2016 has been a very busy year and my team and I have been out there meeting with and talking to banks big and small and FinTechs in their hundreds. It’s been enlightening; I’ve learned so much from so many and after consolidating sentiment, data and experience, I’ve chosen five things that I think are hot and five things that – for whatever reason – are not for UK Retail Banking in 2017.
- The Sandbox: Whether it’s your own, someone else’s, the FCA’s or whoever’s sand you’re building castles with, if you’re a bank or a FinTech – you’ll be coming across more and more of these. The pearl of wisdom that I would impart from seeing hundreds of projects die in the Sandbox environment is simply – make sure it’s production ready. Develop in such a way in your sandbox that refactoring isn’t the defacto next step when everybody loves what you’ve created, because getting that sort of budget is a tough ask in a cost-saving climate.
- Regulation: More and more FinTechs will face regulations that were previously not present. As is ever the case with the human race, the few spoil it for the many. Examples of bad behaviour amongst lending platforms means that P2P lending and crowdfunding face imminent regulations and more will follow.
- RegTech: Lost sleep over keeping up with all the latest regulations and ensuring that you’re not in breach and that you can deliver your services compliantly? Enter RegTech. With bodies like the CMA and the FCA working hand-in-hand with RegTech startups, this is an area that will grow very quickly and one that we are closely involved with.
- The IoT: I’m not for one minute suggesting that anything more than a few meetings will happen during 2017 on this topic, within the hallowed walls of our big banks. But Banks will finally need to take this seriously and I am expecting that unlike the Computing 2016 UK Conference on IoT where there were no (zero) banks present, we might expect to see a few of the more forward-thinking ones at the 2017 Conference. Is it so inconceivable that your Hive could send a message to your bank to say that your heating has been up on average by 2 degrees and that your bank could – by use of big data and analytics – deduce that this would equate to you overspending dramatically and alert you to this? All part of what we call holistic banking and with Smart Homes and Smart Cities on a steep incline, this will quickly rise up the agenda.
- Chinese FinTech: You might immediately think it’s all ‘Payment’ related and granted – that’s right up there with the likes of AliPay – but according to KPMG’s recent FinTech 50-China report, the biggest service coming out of Chinese FinTechs is in Big Data – and goodness knows they have the foundation for understanding what Big Data truly entails. The application of the Big Data services being designed are mainly in finance provision and lending. However, with their own regulatory bodies, rules and laws springing up everywhere – as one might expect – they are probably one to watch in 2018 for RegTech too.
- Innovation Theatre: Even the people that work in them are fed up with not getting to release their often brilliant ideas into the hands of the consumer. And these are not the places where you learn about collaboration anymore because FinTechs are fed up of throwing expensive resource at these ‘gestures’ only to find that a successful showcase or pilot never makes it past the press release. I know – I’ve spoken to nearly 150 of them in the last eighteen months. And if you’re thinking that your customers are happy and measuring your customer satisfaction in your low CASS rates, then think again and see point 3. The threat isn’t coming from Current Account Switching, so you can’t measure ‘lack of dissatisfaction’ in that way. For the same reason, NPS is only reflecting the services your customers take from you, not the ones they no longer do.
- Blockchain: Simply – we’re not ready for it yet. It’s undoubtedly game-changing but with very few proven cases for widespread implementation, DLT will see a slow start to mass adoption and 2017 is not going to be the year it all skyrockets.
- Switching: We need to totally re-think the whole thing; we’re looking too high level and ignoring the macro changes that together will make the difference – the death by a thousand cuts theory. The ICB tried to increase our appetite to switch current account providers by implementing CASS – the Current Account Switching Service. When this didn’t work, the CMA then wrote a report of remedies that will be introduced to ensure that customers get a fair deal. Very honourable. It does, however, assume that the Public doesn’t know what they want and will need educating. Whilst this may be true in some cases, it is a somewhat patronising assumption and as starling Bank’s report in conjunction with ‘ Explain The Market’ highlights customer’s largely don’t need educating. They need to be listened to. This ‘customer-led revolution’ in FS isn’t solved by education programmes, but by listening to what customers actually want, how they actually live their lives and then delivering on ways to make that easier, frictionless. Customers are switching themselves to alternative service providers when they don’t like what the bank is offering. I give you Paypal, ApplePay, TransferWise and Revolut as perfect examples of this ‘switch’ – and you can’t measure it through CASS.
- Funding: We’ve seen throughout the latter half of 2016 that funding has been harder and harder to achieve and this will continue through 2017 as political uncertainty proliferates, however we started to see this pull-back in VC-backed funding in Q4 of 2015 when there was less political uncertainty. The Federal government’s remaining hint of a rising interest rate climate is also not helping the global picture. One thing is for sure is that until the UK and the US settle into a more predictable pattern of political behaviour, we can expect funding – especially for companies that depend on revenue from these two countries – to be much harder to achieve.
- Brexodus: Quite simply – nobody knows the impact that triggering Article 50 will have, but the plan has now been public for some time and it may very well be that the UK is in a position to offer favourable terms to FinTechs who base themselves in the UK that Europe simply can’t compete with. Add to that the political uncertainty in France, Italy and Spain and others such as The Netherlands and Denmark facing their own people’s calls for a referendum – it seems unlikely that most will choose to jump from ‘ship-UK’ right now.