The mission in financial services today is driven by the need to improve customer engagement in selling, delivering, and servicing financial products, payments, and services. Included in this mission is the need for some financial service firms to improve their “brand trust,” providing their customers with a more transparent and secure environment. While some of this will be driven by internal strategy, much of it will be dictated through regulation and guidance. Driving all this is a concept called “connected banking,” which is forcing the industry to disrupt its own business model by connecting to adjacent markets in order to expand the relationship with its customers and provide an experience that is being shaped by industries outside of financial services.
Despite the significant changes already witnessed in the financial services industry over the past 10 years, the changes from 2019 to 2024 will be unprecedented. The impact of a scaled-up digital transformation (DX) economy on our industry will see more enhanced customer experiences, a proliferation of next-generation security solutions, the expansion of cognitive and artificial intelligence (AI) technologies, and the modernization of back-office infrastructure using open application program interfaces (APIs) frameworks, all aimed to improve efficiency and overall profitability. As part of this digital economy, new rules for competitive success will be built, there will be new roles for IT leaders, and how financial institutions (FIs) interact and engage with fintech vendors will be presented with new requirements and challenges to the status quo.
This IDC FutureScape is a planning tool for technology leaders and their line-of-business (LOB) counterparts to use in their IT strategic planning efforts:
- This study provides the strategic foresight needed to inform technology-based strategies by laying out our top 10 predictions.
- Each prediction supports a five-year planning process by identifying the timing on the x-axis, and the overall cost and complexity to address on the y-axis.
This IDC Financial Insights study presents the top 10 predictions for the financial services industries. Each prediction is shaped by a common set of key drivers that provides a planning tool for technology leaders and their line-of-business counterparts to use in their IT strategic planning efforts. The challenges of the industry today continue to be shaped by trying to match fintech innovations, meet customer expectations, and protect the brand while resources are scarce and regulatory burdens persist.
In no particular order, our 2019 predictions for the worldwide financial services market are as follows:
- Prediction 1: By 2020, 60% of all banks will have invested in IoT and NFC to address rising expectations, offering customers and employees wearable authentication for in-branch teller system and ATM transactions.
- Prediction 2: By 2021, 45% of all banks will have invested in automated GRC applications to improve operational performance and substantially reduce the operating expenses associated with manual processes.
- Prediction 3: By 2022, 25% of personal and commercial lines carriers will have piloted and/or implemented use cases that combine blockchain and IoT to make frictionless insurance sales and service a reality.
- Prediction 4: By 2024, passive robo-advisors will be the standard for the lower-wealth segments, while 40% of the higher-wealth segments and institutional investors will seek alpha from active robo-advisors 4.0.
- Prediction 5: By 2022, driven by open banking and AI, 25% of financial institutions worldwide will be processing transactions initiated by third-party digital personal assistants or will be capable of doing so.
- Prediction 6: By 2020, 25% of all banks will have achieved a Connected Core by proactively opening core systems to enable platform-based and componentized modernization and thus participation in open marketplaces.
- Prediction 7: Cross-border payment tracking will be improved by the SWIFT gpi quasi standard, but only 10% of banks on the network will monetize it by 2020 with their own data-rich analytics.
- Prediction 8: By 2021, 75% of Global 200 banks will have established Open Banking APIs with their key business partners, but revenue thus earned from third parties will be less than 10% of total annual revenue.
- Prediction 9: With the growth and acceptance of consumer and corporate-provided wearables, by 2024, 15% of consumer payments worldwide will be authenticated and/or transacted via wearable devices.
- Prediction 10: Looking for further efficiency gains and cost savings, 50% of all banks will have moved at least 20% of critical business functionality to as-a-service cloud platforms by 2024.
The digital lifestyle of the customer has forever changed how financial institutions understand, build, interact, and deliver services while providing a true omni-experience. The predictions in this study are a culmination of the tenets of our research over the past few years. Innovation has reached the point of disruption for financial service firms of all sizes and geographic locations. Driving this growth are advances in platform solutions, open APIs and connected sourcing, artificial intelligence, IoT and robotics, and solutions aimed at improving risk exposure.
Learn more about the 2019 Financial Services Predictions
For context around these predictions, including the IT impact and guidance on how to integrate each prediction in the digital strategy of the enterprise, view the IDC FutureScape: Worldwide Financial Services 2019 Predictions web conference on-demand.
The 2019 Financial Services Predictions come from IDC’s dedicated team of analysts with IDC’s Financial Insights group. Visit idc.com/financial to learn more about research from IDC Financial Insights.
Jerry Silva, Research Director, IDC Financial Insights
Thomas Zink, Research Director, IDC Financial Insights