Banks will face an environment of accelerated innovation this year after investing resources to account for last year’s business model changes that were forced on the industry by the coronavirus pandemic, an international consulting firm said over the weekend.
In a recently published study, Accenture said the financial services industry was forced to make years’ worth of technology and business model changes in just a matter of months in 2020 as demand for both digital solutions and secure work-from-home systems exploded.
This year, however, these banks will be required by the evolving landscape—which includes even greater competition across the industry—to maximize the returns from these investments in terms of new strategies.
“The pandemic has stretched the entire industry like an elastic band, and there is an understandable desire to let the band relax and go back to normal as soon as conditions permit,” Accenture said in its “Banking in 2021: Top Trends to Watch” study authored by Alan McIntyre, senior managing director for banking of Accenture.
“When you stretch an elastic band, you also create potential energy,” it explained.
“In a slingshot, that energy can be transformed into rapid forward motion. For banks, that took the form of a sustained burst of innovation and improvisation.”
‘Ease the strain’
The consulting firm said banks are now faced with the question of “where to let the elastic [band] relax and ease the strain of 2020,” and where the experience and pent-up energy of last year can be used to propel the institution forward.
The study lists key trends that are most likely to affect banking globally over the next 12 months.
The first is the “winner takes all” phenomenon now emerging in retail banking, where only large-scale efforts at engaging with customers will be deemed as worthwhile undertakings. As big banks get bigger, “too small to succeed” will replace “too big to fail” as a key metric, the company said.Accenture also said, under the new normal, the best traditional banks and the best “neobanks” will win customers, while weaker incumbents and undifferentiated challengers will struggle.
This year will also see the twilight of the banking apps, it predicted.
“As banking completes its migration from street corners to screens, competition in retail and commercial will heat up and squeeze out standalone apps,” the company said.
It also predicted a period of “radical transparency” this year, which will be tough for traditional retail strategies. This means that some banks “will lean into radically transparent products to create a more compelling pitch.”
And while it has been said in previous crises that “cash is not king,” Accenture noted that the pandemic “will slingshot digital payments in countries racing to become cashless,” while pointing out that “in most markets, nixing cash will remain a long-term project.”
The new digital environment will also lead to the rise of the digital regulator, which will need new skills and tools to oversee the proper conduct of new players in the industry. INQ