Top 10 Retail Banking Trends and Predictions For 2019

The 2019 Retail Banking Trends and Predictions report combines the insights crowdsourced from a panel of financial services influencers, industry analysts and banking providers with the results of a major global research study. This is an excerpt from the 118-page report.

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Trend #9: Exploration of Advanced Technologies

The scope and speed of evolution in regulation, customer behavior and technology — coupled with the emergence of new competitors — mean that the future of banking will not be a continuation of the past. New technologies will transform banking as we know it, providing both opportunities and challenges for financial institutions.

Many of the new technologies that are threatening the banking industry also present significant opportunities. In fact, those organizations that can leverage big data, advanced analytics and new technologies to improve the customer experience can build trust, loyalty and revenues that are the keys to success in the future.

As opposed to technology taking a secondary position, supporting only the processing of transactions, future technologies will be more customer-centric and efficient, and provide more targeted, secure and intelligent solutions. With technology as the driving force in the future, organizations will be able to redefine themselves to be more competitive and responsive to marketplace needs.

As quickly as past technologies have become the norm, a new wave will combine digital technologies and the power of data to set new standards. The prioritization and investment in each of these technologies will vary based on the business model and strategic goals of each organization. For instance, while the marketplace as a whole does not foresee investing much in blockchain technology, the financial services industry ranks this as a high priority.


Insights from the 2019 Crowdsource Panel

According to David Gerbino, Principal of consulting and consultant at Beyond the Arc., “Forward thinking banks and bank venders will begin to deliver on the power of the voice as an enhancement to the user experience for both bank customers and bank employees across many services. Multimodal voice-powered mobile and web apps will be joined by multimodal smart devices powered by Amazon’s Alexa, Google’s assistant, and other leading voice technologies.”

“As banks continue to focus on improving their customer digital experience, they are finding limitations from their legacy technology capabilities. In 2019, we’ll see renewed efforts to apply digital technologies to address these issues. In particular, machine learning, robotic process automation, and cybersecurity will be areas of increased funding. The era of standalone capabilities for single systems will also begin changing. This includes enterprise-wide fraud, identification, authentication, signature, and underwriting capabilities.” Alex Jimenez, VP and Senior Strategist at Zions Bancorporation

“More early adopters will move out of pilot and into production with vrtual banking assistants, available through conversational interfaces. Digital banking platform providers will begin to offer virtual banking assistants as add-on features.” Keith Armstrong, Co-Founder of Abe AI

“As earnings pressures build in 2019, there will be a shift in digital priorities — with less focus on CX improvement and more focus on driving efficiencies across the business via robotic process automation, AI, chatbots, digitized lending platforms, etc.” Mary Beth Sullivan, Managing Partner of Capital Performance Group

“In 2019, we will see 5G Mobile technology deployed at speed, scale and impact globally. As with any technology that is 30 times faster than its predecessor, it will be more disruptive to banking than what 4G was through transforming the industry to a mobile-first financial services world — and it will happen in a third of the time” – Rocky Scopelliti, Director, Center for Industry 4.0 at Optus

“Banks will increase the study of quantum computing. Although it may take several years to deploy it in real business, these organizations will need to understand the impact of technology on areas like cryptography well in advance to plan their future infrastructure.” Makato Shibata, Previous Head of Global Innovation at Bank of Tokyo-Mitsubishi UFJ

“The exponential changes that tech breakthrough has brought about has placed the customer in the driving seat, much more so than ever before. This is truly the Age of the Customer.  In this new environment, integrated CX journeys, leveraging different tech offerings (chatbots, blockchain etc.) will definitely be an emerging trend to be reckoned with.” – Helene Li, Co-Founder, GoImpact

“The focus in the future will be on improving customer engagement through AI, digital transformation, and an orderly ‘passing of the torch’ to Millennials/Gen Z. However, I expect eking out operational efficiency gains — via bots and other small-scale changes — will be the bigger focus because of recession concerns.” – D. Scott Andrick, Sr. Director, Industry Principal – FS Sales and Marketing at Pegasystems

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Trend #10: Finding and Training New Talent

With unemployment in the U.S. reaching near historic lows, financial institutions are struggling to fill critical positions essential to their digital transformation strategies. Demand for talent now outstrips supply when it comes to openings in several key roles, from data analytics and user experience (UX) design, to artificial intelligence (AI) and software engineers. Sure, there may be lots of IT talent out there, but those people aren’t lining to take a job at your local bank or community credit union. They are knocking on doors at Google and Amazon — hot companies with deep wallets.

According to the research done for the 2019 Retail Banking Trends and Predictions report, close to four in ten organizations are concerned about job loss caused by technology and automation.

Finding the right people to drive and implement innovation will continue to be a challenge according to our research. As a result, the need to partner with outside organizations continues to be a primary focus, followed by training current employees or hiring in the traditional manner. Using innovation events like hackathons was seen as the least likely source of finding talent over the next three years.

Another option is to pull smart, ambitious employees who are interested in pursuing an IT career from other areas of the organization and get them into a formal training and certification program. The rationale? It’s easier to teach someone the tech skills they need than it is to find someone willing to work in banking. If you can convince someone to work in the financial industry, the hard part is over.

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Insights from the 2019 Crowdsource Panel

“Ongoing efforts to change banking culture will begin to gain traction; a changed mindset of customer centricity will move out of the C-suite to unify the front lines of business and technology, presenting a significantly improved customer experience.” Dan Latimore, SVP of Banking at Celent

“Instead of MBAs and traditional bachelor’s degrees, banking organizations looking for the brightest will look at those who self-learn through nanodegrees (behavioral science, data analysis, etc) or opt for informatics to solve real problems. Commitment and buy-in is already part of these individuals’ make-up. Less time will be spent on executive search for these individuals through traditional firms, with more time spent on direct connect via social channels and smart leaders.” Lisa Kuhn Phillips, VP at Allied Payments Network

“Banks will continue to increase recruitment of technology specialists in 2019 as they rush to fight rising competition and find new sources of talent. Banks will increasingly be engaged in a ‘war for talent’ as they are forced to compete with big technology groups in addition to traditional rivals in the financial services industry.”  – Eduardo Roma, a partner at Bain & Company

Regarding the use of social media, Jay Palter, Chief Engagement Officer at Jay Palter Social Advisory, said: “LinkedIn will emerge in 2019 as the most consequential social network for financial businesses, executives and leaders. If you’re not using LinkedIn effectively to stay connected, informed and visible within the ecosystem, you’re leaving money on the table.”

Closing Thoughts – A Digital Future

As we enter 2019, all of the major trends and predictions move traditional banking organizations towards the ultimate goal of digital transformation. The need to ‘”ecome digital” is not a matter of “if”, but “when”. The consumer expects the banking industry to follow the lead of technology and fintech leaders.

Digital transformation in financial services requires a departure from traditional operating models in order to develop hyper-personalized financial products and services. This movement calls for leveraging new technologies to create more frictionless ways of interacting and transacting. This transformation includes the use of the blockchain and the digitization of virtually all back-office processes, all within the constraints of an evolving regulatory environment.

The process of digital transformation is not easy. It requires a shift from legacy IT systems and traditional business models towards integrated, agile, customer-centric processes. Possibly more importantly, this transformation requires a cultural adjustment and mindset shift in application development and data flows. All of this with a focus on quality and compliance adherence, and security protocols to ensure privacy and data integrity.

Since legacy systems are incapable of supporting the future needs of a real-time digital bank, this means that many firms will need to partner with outside organizations to facilitate the innovation and changes needed. Because the marketplace is rewarding digital organizations, there is a greater need to find partners who can provide the solutions that can be implemented quickly and integrated easily. From new products to improved marketing capabilities, sitting on the sideline is no longer an option.


Closing Thoughts from the 2019 Crowdsource Panel

“2019 could be the year of grave disappointment in finance. The promise that fintech and regulation brought have come and gone, and little has changed to transform banking products into true humanized experiences for the consumer. Technology alone can’t move us along — the answers are not in crypto, open banking, cloud or blockchain, but limited by banks’ capacity for change. This is the limit which we’ve reached for now, and the only compelling promise for real transformation may be an overt GAFA-level entrant attacking traditional banking directly and raising the bar that few can reach.” Duena Blomstrom, Co-founder and CEO of People Not Tech

“This coming year will see regional, mid-market and community banks scrambling fast to address the gap that has opened between their limited digital customer acquisition journeys and the slick platforms that tier one banks have already rolled out. The panic to attract customers in the digital, mobile-first age has already begun for these smaller organizations, and will only intensify in 2019.” Don Bergal, CMO at Avoka

“Banks will begin to become invisible in 2019. The idea of completely erasing friction is turning into reality, with technologies automating the historical role of banks and solutions being integrated in the heart of everyday actions (payment) and life courses (real estate purchase, financing of a company, etc.). When all the friction disappears, banks will become invisible and their ancestral model being shaken, even annihilated.”Jean Baptiste Lefevre, Head of Digital and Open Innovation DX Lab at BNP Paribas

“In 2019, blockchain technology will enable disruption with Security Token Offerings redefining the IPO business. We will also see the creation of decentralized ecosystem platforms powered by smart contracts, opening up innovative new P2P business opportunities that were not possible before.” – Oliver Bussman, CEO and founder of Bussman Advisory AG

Thanks

I would like to thank the members of this year’s crowdsourced panel who accepted our invitation to be interviewed for this expansive annual report. The insight shared was extraordinary, and the continued support of this effort is greatly appreciated.

I would also like to thank the more than 300 banks, credit unions, suppliers and vendors who took the time to help us prioritize the trends from both 2018 and 2019. We know you’re busy, so some special thanks.

I would also like to thank Carol Ryan, Jim Booth, Jeffry Pilcher, Geoffrey Rucinski, Bill Weil and the rest of the Digital Banking Report team for the daily support, inspiration, insights and laughs. My wife, Linda, and son, Cameron, also get a huge thanks for putting up with me daily (it’s not easy).

Finally, and most importantly, I would like to thank the sponsor of this year’s research, Kony DBX. Without their support, this research would not be possible.

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