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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:

The Americas

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.

Europe

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.

Asia-Pacific

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.

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2019 has flown by, and even though it feels like we just welcomed in the new year, there’s less than two weeks to go until 2020! This year was incredibly exciting for the Provenir team as we expanded into Canada, opened offices in San Francisco and Miami, grew our Europe and Asia-Pacific teams, and extended our footprint in Latin America.

As a global company we love to learn about the industry trends and innovation opportunities our teams are witnessing in their respective regions. It’s a great chance to learn from regional trends and spot new innovation opportunities! So, we asked our team of sales executives from around the globe to share their answer to the following question:

The Americas
Brendan Deakin, Sales Executive – Northeast US Region

The industry saw three key areas of innovation during 2019:

1. The launch of Open Banking/API driven access to financial services is driving up innovation of, and consumer access to, personalized banking services vs. a historical one-size fits all/product penetration focus by most banks.
2. More and more established players are committed to the digital channel like never before. This is being done to fight the competition from new FinTechs, which continued to grow in number throughout the year.
3. AI and Data Science are taking hold, banks are looking to leverage the massive amounts of data they generate through customer interactions, product utility, etc. This is actually creating a new paradigm in the market, where banks can look to reduce their reliance on 3rd party vendors like Credit Bureaus in the future by leveraging all of the “on us” data on consumers. This will help them build better cross-sell and up-sell opportunities for existing customers while also building acquisition strategies based on these massive data sets.

Dominic Schaffer, VP of Sales – US West Region

The US will look back on 2019 as a landmark year for alternative data! In their recent statement 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, announced support for the use of alternative data in credit underwriting. In summary, the agencies said that alternative data can:

•  Improve the speed and accuracy of credit decisions
• Help firms evaluate creditworthiness of people who might not be able to get credit in the traditional system
• Help users get better pricing & terms

With the use of alternative data greenlit, when used in compliance with existing rules, lenders can explore a huge range of data to drive smarter decisioning. We’ve also seen a big focus on cash flow analysis—basically analyzing a user’s income and expenses over a period of time to figure out the borrower’s capacity to repay a loan.

Julie Mannella, Director of Sales – Canada

With the Canadian economy being driven by the consumer-first mindset 2019 saw increased pressure for businesses to deliver world-class user experiences. Consumers are demanding that their financial institutions deliver a frictionless, convenient digital experience. They want single-platform engagement and easier access to the products and services, with rapid delivery and value delivered for their money. This is leading organizations to rely on their IT team to drive transformation and innovation in more ways than ever before, putting a strain on these business units to deliver.

Gaston Peralta, Director of Business Development – Latin America

2019 was a big year for financial services in Latin America with an increase in venture capital and investments from large financial institutions into FinTechs is a highlight. Capital investments in startups and FinTechs are surpassing the 3 billion USD mark in Latin America alone. This kind of capital has never been seen before according to Andre Maciel from Softbank, which manages a 5 billion USD investment fund dedicated solely to Latin America. Maciel also claims that they have their mindset on 300 additional capital contributions to Fintechs in LATAM, with 200 of those in Brazil.

The expansion of nontraditional lenders, in the form of marketplace lenders, replacing banks for previously underserved markets, was also a key shift in the industry. Lenders are exploring the inclusion of Social Media to create financial identities and data from alternative sources has replaced the use of traditional credit scores to extend credit options into sub-prime and thin file markets.

Europe
Chris Kneen, Regional Sales Manager – United Kingdom

Over the last 3 years, there has been a surge in new challenger banks entering the UK market, set up to disrupt the sector and compete with the incumbents. This growth has accelerated in 2019 with Monzo, Starling Bank, and Revolut gaining a higher volume of customers. Setting up an account has become simple, fast and frictionless with innovative use of video identity verification.

2019 has also seen a second wave of challenger banks that are challenging the first breed including Tide, Bunq, Monese, Curve and Tandem. Natwest has also launched its standalone brand Bo to compete in this segment. Increased competition is great for innovation, but whilst the new challenger banks are gaining customers in impressive volumes, there’s a question around how many are switching their primary accounts. Monzo has 3 million UK customers, out of which, 1 million customers have fully committed to using a primary account. This 1 in 3 ratio will be something Monzo will be looking to improve on in 2020. Figures announced recently also show that only 14% of Curve’s 500,000 customers are ‘active users’.

Marcus von Rahden, Regional Manager – Central and Eastern Europe

Throughout 2019, the Central and Eastern Europe market has been fast-moving, with lots of innovation across the finance sector. There’s been continued investment and expansion in larger Fintechs including Numbrs, N26, Wefox, and Adyen. We’ve seen comparison platform Check24 apply for a banking license, several new mobile-first consumer and SME lenders launch to market and open banking payments solutions developed following the introduction of the PSD2 regulations.

Inigo Rodriguez Navarro, Regional Sales Manager – Iberia

2019 has seen many banks and lenders working hard to boost innovation following the introduction of the PSD2 payment regulations. Although there have been delays in publication of the technical standards the new regulations created an opportunity for disruption. Institutions such as BBVA have been leading the way in Spain, partnering with new FinTechs to create disruptive models through open APIs and platforms. The transition period is set to continue throughout 2020 when further technical requirements are rolled-out.

The Spanish FinTech ecosystem is growing tremendously and the sector generates over 5,000 jobs, which is set to double in 2020. The emergence of ID Finance, Bnext, and Pagantis shows the growing strength and diversity of the market, alongside the established banks.

Patrick Radise, Senior Sales Executive – Nordics and Baltics

Many new FinTech and startups entered the lending market across the Nordics and Baltics in 2019. They compete with better speed, technology, and lower cost/overhead. Klarna and iZettle have been great examples of payment businesses that have scaled their models globally in a rapid timeframe.

The use of automation and AI/ML grew. Many, especially in the Baltics already have automated consumer loan processes with many aiming for a 95% automation rate for consumer products and a slightly lower percentage for the B2B segment. Most banks are already using machine learning technology for areas like Anti Money Laundering, Fraud, and Customer Relationship Management, and exploring its use in lending processes.

Finally, there’s been an increased focus on Green loans, which are increasingly attracting Millennials and environmentally conscious people.

Asia-Pacific
Tim Kerslake, Account Director – Australia and New Zealand

For Australia, the most significant event in 2019 was the delivery of the final report of the Royal Commission into Banking (Feb 2019) and the subsequent consequences. Following the report, two of the region’s major banks—National Australia Bank and Westpac—had senior leadership changes, we’ve seen increased vigilance from the regulators ASIC and APRA, and there’s an increased focus on responsible lending practices.

Australia and New Zealand saw the continued rise of the Buy Now Pay Later segment both in terms of growth of transactions/value as well as the number of entrants. This sector is led by AfterPay which has commenced a global expansion. We also saw an announcement by Klarna that they will launch in Australia and an investment by Commonwealth Bank into Klarna.

Patrick Tan, Regional Sales Director – Singapore

Overall in 2019, the banking sector has been playing catch up with FinTechs by either using their technologies or collaborating with them. Banks are also increasingly investing in startups, hoping to catch the latest technologies and keep them close by.

2019 also saw a huge rise in mobile digital transactions, which helped drive an increase in mobile payment apps that facilitate the transfer of funds for purchases. For example, digital and mobile payments make up 30% of the FinTech industry in Thailand.

The potential for FinTechs to disrupt financial services is tremendous. Banks, who are slow to market and heavily regulated by central banks, have struggled to grow adoption of bank services in the region with only 27% of the adult population owning a bank account. 2019 saw FinTech companies, who are nimble and less impeded by regulations, tap into this lack of access to financial services with Grab and other similar tech companies venturing into the digital payments sector.