2021 trends that will shape banking and finance

2020 in review

2020 saw unprecedented societal change. The Coronavirus pandemic led to an acceleration in the use of digital tools across all sectors. In banking and finance, contactless solutions were integral to reducing infection rates, as people sought physically safe and secure ways of making payments.

However, a rise in cashless payments also presented new challenges for the industry, most notably around fraud. In many ways, COVID-19 created the perfect storm for cashless payments fraud, invoice fraud, and identity theft, as cybercriminals targeted stressed and digitally inexperienced customers and exploited ineffective technological infrastructures.

Indeed, according to UK Finance, more than £200m was lost to bank fraud in the first half of 2020. In the UK, Authorised Push Payment fraud remains one of the most prevalent types of digital fraud, where customers are tricked into sending funds to an account posing as a legitimate payee.

A best practice example of successful bank fraud prevention during COVID-19 is our work with SurePay to mitigate fraudulent transactions within the payee validation process. SurePay’s Confirmation of Payee (CoP) provision is a great example of helping to prevent these scams by enabling trace and confirmation of the recipient payee from the payer. This ensures that funds are going to the correct entity and as a result, SurePay has reduced invoice fraud by 80% and misdirected funds by 67%.

Meanwhile, criminals also exploited loop-holes in digital infrastructures such as the UK government’s Bounce Bank Loan Scheme, which offered a lifeline to struggling companies. According to the Financial Times, it has been estimated that more than half of the £43bn lent has been lost to fraudulent claims.

It’s essential, that as we move into 2021, the banking and finance industry takes a holistic approach to digital innovation - establishing human touchpoints to prevent the mistakes made in 2020.

In the latter stages of the year we saw “Big Tech” pick up the mantle and take a deeper dive into the financial services ocean. New brands such as Plex, leverage Google’s global insights to innovate while striking up key partnerships with the banking community to take care of compliance and regulatory requirements. Meanwhile, Amazon Web Services (AWS) provides services to dozens of finance firms. By maximising their data sets, “Big Tech” firms can pick and choose their FS points of entry, and I suspect in 2021 we will see further collaborations take place. 

At the same time, the convenience and ease of digital banking means that many people who used digital banking solutions for the first time during the pandemic, might not go back to visiting their bank branches as frequently in the future. Banks need to rethink their digital strategies to remove customer frictions, ensuring they retain and grow their customer base in 2021. 

2021 predictions

Improvements in digital customer experience for insurers 

The acceleration of digital innovation last year sparked many sectors into action. However, insurers are lagging behind banks when it comes to digital innovation and customer experience. Mobiquity’s ‘Benchmark report for the UK P&C Insurance Industry’ highlights this divide, with insurers recording lower reviews in digital apps across features such as login, notifications, design and user experience and performance. As the transition from physical to digital continues, 2021 will see the insurance industry going through the same digital growing pains as banks in previous years. It’s essential that insurers do not lose sight of the human touchpoint along the way when implementing digital strategies to catch up with rising customer expectations, otherwise they could risk losing customers.

Continued vigilance with fraud

Cyber fraud in 2021 will continue to rise and its essential banks and financial institutions are prepared. Evidence from 2020 shows the need for greater data security and identity management to align with the societal shift to digital payments. Banks must take a human-centric approach to implementing a robust security and regulatory compliant framework to protect their customers.

Contactless behaviours are here to stay

Contactless behaviours have led to many positive benefits including increased convenience, reductions in waiting time and the protection of one’s own health and the health of those shielding from COVID-19.

With the introduction by the UK government of a new national lockdown, and continued lockdowns across the world, remote working is firmly here to stay and with it the necessity to provide digital services which are easily accessible by all. Digital banking is continuing to provide access to millions unable to visit physical branches - presenting opportunities for all sectors to tap into the benefits of digital payments in 2021 and beyond.

Corporate social responsibility

My final prediction will be the continued importance of supporting societal challenges. For example, banks are already innovating new products and services to support those in debt, providing flexible lending options for customers affected by COVID-19. Meanwhile banks such as HSBC, are helping to improve the lives of homeless people by offering bank accounts. The Coronavirus pandemic has placed corporate social responsibility (CSR) centre stage, and we’ll see more corporations continue to innovate and collaborate in 2021 to create a positive impact across the world.