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20:20 or blurred digital vision?

Forecasts for the upcoming year have become an industry staple, but how often are these predictions correct? In this post I review forecasts made at the start of the year so that you can judge who got 2017 right and who needs to brush up on the research.

Customer Experience – One of the most discussed topics expected to play a key role in 2017 was not the latest digital innovation or trend but a core banking concept essential to a customer-centric approach – providing a seamless customer journey. To meet customer expectations, The Financial Brand stressed the need for banks to improve their core journeys from front-to-back in order to deliver a seamless digital experience and improve customer satisfaction. This sentiment was echoed by Forrester, expecting banks this year to increasingly build and buy real-time core banking solutions to ensure end-to-end digital banking can be supported in the hope of mirroring the quality of the customer experience present in other digital sectors. Ovum also highlighted the importance of this for 2017, predicting the removal of complexity and data siloes to be key projects for improving customer experience. Ovum cited modernising legacy systems to be an aim for 57% of retail banks in 2017, reflecting the view that banks utilising batch processing will face increased pressure to alter their systems to remain competitive. This was an easy one to get right.

 
Blockchain – Took the banking industry by storm in 2016 as we collectively mused over the fascinating potential of this new technology, and consequently was a notable presence in 2017 forecasts. But the predictions for the role of blockchain this year were considerably less ambitious, mindful of the time it will take for blockchain to have a compelling role in banking services. While Chris Skinner suggested 2017 to be the year blockchain proof of concept would go mainstream, querying how long we can continue to test it, Business Insider concluded the trend of prototypes and innovation labs will continue, with initial use cases emerging in internal bank processes, transactions and trade finance. A similar point of view was expressed by Forrester, expecting blockchain to mature and understanding of its potential to become more realistic and focused, with banks considering use cases such as trade finance and cross-border payments. Elsewhere, Gartner suggested blockchain prototypes are too immature and risky to see replacement of current business flows in 2017, offering meagre improvement on existing services with minimal impact on improving cost and profit. It looks like they were on target with this prediction too.


AI & ChatBots – Chatbots were a staple of 2016, showcasing how individual customer interaction can be successfully executed through digital channels. But the forecasts for 2017 moved beyond this to the potential of AI technology in general, and how machine learning and analytics can further improve customer experience. Forrester forecast AI to enhance digital experiences in 2017, expecting banks to improve their understanding of how to best deliver valuable AI services. Business Insider predicted AI would progress from a buzzword to an important driver for improved client outcomes, personalisation and bank efficiency in 2017, deployed by many banks across 2017 and 2018. Business Insider also put forward that more complex AIs able to utilise large volumes of data would be developed. This sentiment was also offered by Ovum, suggesting big data generation, connected systems and automation to lead to wider use of AI analytics and machine learning. Looking back now I feel this was reality of AI in the field was well behind the hype, and although there was wider adoption of chatbots, we’re really only seeing a couple banks, like DBS, on the cusp of real revolution in service.


APIs and Open Banking – While APIs did not generate huge amounts of interest in early 2016, the concept was anticipated to become an influential and important trend during 2017, as interest in open banking and the role of PSD2 turned attention to API opportunities. The Financial Brand noted the importance of APIs in delivering innovative solutions in 2017, with competition and regulation pushing incumbents to take heed of the importance of APIs this year. Forrester put forth the view that APIs are a “must have” for 2017, noting banks must plan for their impact and their role in meeting the requirements of PSD2, in order to remain competitive while also accelerating the role of APIs worldwide. Ovum largely echoed this view, expecting PSD2 pressure for APIs to aid identification of digital opportunities, as well as having global ramifications through global banks active in the region becoming compliant and encouragement of other regulators to develop similar initiatives. For API’s we have seen a huge amount of activity with many API marketplace launches. What we haven’t seen, and probably won’t until 2019, is banks realising benefits of API ecosystem investments.


Fintechs – No annual banking forecast would be complete without some mention of the role of Fintechs, though the expectations for their position during 2017 differed from the competitive threat Fintechs are often portrayed to be. In fact, for 2017 the Financial Brand believed collaboration between fintechs and banks to continue to be explored and an important element of the year, as Fintechs may require additional investment to achieve scale and profit, while also reaping the benefits from API development. Business Insider reiterated this view, putting forward that most fintechs will need bank partners to successfully compete in 2017, seeking out banks themselves to partner with. Gartner expected fintechs to continue to generate publicity but were likely to struggle to grow their customer base, creating acquisition chances for banks. Ovum also anticipated partnerships with fintechs to continue, fuelled by the opportunities created by API development. Again we have seen few acquisitions or partnerships really paying off for banks or FinTechs so I believe this was overhyped.

No doubt forecasters play an important role in helping banks to plan the year, but their digital maturity increases, a digital strategy needs a multi-year business plan which will need longer range forecasts. The problem is with these is nobody really reviews a 5 year forecast ;o)

Happy Holidays Everyone… 

 

Digital Vision
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