Digital banking trends and disruption for 2016 and beyond

In the lead up to their summit in September 2016, Mobile Banking and Payments USA conducted a survey to gain a better understanding of the current state of affairs in the digital banking ecosystem. More than 300 financial professionals responded in total, including those from traditional banks, FinTechs, payment processors, and solution providers.

It probably comes as no surprise that the buzzwords respondents cited as dominating 2016 were ‘FinTech’, ‘Customer Journey,’ and ‘Blockchain’. Digital banking trends and disruption are also being defined by terms of ‘Digital Identity’, ‘Omni-channel’, and ‘Analytics’.

Mobile innovation and customer experience came out as the primary area of focus and opportunity (31%) for strategy in 2016, closely followed by big data management and analytics (23%). 18% will invest into API, 15% into biometric security, and the remaining 13% will focus on movement into cloud (10%) and dev ops (3%).

How will the banking ecosystem develop in the next 3-5 years?

17% of those surveyed predict that tech giants such as Facebook, Google, and Microsoft will enter into the financial market, creating a permanent ecosystem shift.

In line with these ideas, 53% of respondents believe there will be a wealth of mergers, acquisitions and partnerships in the near future. With almost one fifth (18%) holding the belief that there will be an ongoing battle between the traditional banks and FinTechs.

Emerging cryptocurrencies and blockchain technologies are capturing attention from some financial professionals, with 2% believing they will gain enough momentum to completely wipe out banks in the future.

When asked how soon cryptocurrencies are likely to become mainstream, the vast majority (39.1%) suspect this will happen between 2019-2022. Others are not so convinced by an immediate rise of these digital currencies, with 27.6% assuming it will be delayed until some time after 2022, and more than 15% predicting it will never take off.

For the future of traditional brick and mortar banks, there is no real consensus of opinion. However, it is widely accepted that these institutions are positioned for some pretty serious disruption in the future, with 22% claiming that current features will require upgrading, and 44% predicting they will need to innovate and invent new services. Somewhere in between these figures sits the number of respondents (34%) that believe these banks will significantly reduce in number or close altogether.

What else lies ahead?

Back in January we discussed where we felt the FinTech landscape was heading, and it seems our predictions are very much in-line with the majority of the financial community.

However, while we would anticipate that we will see more and more collaboration between banks and FinTechs during the remainder of 2016 and beyond , we could also potentially see banks and FinTechs competing; particularly once the UK open up the real time gross settlement system (RTGS) to non-banks, and PSD2 is fully rolled out.

Only time will tell as to how the payments landscape will evolve, but with the pace of innovation we have experienced in the last five years, we can certainly expect some big changes on the horizon.

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