As we draw a close to 2019 and welcome 2020, what a year it has been for FinTech and innovation in the banking sector. With record-breaking investments, exponential growth and huge innovations the real question is does the innovation cycle stop there?
2020 has massive opportunities for banking and fintech with key priorities defined in the industry and key challenges that we can see as well.
MoneeMint’s founder and Chief Executive Officer Hassan Waqar states his predictions for FinTech in 2020.
Banking Technology- Legacy VS BaaS
Banks now are looking to cut down on their costs and one of the biggest costs is technology. With many banks such as RBS, HSBC, and NatWest having technical outages in 2019, the pressure is on to upgrade their technology. We will see many banks now turning off their legacy banking systems in which they have many systems all dis-integrated and will start switching from legacy to banking-as-a-service platforms in a cost-saving drive but more importantly to offer new means of banking to target the non-cheque book customers.
One question, I always ask the c-suite people in specialised banks is what will happen to your business model when your cheque-book customers die?
The interesting thing about BaaS is that because it is cloud-based and can be hosted on cloud servers such as Amazon AWS, Azure and Google Cloud integrating them with technology such as blockchain, artificial intelligence, and machine learning is now much easier and cost effective for banks to develop off.
Use of new technology
We see in the industry new buzz words such as machine learning, big data, blockchain and artificial intelligence. There has been a real challenge for banks to really understand the full use case for these types of technologies and although we see little going on in the market to adopt the technology, there is still huge opportunity to really use the technology to better offer products and services to end banking users. 2020 will see more adoption of key technologies especially around blockchain and machine learning where the use case can be used to tailor the banking experience based on what the customer does and make full use of potential. I am still looking to see how banks will utilise their customers profile to really engage with the customer and I think 2020 will be a game-changer in the industry.
Regulation is still a grey space when it comes to fintech. There is so much innovation happening that regulation has not caught up with the developments and this has been troublesome for some companies as operations can become limited. A global fintech sandbox run by the FCA has been introduced however, this does not solve the issue of faster innovation vs slower regulation and the real question is how do the regulators play catchup with their regulatory regimes in developed countries and in countries such as Malawi and Pakistan, how do regulators create and enforce regulation that is acceptable to a global standard. We will see more third-world countries enforcing regulation but also allowing fintech’s to enter the market through programs with banks and the government. This is something to look forward to if you are looking to expand in that area.
Are banks needed?
While we see many fintech’s turning in to banks and become regulated deposit holders, the question really is do we need any more banks? The answer is no.
Banking is a saturated market where there are many players like Monzo, Starling and wallet providers such as Revolout that are entering the banking industry. I don’t see the point of this. Banks need technical providers that can help them stay alive through process, technology, and system changes. I often think about this, what happens when Barclays goes down vs what happens when Monzo goes down. The impact of Barclays going down is much higher than the later and this is something that needs to be addressed. Mobile wallets are increasing and honestly speaking, I prefer Revolout than any of them purely because I travel a lot and it serves my purpose for exchange rates. Whereas if I was to use my bank the fees to use my card would be enormous.
We will see more banks launching globally and this is something we can not stop but I believe we will see more specialised banks such as MoneeMint focussing on the ethical market and some other examples. No one needs another Monzo or Starling or even better Barclays because in my sight apart from the user experience everything else is the same.
Non-Financial companies entering financial services
This must be my favorite by far. Companies such as Google, Amazon, and Apple are entering the financial services market because they see how underserved the market with a higher unbanked population globally this is the main reason behind them. What is more interesting is that you will never see these companies getting their own licenses and instead of working with another financial institution to offer the services. Guess why! REGULATION. They don’t want to have the burden of regulation on them and they want to focus on their core business.
Finally, priorities for the banks
The pace of change is increasing and shows no sign of slowing. The world is changing, people are changing, process is changing. But what is not changing is the banks.
Banks have now realised the priorities they need to focus on to stay healthy and capture market share.
I see six main priorities for banking success in 2020”
- IT operating model updated so that the banks are ready for the new normal
- Cost-cutting by retiring the legacy and moving to SaaS, Blockchain, AI and BaaS.
- Data- using data in a smart way to know more about the customer and become an intelligent bank
- Connect anywhere anytime- Build an architecture around open banking
2020 will be an interesting year for fintech with many new things coming in the market, record amounts of investment, growth and strategic partnerships increasing.
Heres to a great year of Fintech!