What are the top trends and predictions for Banking and Financial Services this year?

As we enter a new decade the landscape of banking and financial services continues to evolve and adapt to the changing demands of its customers. Digital transformations alongside further technology innovation are top of the strategic agenda for most banks, alongside meeting increasing regulatory pressures. Neo banks and fin-techs continue to challenge the traditional banking model and strong data will be the currency required by banks to support their future success. These trends have all recently influenced the financial services market and how banks transact with their customers.
This article will cover the top trends in more detail and how they’ll likely shape the recruitment industry this year.

1. Digital transformations of traditional banks
Changes in customer expectations in the banking arena requires companies to continually evolve and update their services and technology to meet demands. For many years, banks have been ‘going digital’ to reduce risk, improve efficiency and better serve their customers and while many companies are now well on the way to bringing themselves into the digital era, many still have some way to go.  This year, digital banking transformations will continue to trend in line with customer demand for speed and convenience and banks must consider how they adapt and evolve to deliver a service that allows customers to conduct their banking matters in the same, slick fashion as they would if placing an order on Amazon.

Website and mobile app development will continue and the use of AI for chat bots (such CORA at The Royal Bank of Scotland) will further advance and enable customers to more effectively self-serve. Personalised, real-time advice is a need that’s only growing, and AI will continue to support the digital advancements in financial services this year. One study by Accenture found that 54% of banking customers wanted more tools to help monitor their budgets and make real-time adjustments, with 41% saying they were “very willing” to take financial advice from an AI tool.

2. Neo and challenger banks
Continuing to put competitive pressure on traditional retail banks are the fully digital or “neo bank” models that recently entered the market. These smaller, more nimble competitors are challenging the traditional market and typically aiming to target younger customers. Currently holding 50% of the market share, Monzo has emerged and is currently the UK’s market leader in neo banking and last year it was reported that 2 million people are already using Monzo alone with 35,000 new accounts being opened every week. 

Monzo also operates an app and website designed that resembles the well-known layout and UX of popular social media sites. This marketing strategy is designed to capture the attention of the younger demographic and to foster a hassle-free approach and mindset towards banking with them. While neo banks position themselves as fully digital they still offer most of the same services as a traditional bank, including a human customer service option and FSCS protection.

3. Retail Bank Branch closures
In 2020, the decline of the high street shop will extend beyond retail into financial services. As neo banks are born, according to Forbes, across Europe, we are likely to see record numbers of bank branch closures as demand for mobile-only services increases as transactions shift online. For the remaining high street branches, the focus will be to continue to maximise customer experience with more mobile technology enabling self-service and personalised banking. Traditional banks will continue to be challenged due to their large size and often, bureaucratic processes which can typically make the pace of change slower than market demand. This however is creating an opportunity for the challenger and neo banks (like Monzo, Atom Bank and Starling Bank) to step in.

4. Strong customer authentication (SCA)
With so much data now stored digitally, banks can deliver quicker and slicker services than ever before. However, these digital platforms are also providing a veil under which criminals can operate and expose banks and their customers to serious risk of fraud. Regulations like PSD2 are now in place and strong customer authentication is high on the priorities of the regulators. In 2019 data breaches reported to the FCA rose by 480% and according to KPMG’s inaugural Global Banking Fraud Survey, retail banks experienced an increase in total fraud value and volume in the same year. The most common fraud scenarios cited were increased identity theft, account takeover (ATO), card not present and authorised push payment (APP) fraud. Many of these stories have been brought to light in the media including the major Tesco Bank security scandal last year affecting 20,000 customer accounts. For banks, this means thinking and acting beyond simply providing customers with access to their money, loans or mortgages; attracting and retaining custom lies in great service and security and those who invest in technology now will help shape consumer behaviour in their favour in years to come. This year, failure to comply with legislation with will no longer be an option and we will see all banks and other financial services providers gearing up their strategy and investments to ensure that SCA becomes a reality.

5. Data analytics to improve customer service and reduce risk
The financial service sector has long been a leader in the adoption of advanced data analytics. Historically, using data to inform lending decisions, but more recently to track and analyse everything from the transaction of a bank account to the way customer navigates a website or mobile application. Data is also being used across the sector to market new products or services via push messages online and on mobile phones. In the absence of human interaction and with more customers banking online or using self-service technologies the need to capture meaningful data upon which to deliver a personalised service has massively increased. Effective data analysis can also be used to influence buying behaviour with a long-term view of creating loyalty; an important factor given the rise in competition in the sector.
In addition to helping customer service data will also better inform risk management teams and help support the rise in cyber-crime.  This year, data will continue to be of importance to banks but harder to gather and manage with new E-privacy and GDPR laws.

Predictions for the recruitment industry
Overall, the financial services market is likely to have a busy year and as a result of these trends we can say with confidence that recruitment will be buoyant in the following areas:

• Compliance — due to an unrelenting focus on customer security and fraud prevention from the regulators and tough penalties for non-compliance the need to bolster compliance teams across the sector will be of high priority across the industry.
• Digital— for those larger banks still undergoing or about to start ‘going digital’, demand for those who have previously worked on large scale transformations in retail banks will be of particular interest; so too will those with fintech experience and who can support with new, innovative ways of working.
• UX and Digital marketing— with retail banking branch closures and customers interacting more via digital platforms traditional banks as well as their new neo bank rivals will be out to find new and innovative ways to engage customers focus on user experience will be key. Open banking is making it easier for customers to switch vendors, so employers will need to hire those with the skills required to create new ways to compete, engage and retain these customers will be key.
• Data analytics— the future of the banking industry will depend on its ability to leverage the power of customer insight, advanced analytics and digital technology to provide services that help today's tech-savvy customers manage their finances and better manage their daily lives so those with a skill set in data science or data analysis will be in demand this year.

We also expect that:

• Competition and Collaboration will increase — with partnerships like Citi and Google who are looking to bridge the gap between big bank and technology to play in the space that Fin-tech's currently occupy. We expect other traditional banks to take the approach of companies like JP Morgan who recognise their challenge and are partnering and collaborating with some of the smaller tech players in the market.
• Automation brings opportunity to reskill — skills in AI and automation will remain relevant, but in areas where these technologies replace manual work, such employees are likely to need to consider new career paths or upskill in the new technologies.
• Banks must find new ways to identify and attract the right talent — with increased competition and attractive brand strategies coming from the ‘Monzos’ of the market, big banks will need to reconsider their Employee Value Propositions (EVP) to attract top talent and understand what’s important to the current candidate market candidate while looking beyond the traditional attraction of working for a large corporate brand.

Overall, times are changing across the financial services market, but with this bring opportunities for candidates to upskill and reskill in the areas which are set to thrive in 2020. The future of banking lies in digital and the development of AI and other technologies that will enable banks to connect with the market in a quicker, more personalised way than ever before. As the industry grows, so too does the risk of financial crime and for those working in the compliance market it is worth keeping a finger on the pulse of the latest compliance regulations. As competition and collaboration continues to advance between banks and technology houses a new generation of skill will likely appear on the horizon that breaks the traditional financial service mould to create an interesting new dynamic within the banking industry.

Aston Carter partner closely with many of the large banks across Europe, as well as some of their smaller competitors. For more information about live roles in this market please visit our website.