But many banks handled the challenges well. Therefore, despite the higher rates of digital customer engagement, keeping customers satisfied, retaining them for the long haul, and gaining a greater share of wallet may still be as daunting as ever. Author of the book Smarter Bank and the Fintech Snark Tank on Forbes, Ron is ranked among the top fintech influencers globally, and is a frequent keynote speaker at banking and fintech industry events. U.S. Bank rolls out new branch formats for digital age. Banks should also buttress risk sensing. Last, the finance organization should help manage climate risk. View in article, World Bank, “COVID-19 to add as many as 150 million extreme poor by 2021,” press release, October 7, 2020. It should also play a fundamental role in improving productivity in a virtual environment, boosting learning, creating flexible teams, sharing knowledge, making information flows efficient, and promoting new forms of collaboration across the organization. According to research from Atos, the four most transformational challenges and opportunities for the future of banking through the next 5 years include:. 2. Power, September 25, 2020. Undoubtedly, agility goes hand in hand with resilience. The basic rationale for M&A may remain the same as in recent years, but pandemic economics have altered the catalysts and inhibitors. The most obvious is that banks, globally, need to counter the strong headwinds to achieve profitability, given compressed NIM from lower rates and lower demand for loans. Each year, financial health advocates exhort the industry to focus on consumers’ financial health, relying, however, on nonsense like “half of Americans can’t cover a $400 emergency expense.”. COVID-19 has revealed that many banks still have outdated organizational structures and hierarchies. This feature, largely provided by challenger banks, enables account holders to receive paychecks up to two days in advance from standard payday. Of course, this is a broader cross-industry problem that banks can work with clients and data vendors to address. All Rights Reserved, This is a BETA experience. To attract this talent, banks could need to offer agile work environments and new technologies that would shift away from having employees handle repetitive and mundane manual tasks, allowing them to focus on analytical, creative, and strategic activities. Leaders must recognize that technology deployment in remote settings can be a two-sided coin: videoconferencing fatigue on one side, the need for social contact on the other. Forced to respond to some exacting realities, banks learned valuable lessons in the early months of the pandemic. Needing to make these investments in a low interest rate environment, some banks, especially smaller ones, may pursue mergers and acquisitions (M&A) opportunities for scale. As I just mentioned, digitalisation provides opportunities for efficiency gains and new business. Enhancing data security and designing effective privacy management programs through a combination of programmatic and technology capabilities are also top priorities, according to the survey. Social login not available on Microsoft Edge browser at this time. While reported incidents of conduct risk are not yet widespread, 72% of respondents said their institution was looking into programs that reduce conduct risk. Four risks could make 2021 the toughest year for banks since 2009, says S&P The ratings agency currently has a “negative” outlook for about one third of global banks, with many downward revisions... S&P’s base case is for a sharp rebound in global … For instance, educating consumers on better debt management and being empathetic in debt collection efforts could help strengthen banks’ customer relationships and engender trust. EY's annual bank regulatory outlook reveals emerging non-financial risks that will influence growth and future investment. In our 2021 banking and capital markets outlook, 200 industry leaders weighed in on their companies’ COVID-19 recovery efforts. Risk Management Conference. And despite the global uncertainty, M&A should move up on the bank executives’ agendas. View in article, Bank of England, “Operational resilience: Impact tolerances for important business services,” December 5, 2019; OCC, “OCC highlights key risks for federal banking system,” June 29, 2020. Financial health is going to take center stage in 2021 for a few reasons that have nothing to do with what the advocates talk about: The combination of these three factors will spur innovation in the fintech community to build financial health platforms. Customers were served, employees were productive, and regulators were reassured. Institutions should also focus on workplace redesign to help strike the right balance between in-person work environments and remote arrangements, which should be based on the specific needs of various roles or jobs. Concurrently, banks should continue to explore how technologies, such as cloud, machine learning, robotic process automation, and distributed ledger technology, can simultaneously contribute to significant cost savings, while also helping increase speed, improve accuracy, and provide scalability. To bolster revenues, many banks try to leverage fee income as the primary driver of growth, but such prospects may be limited, given the somber macroeconomic climate and surge in industry competition. Platforms can offer users interest-earning accounts eligible for FDIC insurance and enable customers to have near-instant access to revenue earned through Stripe, and then: 1) spend it directly from their balance with a dedicated card, 2) transfer it via ACH or wire transfer, or 3) pay bills.”. Establishing new talent models should facilitate flexible, self-organizing teams that come together for a common purpose. User behavior analytics and machine learning can further help detect potential anomalous behavior on the network and individual endpoints. Caution should be exercised, and due diligence efforts may need to be modified to account for COVID-19’s unique impact on asset quality and industry competition. Anna is the Global Banking & Capital Markets Practice Leader for Deloitte, with the responsibility for setting and executing the global banking strategy. Banks’ healthy capital levels before the pandemic also helped mitigate the negative impacts from the crisis and should pave the way for the global economy to thrive in the future. Financial services clients expect meaningful and personalized experiences through intuitive and straightforward interfaces on any device, anywhere, and at any time. Lastly, M&A demand may also be spurred by private equity investors, who will want to deploy their growing dry powder, now that valuation levels have come back. Online business and making money online by smart phone. She has been a member of the Swiss Executive team since 2010 and has over 25 years of experience serving financial services institutions in Europe and the US. Cybersecurity remains a persistent challenge for the banking industry. Scale could become an even more dominant consideration: Banks will likely need economies of scale to survive, rationalize costs, and thrive. They may discover that such actions may also yield commercial benefits. The path is difficult—resources to develop partnerships are limited, integrating into the core is a massive job, and developing other approaches from scrap is time-consuming. Knowing which risks to focus on is key, but so is understanding the implications and the right steps to take. View in article, S&P Global Market Intelligence, “Tech in banking 2020: The race to digital adoption,” July 2020. New solutions, such as knowledge graphs, are available to extract the full value of data by addressing data fragmentation. DTTL and each of its member firms are legally separate and independent entities. For instance, the PCAF has developed a global carbon accounting standard, while the Global Sustainability Standards Board is setting standards for reporting.14 But there still isn’t enough coordination and consensus across regions and within the financial services industry.Other persistent challenges are insufficient data and the use of imperfect metrics to assess sustainability activities, performance, and outcomes. In total, we analysed 412 current risks and 281 emerging risks to create this report. But only 40% and 43% expect increases in investment spend on automation and AI, respectively. Opinions expressed by Forbes Contributors are their own. ... emerging risks, and horizontal risk assessments in the Semiannual Risk Perspective report. There are also new risks emerging on the horizon, including those related to the rapid advancement of technology. Indeed, our respondents indicate spending on cloud will increase over the next year. While banks have made good progress on sustainable finance, there is much more that can be done. Conference | March 24, 2021 March 24-26, 2020 | Nashville, TN | An annual opportunity to assess the current risk climate, what's on the horizon and … In addition, banks could incorporate artificial intelligence (AI)-based banking assistants and sensor-based augmented reality and virtual reality experiences. . What is even more impressive is the spike in digital sales—the holy grail in digital banking. APAC to see a ‘platform surge’ APAC is already home to some of the largest digital platforms. Banking-as-a-service has become a popular term (and service) and refers to enabling a company—usually a platform—to embed banking services into their offerings.