Long reads

Why Fintech Innovation will Power Banking’s Next Decade

Marco Mottadelli

Marco Mottadelli

Head of Global Brokerage, Fineco Bank

Across a number of industries, the impact of the global pandemic can be summed up at its very core as being one of an accelerating agent. While the virus did not reverse or even necessarily altered the course of growth of certain industries, it rather moved innovation forward. Some technology companies suggested they saw four years of consumer behaviour change in just a quarter.

The change was rapid, unexpected and sometimes disruptive from companies and consumers alike. But it also represents a further increase in a pace of change that was already gathering pace in the last decade. Nowhere is this more true than the state of the British banking and financial investment industry. While decades may have passed with little to no changes in the core consumer experience at branches, that’s no longer the case. The majority of the British public is now accessing their banking services online.

As the company behind the first traditional banking institution to offer a digital-only offering, we at Fineco feel in a particularly useful place to offer a view about the next phase of development. We see three fundamental shifts that should drive how banks evolve over the next decade: integrated offerings, tailored data and adaptive solutions. Let’s examine what each of these mean in more depth.

Integrated offerings

The British public has traditionally relied on a series of specialty providers for their financial offerings. Current and savings accounts were handled through large high street banks and building societies, while investing came through other institutions such as insurance companies and unit trust providers. Stockbrokers and later online companies had the lion’s share of trading volume. All of this means that the average person might have as many six or eight financial relationships. The arrival of so-called neo-banks saw customers add yet another account.

Consolidation is inevitable, but will only occur en masse when a single provider is able to offer comprehensive services across investing, trading and payments. These have been more common on the European continent, while the British diversified. It’s ironic as Brexit may see divergence between the British and European banking regulatory regimes, consumer behaviour is moving closer together.

Tailored data

A downstream effect of consolidating financial providers will be better understanding of customer needs. More and more services are moving online, where it is easy to (safety and securely) gather data about consumer needs. Armed with this information, banks can adapt mobile and desktop displays to start to intuit what information to show clients. That may mean information about particular funds for an ISA based on shares activity.

Machine learning and other forms of algorithm-based programs should increasingly allow financial products to feel less like labyrinthine systems that need to be combed through to find a piece of data and more like answering devices, where the solution almost magically appears.

Adaptive solutions

The next step beyond presentation of data is for banks to use this information to create solutions. Better information is increasingly allowing banks to create products tailor made for parts of their clientele. These services should take advantage of expanded mandates of integrated offerings to provide saving, investing products and asset allocation designed around specific life events or goals. The cost of implementation and deployment is plunging, allowing more room for experimentation and quick response to changing market conditions. This has the potential to increase overall satisfaction in the region.

Although we are just a year into the new decade, we are already seeing the outlines of what global banking will look like at its close. While we believe these trends will stretch across borders, British customers are in a favorable position as customers here will be at the vanguard of this development. We already see a large shift into digital products. The willingness of millions of people to sign up for digital banks showed the inherent flexibility and hunger for better results. Those institutions, be they ‘legacy’ or ‘upstart’ that move quickly into this space will set themselves up to better serve customers in the years ahead.

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