26 Oct 2017
Posted in Insurance
Banking in the midst of a technology driven revolution which could cost a third of banking jobs by 2040
The four day Money20/20, event is currently taking place in Las Vegas – 22-25 October 2017. Money20/20 is the world’s largest marketplace for ideas, connections and deals in Payments and Financial Services, and on day two it turned its attention to the future outlook of the banking sector.
Daoud Fakhri, Prinicipal Retail Banking Analyst at GlobalData, a leading data and analytics company, attending Money20/20, commented: ‘Part of day two’s agenda focussed on payments, commerce, security, and banking. Every speaker agreed that banking is in the midst of a technology-driven revolution lead by AI-driven automation and fintech challengers. But there were different opinions on how much this would affect the sector with some speakers pointing out the risks to banks’ very existence and others who believe that ultimately banks will reach an accommodation with the challenges ahead.’’
The banking section opened with a lively presentation from host Chris Skinner who issued an impassioned plea for banks to adapt or die. He explained how a third of banking jobs will disappear over the next 20 years as a result of AI-driven automation, and how a high proportion of US banks are still running core systems that are so old the programmers who know how they work are starting to die of old age. He went on to urge banks to address the lack of diversity on their boards, citing the fact that 94% of senior decision-making personnel have no knowledge of technology.
This set the scene for the next session, ‘Blockbuster Banking: When is the Netflix Moment?’ Panelists from a number of new entrants tackled the question of whether banks will be rendered obsolete by fintech challengers. There seemed to be agreement that banks and fintechs need each other, with the former offering scale, trust, and security and the latter dynamism and customer-centricity.
Fakhri commented: ‘‘An interesting point raised was that with consumers no longer primarily choosing their bank on the basis of branch location, brand will become a far bigger driver of choice. However, banking being one of the least differentiated industries in this respect may leave incumbents vulnerable to attack. For any provider, old or new, to succeed in the new environment a focus on trust, prioritizing customer outcomes ahead of cross-selling, and listening to customers will be essential going forward.’’
In a fact-filled presentation, Jeff Yabuki of Fiserv identified the four key trends that will drive change in banking. Namely:
• Digital experience:
By 2020 there will be 50 billion connected devices in existence worldwide. This makes a digital engagement strategy essential, but with 60% of consumers still using branches, an omni-channel approach is needed.
• War for payments:
Non-cash payments in the US amount to $75tn per year, creating a market worth $400bn. By 2020, P2P payments alone will be worth $300bn.
• Reimagining lending:
How will loans be decisioned and what assets will be financed? Car ownership, for example, may decline, leading to reduced demand for motor finance. $600bn in interest income in the US is driving significant interest from alternative lenders.
• Power of analytics:
Data creation is growing exponentially, with 90% of all data in human existence generated in the last two years. Combining transactional data with machine learning will enable banks to improve customer engagement.
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