.
Expect further disruption as the
big techs advance into the space, with new patents and investments in payments technologies and startups.
The Escalation of Responsible and Sustainable Banking
Digital banking and migration to the cloud has not just better served customers during 2020, but significantly reduced the need for travel and paper-based transactions, positively impacting banks’ green agendas. Sustainability has been hot for some time,
and this will rise in 2021 as investment banks roll out indices that track how green investments are, and corporate loans become tightly integrated with how ‘green’ a borrower is. We’re already seeing data providers accelerate the launch of sustainability
monitoring tools. Finally, following on from the adoption of open banking, we’re seeing a huge opportunity in personal finance management (PFM) tools. Data sharing is going to hit a new high in 2021 and I believe that PFM – for all customer demographics including
those that educate children about money – will be a key driver.
Retail Reprioritisation
Obviously COVID created a huge surge in digital banking demand – not just for ‘regular’ transactions but loan origination, payments, onboarding and more. And it’s no longer driven by younger users, as
older generations flock to adopt. This ‘world of remote’ is just beginning to unravel and will continue to shape decisions as banks grapple with balancing premium real estate, tighter margins and a growing ability to comprehensively service their customers.
Digitizing the front office will become a priority
For banks slow to digital transformation, it has been a time of reckoning. It will be harder to catch up particularly for those still championing personal relationships. Digital leaders are already leveraging Bank as-a-Service (BaaS) and Bank as-a-Platform
(BaaP) advantages, and those expanding portfolios through third party integrations and open APIs can effectively bring innovation budgets close to zero. 2021 will be the year of scaling up these transformative efforts and grabbing market share.