2019 has been a big year for banks and FinTech’s alike. And as we move into a new decade, we’ve rounded up what we think are some of the key trends in payments coming out of 2019.
Transformation. Thinking beyond BAU.
Deloitte’s 2019 Banking Industry Outlook said “there may be no better time than now to reimagine transformation”. This has rung true throughout the year and we expect will continue into 2020. What this means is that in key areas such as core system renewal, adoption of digital technologies (including blockchain) and risk management, banks have the opportunity to do more than just the status quo required to meet new mandates or improve systems.
Take for example the adoption of ISO 20022. While Deutsche Bank cautioned earlier in the year that ISO 20022 migration was a bigger undertaking than many realised, there’s another way to look at it. ISO is about having more information on each and every transaction. This means data. And how banks handle data is usually siloed and difficult to navigate. Not to mention that the use of email still prevails when it comes to data sharing.
To look instead at ISO 20022 adoption as a transformative opportunity means reimagining how the bank collects, stores and shares payments data both internally and externally. The question is why look at just the data that fits into an ISO 20022 message when this is a unique opportunity to take payments data beyond just reporting or structured fields. Why not look at all data needed across the payments chain and handle it differently, outside the message itself.
Looking at data in a ‘big picture’ way is one of the key opportunities we see for financial institutions in 2020, as new technologies such as blockchain enable it to be handled differently, without significant impact on existing systems or underlying message formats.
A new perspective on risk
How to improve the accuracy of risk and reporting has been a key focus in 2019 and will continue into 2020. Here in Australia, the focus was on conduct and performance at the start of the year, with the Banking Royal Commission report into Misconduct in the Banking, Superannuation and Financial Services Industry being tabled in February. As we close the year, we’ve shifted towards reporting and financial crime risk, with AUSTRAC looking to Westpac to account for 23million breaches of its anti-money laundering and counter-terrorist financing rules.
The outcome here is that banking is changing and technology will play a key role across all areas as regulators crack down, rules get tighter and more oversight is demanded. The impact for banks of course is the need for more transparency, something that isn’t easy to achieve with the current combination of legacy systems, processes and strategies. In particular when you think about the increasing need for accurate, transaction level data to be identified and reported. How banks handle the need to maintain data integrity internally across systems and processes and externally as it moves between parties, is going to be the difference between compliance and massive regulatory fines. Not to mention the potential for huge damage to reputations.
FinTech: Collaborator or competitor?
As a FinTech/RegTech (and someone who’s worked in ‘FinTech’ when it was just technology that got sold to banks), the word has gone through a transition in 2019. There was a time when it represented only competition, threatening banks with loss of revenue or market share. Today, we see a much closer collaboration between banks and technology companies, as they recognise that they have complimentary offerings that help deliver a stellar digital customer experience.
In 2020 we hope to see the word FinTech come to signify the alignment of financial services and technology, whether that be innovations created by banks, technology companies or a mix of the two. It shouldn’t be reserved for technology companies that sell financial services or solutions to banks, as some of the best innovations of this year have come from collaborations.
So, are banks ready for FinTech partnerships? Are FinTech’s? There is still some ground to cover, but the innovations, speed to market and customer benefits are plenty, and there is appetite from both sides to make collaboration a success.
What else to watch out for in 2020?
There have been so many changes, opportunities and forward leaps in 2019 that it’s too hard to cover them all here. But here are a few key opportunities we see for 2020:
- A continued shift away from ‘replacing the rails’, towards making what is already working, work faster, smarter and more digitally
- Using technology to solve the financial inclusion challenge in high risk markets, ending the trend of correspondent banks closing banking channels due to lack of trust or information
- Regulatory mandates around cryptocurrencies, bringing the KYC and KYT requirements in line with those for fiat currency
As we enter the new decade, I look forward to discussing each of these with you in the New Year.
Clare Rhodes is Identitii’s CMO based in Sydney.