There are several activities which I don’t get the opportunity to undertake regularly. Writing is a prime example. My enjoyment of putting pen to paper, or fingers to keyboard, began at an early age. I’ve always been fascinated by words. From my teens to my late twenties, a potent combination of shyness, social awkwardness, and self-doubt meant that I felt more comfortable expressing myself on the page. My [latterly developed] love of appearing on a stage has been nurtured rather than occur naturally, and while I spend most of the time verbalizing my thoughts to those who care to listen, there are moments when scribing is apposite.

As 2021 draws to a close and 2022 beckons, I’m moved to review the trends predictions I made twelve months ago and assess how accurate my crystal ball was. I recognize this is akin to marking my own homework, but if you feel compelled to grade me, go right ahead in the Comments (while remembering it’s the season of goodwill).

Let’s commence with the sub-heading which accompanied my 2021 musings, namely “The race to remain relevant requires resilience”. Apart from being a textbook illustration of alliteration, this was a valid way to characterize the industry, and the statement still rings true from my perspective. Legacy banks are competing against both their traditional rivals and nimbler niche specialists, with customers increasingly keen to choose financial providers which align to their lifestyles and social values. Remaining relevant matters, and there’s a quote – courtesy of retired US Army general Eric Shinseki – which encapsulates this perfectly: “if you dislike change, you’re going to dislike irrelevance even more.” Well said, General, I salute you (and all who serve(ed) in countries throughout the world where democracy is respected).

As we’ve seen in 2021, relevance is not enough. Resilience is the capacity to recover quickly from difficulties, and banks – like other verticals – have endured their share of strife. Operational teams deserve credit for the making the rapid transition to remote working as smooth as possible, and while the global public health crisis continues to disrupt, a financial crisis has not materialized. Granted, there are legitimate concerns among central banks related to inflation, but the situation could be worse. Banking’s resilience in 2021 has been evident, and the efforts made post-2008 to stabilize industry foundations has contributed to firms being able to stand strong in turbulent conditions. I’ll be alliterative again: relevance and resilience remain [important in 2022].

I also examined the megatrends shaping banking throughout ‘21. Digitalization would accelerate. Virtualization would occur as part of the remote working transition. Hybridization would see banks making greater use of the cloud in addition to their premise-based technologies. Modernization efforts would continue, with players overhauling legacy technology, business processes, and – in many instances – their workforces. And there would be subsidization too, with banks ‘doing their bit’ – often helped by government-backed financial assistance schemes (i.e., loans made with taxpayers’ money) – to prevent customers from experiencing undue hardship through no fault of their own. I wasn’t too far wide of the mark with any of these, not because I’m a seer blessed with the ability to identify key developments before others spot them, but because the megatrends were simply impossible to miss. It’s okay to be Captain Obvious occasionally.

It’s okay to be wrong too (although the younger version of me would struggle to accept this). In December 2020, I wrote “credit losses are anticipated to increase as a direct consequence of the global pandemic.” I couldn’t see how the industry would avoid losing enormous amounts of money as C-19 ripped through economies, killing people and businesses indiscriminately. And yet while the mortality statistics were appalling, the financial performance of banks confounded, with pessimistic predictions largely unproven. Due to the resiliency highlighted earlier, banks managed to keep NPLs to a respectable level. In some geographies, the numbers reduced. For example, Europe’s banking sector reported a significant reduction in problem loans, although the EBA raised concerns over banks’ exposure to hospitality and leisure-related sectors, where NPLs are rising. In the US, the percentage of NPLs declined quarter-on-quarter at the time of writing, from a high of 1.19% in Q420 to 0.94% in Q321. I’m pleased to acknowledge my prediction was wrong. However, the risk of previously performant loans becoming problematic remains omnipresent, and vigilance is required to minimize exposures while simultaneously restarting lending in 2022.

I was also partially right about another trend of significance. “With a K-shaped recovery the likely outcome, this will change the dynamic between banks and their customers.” Different parts of the global economy are recovering at varying rates, times, and magnitudes (i.e., in a k-shape), but the emergence of new variants – like Gamma, Delta and Omicron – is hampering progress. However, the relationship between banks and account holders did change in 2021, influenced not just by the pandemic but wider societal issues related to concerns over climate change, diversity, equality, inclusion, and other pressing matters of importance to individuals.

I’ll give myself an A- (borderline A) for the accuracy of my 2021 trends. I’ve not long finished my 2022 predictions, and this means there’s going to be at least another two articles coming from me in the next 12 months. One which outlines my thoughts, and a second which assesses if I was w-a-y out of line.

I’m not as prolific in my output these days, but as the last two hours of my life has proved, I still enjoy writing. And I always will.