With an eventful year for fintech behind us, it is now time for crystal ball gazing for 2018.

At this time last year, I predicted that in 2017 blockchain applications will start to trickle down to retail banks, cloud services become the new normal, and we’ll see new authentication technologies, the Internet of Things (IoT) and the ‘Facebook effect’ change the way customers transact and engage with their banks. While some of the predictions may have proven a little bold, some of them have come true. 

My top predictions for technology in retail banking in the coming year are as follows

Migration to the cloud to accelerate rapidly. I expect banks to move significant resources, including data currently stored on legacy systems, into cloud environments which will provide them with additional flexibility, agility and resilience. 2017 has seen a shift in banks’ mindset as their earlier concerns around security in the cloud have eased as the robustness of platforms has improved and a range of cloud security services are now available to protect them. We are likely to see a rise in the application of novel technology solutions that imitate mainframe computing in a cloud-based environment.

Distributed Ledger Technology (DLT) applications in retail banking. While 2017 might have been too early for tangible DLT-based solutions to surface in retail banking, banks have been actively experimenting with blockchain technology and we are likely to see real-life applications in the coming year. While these solutions might not immediately bring about a revolution in retail banking, we are likely to see small but important applications, particularly in the areas of credit cards and currency exchange.

Open banking. ‘Open banking, open doors’ is likely to become the mantra of 2018. Open banking allows anonymised personal information to go through API enabling financial services providers to develop personalised solutions, helping clients to improve their credit score, control their monthly spend or get a better insurance product. It opens doors to a number of value added services for banks’ customers, which may lead to an increased amount of switching between banks. In fact, as moving bank becomes easier, it is also likely that a new sense of loyalty is likely to arise between the most in-tune customers and the most effective banking services. As such, 2018 will be an opportunity for the best brands to really start to own their customers through their service-driven models.  

Cyber threats. With the ingenuity, scale and frequency of cyber threats growing, it is very likely that a leading financial services provider will suffer a significant cyber attack next year. But while the risk of being targeted by cyber criminals increases, so does firms’ ability to counter cyber threats. We have seen a number of sophisticated new cyber security solutions emerge to help firms bolster their cyber defences, as well as mitigate against the severity of cyber attacks. Additionally, firms in the financial sector are increasingly working together to respond to this ever growing risk. These are commendable developments, which improve individual firms’ as well as the entire industry’s capacity to withstand a major cyber attack.

The rise of mobile-only banks by established players. I expect to see at least one of the UK high street banks launch a mobile-only brand next year. With various alternative players from outside the financial services space entering the market, retail banks have been paying much closer attention to their digital offerings. We might see some of these new digital-only solutions launched through the acquisition of start-ups by the established banks, which would further reinforce the ongoing trend of consolidation and evidence a further maturing of the fintech market.

Regulation, regulation, regulation. 2018 will be a game changing year in terms of regulatory mandates affecting retail banking with the revised Payment Services Directive (PSD2) to be implemented in the UK by 13 January and the General Data Protection Regulation (GDPR) becoming law on 25 May. But confusion still exists around both. With regards to GDPR in particular, banks will need to significantly increase their knowledge of the regulation and what is required in order to ensure compliance. It is likely that we will see a number of established players in the market partner with smaller fintech providers, especially those in the data space, who are able to supply solutions that will ensure incumbents are well prepared for the May deadline.