Wednesday, 14 January 2015

Hot Fintech trends for 2015 - analyst round up part one

What are the industry analysts predicting for retail banking, risk and FX?

Guest post: Eria Odhuba analyst relations lead for Comms Crowd puts together a digest of analyst insight on fintech trends in 2015.
What's hot in fintech?

Traditionally, this time of year means predictions – when wise industry analysts predict the key IT trends for the next 12 months or so. Kudos to analysts willing to stick their heads out! So, at the CommsCrowd we thought it might be helpful to summarise analyst predictions for 2015, specifically, the financial services technology industry – one of our sweet spots.

It’s going to be a series of posts as there is much to cover, this one looks at retail banking, risk and FX. I’ve decided to start by pointing to a number of articles that I feel provide a really good overview of the predictions within specific sectors of financial services for 2015, to which industry analysts have wholly or partially contributed.

Caveat - some analyst firms still have predictions webinars coming up so maybe I jumped the gun a bit (e.g. Celent). However, if you know of other predictions that should be read, please feel free to share these. I definitely don’t claim to have scanned all the key predictions out there – so share away.

The digitisation and disruption of retail bankingThe first article, if you have not seen it already, is a whopper! Top 10 Retail Banking Trends and Predictions for 2015, The Financial Brand:
  1. Using Customer Analytics to Drive Contextual Experiences
  2. Expedited Deployment of Digital Delivery
  3. Mobile-First Design
  4. Increasing Digital and Social Selling
  5. Mass Market Acceptance of Mobile Payments 
  6. Focus on Security and Authentication
  7. Industry Consolidation
  8. Enhanced Customer Incentivization
  9. Investment in Innovation, Incubation and Uncommon Alliances
  10. Increased Impact of Digital Disruptors
So what caught my eye? Apart from specific analyst comments, it is the massive interest in, and inter-linking of, digital, personalisation and mobile. I imagine we’ll see lots of waves being made as banks fight to win/keep customers and look to make their multi-channel experiences seamless, enjoyable and secure.

Oh, and Apple Pay. Trust them to put a spanner in the works!! Ovum is just one of many analyst firms that have a view on how this will change the payments landscape.

Align that spine
But, every now and then someone highlights the ‘old world’ stuff that needs to be sorted out. Check out Four big bank tech trends for 2015 by Chris Skinner. Good old core banking systems renewal is, reluctantly, hanging in there as a major target for investment against ‘newer world’ entries like cloud, analytics and incubators. Banks have to get their spines in order and renewing core systems is a nasty job (probably why CEOs don’t like doing it).

Invest in risk or risk failed investments
If you like going deep, deep, deep undercover in the risk world, IDC Financial Insights’s Worldwide Risk Management 2015 Predictions is a good bet. What do they say?

1. Risk data aggregation, analytics and reporting consumes 75% the CRO agenda in 2015.
2. Led in part by big data solutions, fraud and financial crimes analytics will set global financial institutions back US$2.8 billion for software and services by 2016.
3. 30% of top compliance functions introduce a technological means, business processes, and metrics to manage and minimize conduct failures.
4. Institutions increase investments in risk culture through enterprise education by more than 15% in 2015
5. Industry clouds disrupt legacy risk operations and contribute to 10% reduction in KYC and other compliance costs by 2016.
6. Virtually all CROs will be engaged in credit risk modernization initiatives through 2016
7. By 2016, threat intelligence security services market will growth at 20% CAGR, with consulting services leading the growth.
8. To meet the demand for convenience, by 2016, 10% of mobile-initiated commerce will be biometrically secured, and password usage begins to show signs of decay.
9. By 2017, with workable boundaries of regulation at state and federal levels, financial institutions find their role in crypto-currency clearing.
10.Through 2016, operational risk spending will grow at 8% CAGR, almost 2 times the average growth rate for all IT industry spending.

What got me, first, is the eye-watering $1/2 trillion (really) IT budget for risk across all financial services and, second, the fact that this is still increasing. Risk management, with all the accompanying regulatory, human, technological and political pressures will be a big issue in 2015. Industry analysts that focus on this area will be VERY busy as the need for advice to navigate this really complex area continues.

Cloud, big data and analytics are entrenched topics for discussion now – and in 2015, the vendors that catch analysts’ eyes will be the ones that actually deliver solutions to mitigate risk across these three areas and not simply have aspirational messages.

FX - up your game plan
What about some capital markets-specific predictions? I’ll stick to FX. We all know regulations and FX-fixing seemed to dominate headlines as 2014 closed.

FX-MM magazine has a brilliant overview of what Aite Group thinks will be happening in the global FX market in 2015. There is a lot to digest but I’ll highlight a couple of things. First, tier 2 – regional and national – banks will need to up their game in various areas to compete effectively with tier 1s. Second, as pointed out by Javier Paz, banks looking to broaden their capabilities will need to carefully manage crucial relationships with FX technology firms, brokers and venues. I predict a queue to analysts that can help vendors and/or banks deal with all these issues – and this is just FX!

Self-fulfilling prophecies
These predictions will, to some extent, dictate what analysts are interested in. And if they are really interested in something, it is because there is a demand for their insight. While I have not covered all the fintech predictions possible in this post, it is clear that things like regulation, mobile, customer experience, cloud, big data and analytics will be top of mind in the industry.

The key thing many banks and vendors have to do is to find the right analysts to help delve deeper than the predictions outlined and actually get insights that give them a competitive advantage.

Look out for predictions post #2

If fintech is your thing you may also find the following of interest:
Picture courtesy of www.theiconconciergeblog.com


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