The forces of change have hit the banking sector with unprecedented speed and intensity in recent years, reshaping the financial environment and leaving in its wake a raft of new challenges and opportunities. If such changes are a gauge of future transformations, the world of banking in 2020 will be very different from that of today.
James Quinnild, partner at PricewaterhouseCoopers (PwC), visualises the banking industry in 2020 as being a more customer-centric business, where innovation in financial products and services is fundamental to success.
"Banks must focus their growth ambitions by putting the customer at the centre of their business and innovating to deliver new products and services," he says. "[They must] anticipate what customers value through analytics and deliver [products and services] intuitively and securely."
Quinnild sees the industry in 2020 as being heavily regulated, but with banks in a better position to react to these regulations as they will have greater experience proactively monitoring the financial risks they take. Conversely, he says that non-banking institutions will be providing products across the financial value chain, such as payments, deposit taking, mortgages and investments, which deliver a better user experience within a broader ecosystem.
The continuing development and implementation of technology will have one of the biggest impacts on the sector. In PwC's Global Digital Banking Survey 2014, 85 per cent of respondents cited addressing customer experience and targeting unique customer and market needs as being the most important factors driving their digital strategy. "This will require anticipating and meeting customer's needs through data analytics and digital technology," Quinnild says.
He adds that while smartphone use is rising across the globe, in Asia, the market is changing more rapidly and at an unprecedented scale. This is especially true on the mainland, home to roughly a third of the world's smartphones, but with a smartphone penetration rate of only a third.
"A global retail bank recently highlighted that 98.5 per cent of all its transactions in Asia happened outside of branches, with seven million customers registered for online banking," Quinnild says.
In the lead up to 2020, the competitive landscape is expected to move from a market dominated by banks with the best branch footprint to banks - or other non-traditional players - which offer an anytime, anywhere service which is integrated into customers' day to day lives.
Alibaba and Tencent, for example, have successfully launched financial service products into the local market. According to Quinnild, these products are different as they are extensions of a customer's existing lifestyle - they are enabled by digital technology and offer customers better returns from an existing trusted brand.
"Differentiated customer experience and trust in their brand is something which traditional banks are currently struggling to address," he says. Research by PwC shows that 55 per cent of bank executives view non-traditional players as a threat to traditional banks, and fewer than 20 per cent of executives feel well prepared for the future, he adds.
