Many of history’s watershed moments—the printing press, the steam engine, the internet—were only recognized as major changes in hindsight. But in banking, there is real-time recognition that the COVID-19 pandemic has irrevocably changed the industry.
If 2020 and 2021 were the years that COVID forced banks to embrace change, 2022 will be the year in which we see that change institutionalized and the beginnings of a new normal emerge. For most of the world’s leading banks, the pre-COVID inclination for incremental change and cautious experimentation has given way to a faster digital metabolism and a willingness to challenge conventional business models, even if these cannibalize traditional revenue streams. Empowered customers are becoming more demanding on multiple dimensions, from service fees to sustainability, and new entrants are becoming more ambitious in their scope of services. So, in 2022, the world’s best banks need to rise to the challenge.
Collaborating with my colleague Michael Abbott , who has taken on the Global Banking Lead role at Accenture, we have identified 10 trends that we think will drive disruption and shape the decisions that the world’s leading bankers will make in 2022.
1. Everyone wants to be a super-app
Just as the smartphone consolidated our hardware needs within a single device, super-apps are consolidating many of our retail, social and other needs. Most digital banking consists of checking balances, paying bills, and making deposits—functionality that big technology players are increasingly incorporating into broader platforms that include other services like commerce and social networks. Super-apps like WeChat cause financial services to disappear from sight as they become enabling functionality for doing more interesting things like travelling, shopping or working a side hustle.
Faced with the expansion of Amazon, Walmart, Meta and others into financial services, how should traditional banks respond?
Banks have several options, each of them with pros and cons. They can try to add non-banking functionality to their own services and compete head-to-head for customer attention, but it’s a costly endeavor with no guarantees and likely a viable strategy in only a handful of markets. Or they can partner with a super-app to provide white-label services—but in doing so accept that they are going to be a junior partner and are likely to compete with their own branded services. Their third option is to wall themselves off from the fray and defend their traditional franchise. But differentiation could be a challenge, and they will need to accept an inevitable shrinking of their share of traditional transactions as super-apps come to dominate more of their customers’ financial lives.
2. Green gets real
Investors and regulators won’t, in the future, be satisfied with empty environmental promises as they urge financial firms to become better stewards of the planet. Proposed rules will require independent verification that banks are living up to their claims and, more importantly, banks will face immense pressure to redirect credit away from carbon-heavy companies toward sustainable energy. That will test banks’ resolve as oil, gas and other fossil fuel companies provide banks with steady and predictable revenue. Some will embrace the change and adopt a stricter stance toward their clients’ environmental footprints. Some of it will be pure virtue signaling, but we are already seeing a willingness by many banks to sacrifice their short-term bottom line. Others will try to stay just one step ahead of regulators and environmental groups in a more cautious and managed transition.
3. Innovation makes a comeback
The decade after the great financial crisis was a period of retrenchment in which many banks pulled back from introducing new products and focused on getting the basics right. Startups and digital challengers stepped into that breach, identifying promising areas for growth that legacy financial institutions had been ignoring. Think consumers who risk running out of funds just before payday and small businesses seeking advice. With the help of COVID-induced improvisation, banks are fighting back with creativity. At the industry level we’re seeing collaborations, like the one that created Zelle, to take on payment apps like Venmo. At the institutional level, banks are more clear-eyed now about when to build, when to buy and when to partner. Two of the world’s largest banks have embedded their treasury services APIs (application programming interfaces) into the Stripe payments platform, which in turn is embedded in Shopify’s e-commerce platform—decisions driven by the belief that product innovation is what is going to move balance sheet market share over time.
4. Fees … a magical mystery tour
Over the last several decades, banking fees have shifted from […]
source The 10 Trends That Will Shape Banking In 2022 – Beyond The Watershed
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