Megatrends in Financial Services: Preparing for a fundamental shift and a wealth of opportunities

 

Posted on: 1 October 2018 by Dan Cohen

 

In the post Wikileaks era, the 2008 crisis is almost a distant memory. Over the past decade, the global banking industry has shown signs of renewed health. Prospects are looking good.

But while many believe the industry is unlikely to experience such discomfort again anytime soon, signals beneath the surface show the industry is under tension: profits remain elusive, margins are decreasing, revenue growth is slowing and perspectives are tepid. Even more worryingly, Return On Equity (ROE) has fallen to around 9% and continues to diminish.

The macro-economic influence

We can explain this performance by several formidable forces. World economic growth continues to be weak; new regulations such as PSD2, GDPR, MIFID 2, and IFRS as well as discussions on Basel IV are proving burdensome ; above all, the emerging data-driven world and rise of non-banking platform companies are disrupting the most profitable parts of the banking value chains, compressing margins as competition rises. Even more disruptive transformation is on the horizon with blockchain technologies and the rise of intelligent things and agents.


new FinTechs are created every year


unbanked people could be addressed through mobile


is sufficient to create a new digital bank


$ = USD increase in operating profits could be gained by banks through digital by 2020

Reinventing for the future

These changes bring threats to established business. New players could capture up to a third of incumbent banks’ revenues by 2020, according to analysts such as McKinsey. Banks that fail to react to the industry shake-up may see their profits tumble dramatically. But these changing times also bring major opportunities for building next-generation, data-driven financial services ecosystems. Banks that leverage digital to reinvent their approach to customer experience, operations, business model design and trust and compliance have extraordinary opportunities to thrive.

4 ways to take advantage

  1. Respond faster to evolving customer demands: Retail banks that digitalize their customer journeys could see a 5% to 20% boost in revenue from improved service, network cost reductions of 15% to 35% and increases in customer satisfaction of 10% to 15%.
  2. Optimize costs radically: Shifting to lower-cost standardized utility processes or deploying intelligent automation can reduce costs by 10% to 25% – by enabling faster and more accurate decision-making – and provide savings to fund blue ocean innovation.
  3. Create new revenue streams with open platforms: Analysts estimate banks that successfully build partnerships to monetize data can raise their return on equity (ROE) by up to 14%, far above the current industry average.
  4. Provide predictive security and compliance: New risk and compliance management systems that inherit behavioral Analytics and AI from civil and military intelligence could slash the $1 trillion annual cost of cybercrime while turning trust into a source of business growth.

Look Out 2020+ for Banking

This blog is part of the Atos Look Out 2020+ Global Banking ‘Toward next-generation financial services ecosystems’ where we explore the business opportunities and key technologies which will shape the future of Banking.

 

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About Dan Cohen

Group Senior Vice President - Global Financial Services, Atos
Dan’s main focus is leading the continual transformation of Atos’ full product and service portfolio, with an emphasis on industry orientation and relationship management within Financial Services. Prior to that he spent over 30 years leading multi-disciplinary and cross-cultural teams in global firms addressing the areas of Financial Services, Public Sector and Scientific & Technical Computing.  In this time, he has amassed a wide range of skills relating to people management and cultural change through internal and external relationships following direct and general management roles.  In his 30 years with IBM, he also spent time on five international assignments that took him to Europe, Asia Pacific and South America. Dan’s pro-bono work has spanned many different organizations across the globe, including board level involvement at The International School of Beijing, The Princes Trust – Edinburgh, and Chemocare – NJ. Dan holds a Bachelor of Science in Chemistry from Emory University.

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