In our last blog, Provenir sales executives from around the globe shared snapshots of the biggest changes to happen in the financial services industry in their region in 2019. This time our teams based in North America, Latin America, Europe, and the Asia-Pacific region, share their thoughts on what 2020 will bring for the industry. We asked:
What innovation opportunities will lenders be exploring in 2020?
Brendan Deakin, Sales Executive – Northeast US Region
Based on what I saw at Money 2020, it appears the industry is going to be very focused on Fraud/Cyber crime over other innovations. However, this is only a subset of the key priorities faced by banks in 2020 and beyond. I would suggest we’ll see more of the same in 2020 as in 2019.
a. Product Personalization – more and more digital product offerings and channels, where banks will market and serve consumers and SMBs uniquely (1 to 1) vs. as a segment or group.
b. More and more partnerships between established/legacy banks and FinTechs to build unique value propositions for various consumer segments. I would also bet there will be some consolidation in this space as well.
c. Payment innovation globally will continue to advance. I see the use of smart appliances (fridge, cars, IP enabled devices of all kinds) as payment tools. I also see more convergence within the POS space, where merchants, payment networks and others continue to give consumers choice at the register.
Dominic Schaffer, VP of Sales – Western US Region
The recent joint statement from the Federal Reserve Board, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration, announcing support for the use of alternative data in credit underwriting will fuel more innovation in lending. The sub-prime and thin file markets will see the biggest benefit with better loan products and services available for consumers and an improved customer experience. The challenge will be for businesses to effectively use alternative data to make more informed decisions and manage risk while complying with federal regulations.
Julie Mannella, Director of Sales – Canada
2020 will see lenders cutting costs by moving away from legacy systems and building the technology stacks needed to improve efficiency and support single-platform engagement. Given the rapidly evolving landscape of big data and access to the same, it will also be important to contemplate the architecture of these systems to connect to many types and sources of new data becoming available.
Gaston Peralta, Director of Business Development – Latin America
2020 in Latin America offers huge innovation opportunities, especially as lenders harness alternative data, social identity, and technology to derive credit scores.
The opportunity to reach more and more of the underbanked market using technology is immense…The areas that will see more growth are the ones who make the most intelligent use of data and expand the use of AI.
We will see a new era of advancement for the use of technology in the form of regulations and the launching of RegTech. FinTechs can benefit from the expansion of regulations if they capitalize on their flexible technology and digital-first approach to respond quicker than traditional banking institutions to the new rules.
Additional monetization opportunities are available to innovative organizations who commoditize services as well as products. For example, the low cost of FinTech could convert previously neglected banking services into very effective financial products.
Chris Kneen, Regional Sales Manager – United Kingdom
There has been an explosion of data in the last couple of years and the banking sector is currently one of the top investors by industry in big data and analytics solutions. The amount of data being generated is vast and unprecedented via card transactions, cash withdrawals, e-commerce and credit scores. Understanding how that data can be used, within a regulatory compliant framework, will be critical to staying competitive in 2020. I expect the sector to continue to invest heavily in data science and intelligence functions to really understand the value that can be gained.
There has also been a significant growth in the ‘buy now pay later’ e-commerce sector with Klarna leading the way globally. There are some huge benefits to the consumer, the purchasing experience is slick and it has changed the way merchants operate online. This growth is set to continue with new entrants looking to compete in this sector and push innovation further. Importantly, I expect there will be additional oversight and scrutiny from the regulator to prevent increasing levels of consumer debt and increase awareness of the risks in borrowing.
Marcus von Rahden, Regional Manager – Central and Eastern Europe
The fintech and traditional banking ecosystem is growing quickly in strength across many European cities including Krakow, Sofia, Amsterdam and Vienna. Klarna have recently announced their move to create a tech hub in the heart of Berlin as a centre of innovation. We also have clients that are exploring the use of social media to facilitate direct consumer loan applications – this is really exciting. These cities are attracting exceptional talent from across the world and I see the sector growing stronger with the development of new disruptive technologies. The combination of big data analytics, cloud tech and machine learning has the potential to change the whole banking industry in faster and more disruptive ways than ever before.
Inigo Rodriguez Navarro, Regional Sales Manager – Iberia
There is some really interesting work been done on machine learning and this is an area I see lenders developing further throughout 2020. Through their brands Plazo and Moneyman, ID Finance have developed lending products to SMEs and the underbanked that that are built on sophisticated machine learning technology. Using this technology to address financial inclusion is really exciting for the industry. Business and consumer lending remains the main area of focus for customer innovation, but I believe there’s an opportunity to translate this across other sectors including utilities and insurance.
Patrick Radise, Senior Sales Executive – Nordics and Baltics
A major driver for banks in 2020 will be a strategic response to PSD2 EU regulation. Almost every bank seems to be massively increasing their levels of investment in innovation in their digital channels and partnerships with FinTechs.
Automation and speed will be essential to compete as we move forward and AI/ML can be a key part of the technology for achieving that. To add value to the end customer, I believe leading banks and FinTechs will be the ones that integrate AI/ML/Automation into all parts of the bank based on the customer journey and experience for a proactive lending service.
Regulation for AML/Fraud is likely to drive digital development/payments and automation.
Tim Kerslake, Account Director – Australia and New Zealand
In 2020 lenders, including existing credit/debit card providers, will need to either adopt or respond to the rise of Buy Now Pay Later financing. A number of existing firms are looking at ways of doing so, such as CBA partnering with Klarna and Latitude Financial Services launching LatitudePay. I expect others to respond.
Several neo banks received banking licenses and established themselves in the market in 2019. In 2020, we will see their offerings launched in more detail, and beyond transactional and saving services we should start to see more financing/lending offerings come into the market.
Open Banking is scheduled for 2020, it will provide greater data access for assessing lending, particularly for neo banks and FinTechs.
Patrick Tan – Regional Sales Director – Singapore
With more than 400 million people using the internet every day and over 80% of it on their mobile phones, there is a significant demand for mobile wallets, mobile payment apps and mobile banking. The governments in Southeast Asia are pushing for a cashless economy. Vietnam’s government has also made a target to become cashless by 2020, while Indonesia aims to be the largest digital economy by 2020. There are other sub-sectors in fintech like insurtech (insurance technology), regtech (regulatory technology) and robo-advisory personal finance platforms, that are still continuing to emerge.