Predictions for the financial sector in 2016
2016 is the year where we’ll see an obvious change in the choice of bank available to customers.
New names are planning to appear, with entrants such as Atom and Starling banks gaining lots of publicity but being beaten for customer numbers – at least initially – by “spin-off” banks such as Williams & Glyn. The emergence of digital-only banks may appeal to the tech-savvy who wish to bank remotely using mobile and internet apps. Those who want to change banks yet still value the branch will be able to find other new entrants which cater for their need. But we suspect that all new suppliers will have to work hard to woo customers from traditional suppliers, given increased competition being reflected in generous (current account switching) offers which are available in the market.
There will be continued growth in new payment methods. 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.
One area in particular to watch is the impending arrival of PSD2, which will be formally adopted by the EU Council of Ministers shortly. Implementing it over the two year permitted timescale will require investment, it will reduce revenue streams and introduce further competition – particularly by authorising the use of Application Programming Interfaces (APIs) and Account Information Service Providers (AISPs). With many established retail banks looking to rebuild trust after the scandals of recent years, developments which potentially open up existing relationships to other organisations will be unpopular – while being welcomed by many new competitors already stalking the sector.
We also anticipate continued focus around Security. At Fujitsu, we fully expect this to remain a hot topic throughout the new year. Recent data breaches have highlighted how vulnerable some organisations are to cyber-crime. The consequences of such breaches 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).
Finally, expect to hear further talk about when 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.