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UK Banking (Trends (Data (Key step in any of this digital transformation…
UK Banking
Trends
Launching Digital Challenger brands to compete with new entrant Fintechs - latter taking 15% of revenue and 33% of new revenue in UK retail banking
Unbundling
Horizontal specialisms
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e.g. Monzo, Startling, ... -
secondary account and card providers
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Data
Key step in any of this digital transformation is getting a better handle on data to extract the greatest value from technology investments. No doubt many banks have established dedicated data management programs, but success up to this point seems modest at best.
The data challenge becomes more daunting as data integrity increases in importance. Regulatory expectations will further elevate the role of effective data management. PSD2 mandates that banks make customer data more accessible to third parties, while GDPR forces banks to ensure the privacy of their customer data. Not managing the conflicting priorities could raise operational risk for banks.
The challenge for many banks is that data,
for the most part, is being managed in siloed,
disparate systems, which complicates banks’
ability to know and serve their clients.
building robust control frameworks to ensure they can progress with open banking initiatives while at the same time protecting their brands
Open banking partnerships = a new range of customer-centric, digital-first services
Technology
ML & AI
not to nag (e,g, 'don't buy ...') but to provide financial wellness feedback - e.g. you're spending more on utility bills than average
Artificial Intelligence (AI) – think new banking 'skills' for Amazon Echo or Google Home that allow customers to 'talk' to their bank through voice-enabled apps
AI to inform business decisions, create innovative payment experiences, and power new digital finance products
AI and machine learning becoming mainstream as firms seek increased efficiencies and more personalised services
AI can even analyse photos, videos and audio files to aid in the fight against fraud detection, drawing in information from myriad sources to make much more accurate predictions and support customers in their fight for security and access to finance.
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Hodgepodge of systems, platforms, software, and tools
Business
Payments services - divergence and convergence.
- Divergence through service differentiation enabled by digital disruption and open banking partnerships.
- Convergence through technology integration.
We've already seen this through mobile payments where mobile phone, banking and telecommunications systems have converged around the customer experience. Next up will be real-time payments at the point of sale, where organisations will give consumers greater choice over how to pay. This will require context-rich front-ends to payments platforms that can differentiate between debit, credit and real-time payments; as well as closely integrated back-end infrastructures that enable easy and low-cost payments switching.
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intelligent payment solutions that drive consumer loyalty while incorporating revenue-generating services for merchants
Invisible Payments
Barclaycard trialled Dine & Dash in partnership with high street restaurant chain Prezzo, allowing diners to pay simply by walking out of the restaurant at the end of the meal
Amazon Go stores, where customers simply walk into the store
IoT and smart appliances opening up opportunities for many different payment touchpoints - but unless these devices could become the weakest link in the chain for fraudsters.
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Lloyds
Lloyds Bank plc plans to deploy a new core from cloud banking provider Thought Machine in 2019 as part of a project to lower its risk and increase its innovation potential. The bank has announced it will enter the development and deployment phase of its massive core-revamping plan early in the year ahead. For this lofty project, the bank tapped its London neighbor Thought Machine, and also made an £11 million ($14.6 million) investment in the company, worth a 10% stake last month.
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Drivers
Regulatory
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the implementation of Markets in Financial Instruments Directive II (MiFID II, fee transparency) has hit some speed bumps
Compliance modernization a priority in 2019
- Making regulatory systems already in place more efficient for business strategy.
- Throughout all compliance efforts, banks should prioritize soundness and safety.
Environmental
March 2019 Brexit deadline - contingency plans, possibly preparing for the worst - either a no-deal or hard Brexit
APAC region
Conduct and culture
- China’s banking regulators issued extensive guidelines on employee conduct management
- Malaysia’s central bank proposed an accountability framework for senior officials in financial institutions
Foreign investment and recovery and resolution planning
- India’s central bank, for instance, introduced a new framework for the resolution of stressed assets, and
- Hong Kong updated its recovery planning legislation
Historic step to merge banking and insurance watchdogs (in China) might help Chinese regulators better tackle the mounting risk in its financial system
MiFID II, which took effect in January 2018, to improve the functioning of financial markets in light of the financial crisis and to strengthen investor protection. MiFID II extended the MiFID requirements in a number of areas including:
- new market structure requirements
- new and extended requirements in relation to transparency
- new rules on research and inducements
- new product governance requirements for manufacturers and distributers of MiFID ‘products’
- introduction of a harmonised commodity position limits regime