By Jason Aird, Partner, Airwalk Reply
For financial service organisations, the COVID-19 pandemic has led to a company-wide shift in traditional business procedures with increased consumer pressures for digital enablement and the requirement to mobilise workforces remotely. Post-pandemic, whilst regulatory attention will transition back to the core mission of consumer protection, with reducing focus on the pandemic, the change in customer expectations is predicted to remain permanently. Financial service organisations must therefore adapt accordingly and consider modern ways of working as a vital business strategy.
In the upcoming year, with easing attitudes towards pandemic-related policy in the UK, it is forecast that consumer protection and the strengthening of financial services will re-emerge as the key focus for regulators. Operational resilience will take a front seat, existing as a vital component in this re-focus of regulation. Incentivised by the upcoming operational resilience deadline in March, the industry will experience an increase in testing and reporting of risk as companies make a final drive to establish their positions. Therefore, firms can expect to see the initial moves towards enforcement and remediations actions from the regulators where others fall short.
Financial crime will have key importance with escalating necessity to consolidate existing vulnerabilities such as Authorised Push Payment (AAP) within the financial ecosystem. Cooperation between financial institutions to share and analyse data will be crucial to mitigate these weaknesses and it is therefore likely that conversations around loosening restrictions around data sharing will take place.
Utilising innovation for customer-centricity
Consumers will increasingly be moved to the forefront of business strategy with banks focusing on providing “banking my way” as customers dedicate preference to providers offering flexibility. Open banking yielding to open finance will be a major factor in this area with increased influence of older generations, who have been required to adopt technology whilst navigating the restrictions and lockdowns of the pandemic. As a result, banks will continue to offer key services through their digital banking platforms, limiting the need for in-person activities and branch visits. Consequently, automated consumer experience technology, such as chatbots, will experience further growth in their implementation and importance.
The ongoing effort to modernise the central payments systems (New Payments Architecture) will continue in 2022. However, it is expected that the ambiguity surrounding the best route to modernisation will remain despite increasing participation and clarity from regulators around their expectations. Modernisation and standardisation will also stretch across the critical components of the currently fragmented global digital regulatory landscape, for example with the DORA legislation leading the way.
The growing technological pressure of digital-only fintech and challenger banks will need to be addressed by the established traditional banks. As more of these companies are awarded banking licenses, incumbent financial service providers must counter their legacy technology constraints to keep pace and protect market share, this inevitably will demand an increased focus on innovation and the customer. To support the shifting demands and behaviours of consumers, traditional institutions will bring their modernisation agenda and cloud adoption to the forefront of strategy with intensified investment, combatting the ability of new entrants to gain significant market share.
Heightened environmental attention
The growing obligation for companies to respond to external environmental pressures will ensure that eco-friendly products and services are made increasingly available for customers. Financial service providers, and their wider supply chains, will face more probing inspection into their environmental footprint. This will lead to an organisational requirement to better understand and manage supply chains to ensure environmental alignment with regulations and consumer demands.
In 2022, consumers will play a more vital role in product and service innovation with developments increasingly dictated by the demands of the market. In the short and medium term organisations with modern technology and ways of working will be placed in an advantageous position to capitalise upon the evolving customer behaviours. Secondly, traditional banks will increase investment into modernisation to narrow the gap between themselves and fintechs. Finally, financial service regulation will continue to make progress to converge upon regulatory harmonisation and resilience. 2022 will be an important and opportunistic year for banking and it is the responsibility of those in the financial service sector to recognise the trends and deploy plans to effectively embrace them.
Airwalk Reply is the Reply group company specialised in the design and delivery of cloud-based services and solutions, driving technology-led transformational change in complex, regulated industries such as Financial Services, Government and the Public Sector. We bring a unique combination of deep technical subject matter expertise across technology strategy, architecture, service design, engineering and security, alongside business domain expertise and a heavyweight delivery capability.