In the fast changing world of retail banking, what might the customers, investors and commentators of British retail banks expect to see in 2016?
At Fujitsu, we expect developments to be particularly noticeable in five key areas.
1) 2016 will be the year of choice for customers
The emergence of digital-only banks may appeal to the tech-savvy who wish to bank remotely using mobile and internet apps. But even though who value being able to visit a branch but crave a change will have a wealth of options among new entrants that can cater for their needs.
However, those new suppliers will have to work hard to woo customers from the traditional players. This is a result of increased competition from the generous current account switching offers available in the market.
2) New payment methods to boom
We expect the use of contactless payments to continue to blossom, driven by increasing levels of customer confidence and growing comfort in using this payment option.
We also expect to see further mobile phone-based wallets being launched in coming months, in competition to Apple Pay. And we expect to see further new entrants targeting payments, given the high returns that are still to be found here.
3) Payment Services Directive 2 to shake-up market
One area in particular to watch is the impending arrival of PSD2 (Directive on Payment Services), which will be formally adopted by the EU Council of Ministers shortly.
Implementing it over the two year permitted timescale will require investment. By authorising the use of Application Programming Interfaces (APIs) and Account Information Service Providers (AISPs) it will reduce revenue streams and introduce further competition.
With many established retail banks looking to rebuild trust after the scandals of recent years, developments that potentially open up existing relationships to other organisations will be unpopular. However, this will be welcomed by many new competitors already stalking the sector.
4) Security challenges here to stay
At Fujitsu, we’re fully expecting security to remain a hot topic throughout the new year. Recent data breaches have highlighted how vulnerable some organisations are to cybercrime.
The consequences can be significant for customers and institutions alike – financial loss, reputational damage, and an adverse impact on the company share price might all be expected. The fact that hackers only have to get lucky once, while banks have to remain vigilant and ahead of the criminals all of the time, means that this will remain a key area of management focus in 2016 (and for years to come).
5) Interest rates – further talk, but no change
Finally, we expect to hear further talk about when UK interest rates will rise (although it may be 2017 before rises actually occur).
Commentators have spoken about the timing of expected interest rate rises for some years now; it is clear that the most likely next movement will be upwards.
While this could be in the final months of 2016, any slowing in economic growth could yet push a rise in 2017. But, nevertheless, households will need to ensure that they are fully prepared for when the upswing in rates finally arrives.
Do you agree? Are there any other trends you expect to see for retail banking in 2016? Leave a comment below and let me know your thoughts.
In addition to advising numerous UK and continental European financial services organizations, Anthony has also held senior line management positions, including as Director of Strategy for a FTSE-100 bank; Deputy Managing Director of a UK commercial bank; and Managing Director of a UK asset finance company. He has also worked in central government, advising Cabinet ministers of the development and passage of company legislation.
Anthony joined Fujitsu in February 2012.