Finance
2021 PREDICTIONS: REALISING THE VALUE OF PAYMENTS TRANSFORMATION

Simon Wilson, Co-Head, Payments at Icon Solutions
It has been said that prediction is very difficult, especially if it’s about the future. The unprecedented events of 2020 demonstrated quite how difficult it can be. The monumental uplifts in digital volumes, shifts in customer requirements and broader economic impact would have been (and frankly still are) barely conceivable.
As such, financial institutions find themselves facing a very different, uncertain world. Yet from this period of unique instability, digital change has been substantially accelerated and foundations have been laid that will shape the direction of banking and payments for years to come.
Getting serious about data-driven payments
A 2019 survey by Aite Group found that only 18% of banks were moving from a transaction-based revenue model to a data-based approach. Although this figure is unlikely to have changed significantly since, data-driven payments are increasingly on the agenda for banks and we can expect more movement towards this.
This is partly due to the accelerated cost-pressure on payments as a result of events in 2020. More importantly, though, banks are steadily identifying concrete use-cases and seeing their benefits. Helping corporates manage cash and liquidity through automated data-based actions can start to ease serious headaches for treasurers, for example. Equally, payments data can be used to provide valuable economic insights to corporate customers. At the same time, retail banks are getting better at making informed offers and suggestions to customers based on payment flows.

Simon Wilson
With the rise of embedded finance, the ability of banks to support personalised and contextualised payments will increasingly be expected by their customers. But organising data efficiently to undertake such actions is no mean feat. Perhaps in 2021, we will see more ways for actionable and insightful data analytics to help monetise payments.
ISO 20022 migration moves up the agenda
ISO 20022 will play a critical role in supporting the shift to a data-based revenue model. With constantly shifting timelines and strained resources, it has been easy for banks to put ISO 20022 migration on the back burner. But as deadlines near, it is important for banks to focus on the long-term opportunities rather than the short-term pain.
ISO 20022 allows banks to improve and extend the payments-related services they provide to business customers, enabling the move from pure transaction-based services to value-added insights and advisory services. As banks look to reassess their long-term strategy, expect ISO 20022 to provide a catalyst for banks to embrace payments innovation.
Realising instant payment benefits
Following years where the focus has been on technical implementation, we are now seeing industry initiatives focused on maximising the value of instant payments.
From a retail payments perspective, we can expect to a hear a lot more about the European Payments Initiative (EPI) in 2021. Unlike the several aborted attempts that preceded it, EPI has big bank buy-in and a strong regulatory mandate from the European Central Bank. This may well mean that the long-held ambition to create a third payment scheme in Europe will actually come to fruition and bring the benefits of instant payments to the point-of-sale both in-store and online.
On the corporate side, Request to Pay schemes could prove to be the ‘killer app’ for B2B instant payments. If uptake builds and businesses get on board, the significant benefits could start to be realised.
The time is now for cryptocurrencies and CBDCs
Beyond instant payments, momentum is also building for cryptocurrencies as an alternative payment method. Although lauded by their advocates for their efficiency and low cost, crypto has for many years been something of a fringe curiosity with a hardcore fanbase. As the underlying technology matures, however, cryptocurrencies are increasingly crossing over into the mainstream with support from global banking and payments giants.
It is central bank digital currencies (CBDCs), however, that stand to present the most wide-ranging strategic implications for commercial banks. Central banks that find themselves compelled to mitigate the decline of cash, modernise payment systems, support economic recovery and promote financial inclusion are looking to expand their fiscal armoury, and this has renewed focus on the potential of digital currencies.
And with private initiatives such as Diem – rebranded from Libra in an attempt to remove the radioactive Facebook connection – posed to launch in 2021, we can expect increased urgency from central banks to explore and leverage CBDCs.
Government backed, digital identity usage goes mainstream
With digital transactions and interactions rising, there is a corresponding and increasingly urgent need for a trusted, convenient and scalable digital identity system to promote financial inclusion, reduce fraud and improve the customer experience.
Yet, it is fair to say a widely used solution to the digital identity challenge in the private sector has so far proved elusive, and the industry has not yet reached critical mass. Revisions to regulatory directives such as eIDAS, the coming age of CBDCs and emerging concepts such as Self-Sovereign Identity (SSI) – plus a whole raft of other national, bloc and international policies on “Digital” – are pointing towards a fully digital world built on a cornerstone of trust. Banks’ trusted position and regulatory know-how gives them a head start, and we saw growing momentum for bank-led digital identity activity in 2020. Expect this theme to continue in 2021, creating opportunities for new disruptors to emerge and the old guard to build on their transformation journeys.
Building the business case for payments transformation
Given the scale and pace of change, transforming expensive, inflexible and unreliable technology estates is no longer optional and must now be a key priority for many banks. Reducing total cost of ownership (TCO) is a critical consideration for any transformation project, but the required investment is about more than cost savings from IT simplification. Dramatically lowering cost requires re-architecting to offer the fastest route to staying competitive in a rapidly changing landscape.
This reflects a big challenge for banks, in that many are not sure how to identify the long-term revenue opportunities and quickly build the capabilities needed to realise them. Indeed, McKinsey reports that less than 10% technology spend at an average bank increases value-added business functionality.
It is crucial, therefore, that transformation projects are underpinned by a clear business case that reflects the importance and role of payments data as an enabler across the organisation. Perhaps the key underlying trend we can expect to see in 2021, therefore, is banks increasingly considering the strategic role that payments can play, but most need to cut costs by factors, not percentages.
Finance
FIVE TRENDS THAT WILL IMPACT THE FINANCIAL SERVICES INDUSTRY IN 2021

Ian Johnson, Managing Director Europe at Marqeta
Coronavirus has shaken things up across all industries, and financial services is no different. This year, we are likely to see a much more risk averse industry, as fintechs and banks alike move into survival mode. Yet, this will also spur innovation. The shift away from cash will give a shot in the arm to digital payments, while lenders in particular will have to get creative to balance their risk against the need to dispense funds.
It’s likely to be an interesting, albeit bumpy, year. Here are five core trends that I see having a major impact in 2021.
Lenders will seek improved visibility to combat delinquency
An economic downturn unfortunately means higher delinquency rates for lenders. But businesses – in particular, SMEs – need liquidity to survive, now more than ever. To balance risk with need, more lenders will focus on enabling visibility and control after a loan is dispensed. Instead of issuing funds to a bank account, loans will be dispensed to virtual cards or wallets, allowing lenders to track exactly how and where money is spent. This way, lenders only release funds as they are needed – rather than in one lump sum.

Ian Johnson
They also have the power to approve or reject payments in real-time, based on whether the request is aligned with the terms of the loan agreement. For instance, if a company has secured a loan for IT equipment, but attempts to spend it on office refreshments, the lender can make an instant decision to permit or deny the transaction based on geolocation and other transactional data. So, borrowers should ready themselves to be much more transparent if they want to secure loans in the future.
Embedded payments to become more commonplace
Embedded payments has been around a long time – just look at pioneers like Uber, where payments are so integral to the customer experience that it doesn’t even feel like you’re paying anymore. In the next year, we will see this expand, with a wider variety of organisations making payments a core element of their customer experience strategies. This trend will be coupled with a shift towards transparency and privacy, where people willingly exchange their data for an improved, personalised experience.
This is something consumers do readily in many areas of online life already – shopping, social media, and so on. In 2021, we will see more banking and payment services operating off the back of this same exchange. In return for data, customers will be given smoother, more tailored payment experiences.
Use of cash to drop below 15%, falling from 23% of all payments in 2019
The UK and Europe’s departure from cash will continue to evolve into next year. Physical cards will begin to give way to a rise in digital payment methods – virtual cards, digital wallets, and the likes of Apple Pay and Google Pay. Banks will need to prepare for this shift; hopefully learning their lesson from the early months of the pandemic, where 88% were overwhelmed by demand for online and mobile banking. This means modernising behind the scenes, using technology to improve and streamline payment processing. Time and money also need to be invested into educating and supporting businesses and individuals that going cashless could leave vulnerable, such as small merchants and elderly people. Until this has been addressed, going cashless risks leaving the most vulnerable in our society behind.
Back-end bank modernisation set to continue
Traditional banks recognise that they need to be able to innovate faster, particularly on the front-end, to compete with the new waves of digital banks and fintech entering the market. While we will see continued modernisation on the back-end, as they try to unpick the complex web of legacy systems they sit upon, I would not expect this issue to be fixed in a year. Instead of taking on the risk of full migration, many banks will ‘hollow out’ certain services – leaving core services in place that are too risky to move, whilst shifting newer services onto more modern platforms to avoid coding them into legacy systems.
This will create the building blocks to build a standalone digital bank within a bank, allowing them to modernise the entire stack and then incentivising customers to make the switch. An example of this approach is Goldman Sachs’ digital bank Marcus, which has debuted to strong demand – it’ll be interesting to see if others follow suit.
Alternative lenders will open up the market to support post-COVID-19 recovery
The process of securing a loan has always been quite painful – involving lots of self-reporting, paper statements and credit reports. And it could take days to find out if you were successful and then even longer to access the funds. Thankfully, it is looking like those days might be coming to an end with the emergence of a new breed of alternative lender focused on transforming specific niches of lending. Take SME lending, which has traditionally been regarded as high risk/low rewards and neglected by traditional lenders.
New alternative lenders, such as Capital on Tap, are changing the stakes. Using data and modern payment platforms, they are able to make loan decisions in minutes, not months. We are seeing the same in Point of Sale lending with companies like Klarna – now, you can apply for a POS loan and get approved in seconds. These companies will set the standard in terms of expectations around lending, forcing bigger lenders to follow suit and helping to transform the loan experience.
Fintechs to continue leading front-end innovation
Fintechs hold the monopoly on defining what ‘good’ looks like in terms of features. From money management tools, to saving incentives, fintechs have the agility to create new, attractive products with a speed and creativity that traditional banks simply cannot match. However, true success stories of fintechs paving the way to long term profitability are rare. Established, traditional banks still hold all the capital and most of the main checking accounts, making it harder for fintechs to really get ahead. This is likely to continue into 2021, but we are seeing signs of convergence, with fintechs acting as the front-end for customers while banks provide capital in the background.
Finance
2021 IS THE YEAR FOR DIGITAL WORKFORCE MANAGEMENT IN FINANCIAL SERVICES

By Tyler Suss, Product Marketing Director at Kofax
Even before the pandemic, the UK financial services sector viewed digital transformation as a high priority. Though adoption of robotic process automation (RPA) technologies was already underway, the pandemic truly upended operations.
When health mandates closed offices, the ability to manage operations became more challenging and complex. Many processes still aren’t fully integrated or automated, leaving remote workers with the challenge of having to bridge the gaps in fragmented and often labour-intensive processes. More than ever, they need a digital environment in which back-office processes are automated end-to-end to be productive.
Consumers, too, are learning new ways to manage financial transactions in a COVID-19 world. They’re becoming more comfortable with mobile banking and cashless payments, behaviours likely to stick once the pandemic ends. As KPMG notes, improving productivity and meeting new customer expectations for engagement are the sector’s top priorities for the coming year.
That means firms will need to move even more quickly to digitally transform their operations if they want to remain competitive. In 2021, intelligent automation and digital workflow transformation will become the main vehicles for driving employee productivity and customer experience.

Tyler Suss
The Next Priority: Digital Workforce Management
There are many reasons why an intelligent automation program combined with digital workforce management will accelerate digital transformation, but the four that follow build a strong case for adopting this approach in 2021.
- Workforce Orchestration
RPA caught on like wildfire because it made automating routine, mundane tasks simple and fast. Motivation-killing work like monotonous, cut-and-paste data entry is now a drudgery of the past. What’s next? For savvy financial firms, 2021 will be all about harnessing their RPA automation expertise—and leveraging it with complementary technologies like process orchestration and document intelligence to automate their mission-critical business and create high-value workflows.
With an open intelligent automation platform, financial firms will be able to orchestrate work across people, in-house technologies, and third-party RPA bots. They can assign the right worker, whether it’s a human or digital worker, to the right task at the right time, while maintaining total control over the complexity and cost associated with a given task or project. Additionally, they can take advantage of more advanced AI technologies as they emerge.
- Risk Management and Security
In financial services especially, it’s crucial that automated processes meet audit and compliance requirements. Security is also of paramount importance, with risk mitigation being a high priority. Yet many firms don’t properly consider the security risks associated with RPA, such as the access software robots have to sensitive data. As human and digital workforces merge, a single governance environment is vital.
Central control allows managers to synchronise software robot releases with broader IT system updates, minimising disruptions and failures among the digital workforce. Robust digital workforce management software lets companies secure and monitor how information is used by all resources. The integration of identity management with financial security solutions supports unified governance over the access human and digital workers have to sensitive systems and applications.
Financial firms also need a way to address potential misuse of digital worker credentials. A sophisticated solution supports the segregation of duties, in which functions are spread out across people and departments. Managers can ensure a particular individual doesn’t have access to too much sensitive information based on the combination of digital workers they oversee.
It’s also important to remember that a digital workforce management solution should enable the organisation to manage and enforce policy controls throughout the entire lifecycle of the digital worker, from creation all the way through decommissioning. Control over the entire lifespan of digital workers enhances security, compliance and auditability.
- Total visibility into operations across the firm
In order to drive continuous improvement, achieving—and maintaining—total visibility into all resources performing tasks within a process is essential. Financial services firms need to be able to answer such questions as:
What tasks are being worked on?
What’s in the pipeline?
How does process performance compare with KPIs?
An intelligent automation platform including process discovery and visualisation provides insight into business processes across the enterprise. Executives and managers get a holistic view overcoming the boundaries between departmental silos, making it easier to identify opportunities for digital workforce automation that can have a greater impact across the entire firm.
- Scalability
The requirement to keep pace with changes in consumer behaviour and agile competitors has only intensified during the pandemic. Scalability will be more urgent in 2021, and yet the majority of organisations have struggled to expand their automation initiatives. The biggest barrier is process fragmentation, in which resources performing the work, including automation and digital resources, exist in silos.
Fragmented operations increase overhead costs and eat into the ROI on digital transformation investments. An open, integrated platform enables common governance and permits financial firms to scale rapidly.
As the pandemic wanes, firms need to reimagine customer journeys and rethink operations to improve customer and employee experiences. The successful ones will build upon their RPA capabilities and rely on intelligent automation digital workforce management to foster more agile and competitive ways of working and thinking so they can work like tomorrow—today.
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