Future scenarios in the financial sphere (II)

What do we know?

The initial approach poses a series of questions concerning the alternative future paths in the financial sector, by taking into consideration the context’s angle, the focus according to its virtues and flaws, as well as the new blooming opportunities that depend on the socio-technological and future work methods. Firstly, we can foresee some of the challenges that surround the banking transformation of the future, which were discussed at the Forbes “Leading the Future” roundtable:

• The traditional banking service as a deposit holder isn’t profitable any longer (Banks lose funds).
• The leaner structured newcomers focus their activity in specific verticals of the financial function.
• The transformation of organisational and technological entities, and the traditional incumbents in the present day.
• Technology makes it possible to provide the service that a traditional bank already offers with a reduced staff in an increasingly efficient way by applying certain automatisms.
• The pandemic and confinement proved that hybrid work models allow banks and their clients to operate with normality.
• The coexistence of different financial service providers in open service ecosystems.
• The risk of disintermediation in favour of 3rd parties (large platforms or tech companies).
• The impact a single digital market poses on financial services.

The main threats to the financial sector according to the analysis of the next 10 years, are the following:

• A leading role of large technological companies, along with the standard they establish in the market, becomes unbearable if there is no control over the evolution of the standard, a lack of independence to work with alternatives or an apparent incapability to stall the financial activity in other assets.
• The pace of tech innovation compromises future investments and resources as long as there is no right bet (proprietary technologies, new market standards).
• The setting of fast paced innovation without an approach to use different levers, or a shortfall in understanding people’s expectations and future needs, pushes the financial entities to a secondary position.
• Retail banking as we know it relies on economic development in great measure, as observed in the past with negative interest rates, and as we are seeing throughout the 21st century with more or less complex situations (financial crisis, the pandemic, war, raw material shortage…). Not having service alternatives is a potential risk that subjects financial activity to economic cycles and eventualities that are proving to be unmanageable.

• Consumer habits evolve continuously in accordance with the scale of social values. Overlooking any of such changes can shift the banking services to an irrelevant role.
• Observing the digital dynamics, it is foreseeable that in the future a 3rd party will manage platforms while maintaining a direct relationship with the financial clients, consequently displacing the financial entities to a second tier.
• Digital service ecosystems (Open Banking), or the digital single market, will become a reality. Not understanding the dynamics, the value provided or the future roles that financial institutions may adopt is a major threat.
• Sociopolitical polarisation poses a clear threat to society as a whole and to the economy in particular; a depiction that renders legislators becoming less predictable in the future.
• An upsurge of tech presence in most features means that non-digitised people may eventually be left out of the digital services ecosystem and its financial permeability.
• A disorderly or lax approach to the organisational and business model transformation would eventually be a failure.