A recent study by Ernst & Young identifies some key trends shaping the future of banking sector. The trends are expected to shape the banking models for the next couple of years with technology taking the centre stage. These trends are discussed below.
New Payments Markets and Models
Developments in technology are shaping the payments sector in great new ways. The rise of non-bank payments service providers offering services like mobile banking and the changing customer demands including quicker, faster and cheaper payments services as well as increased focus on systemic risk reduction and control are some of the key developments. Additionally, more transactions are currently being managed through exchanges affected by regulation of over the counter derivatives.
More Personal Customer Relationships
A trend is emerging where customers are taking more control of their financial relationships. This trend is here to stay and with time, more banks will deepen their personal connections with customers through advanced data analytics techniques. By 2030, there will be a single global bank appearing like hundreds of banks each with a specific product suitable to a discrete customer segment.
Capitalism to Influence Global Banking
While the exact architecture of global regulation continues to be work in progress, government involvement in the structure and operations of the banking industry is growing. Although there are obstacles associated with new regulation, the shift will generate new business models. Resource-limited governments will embrace partnerships with institutions able to provide capital, ideas and operational skills.
Opportunities and Volatility
Global banks will have to leverage the expertise of strong regional partners because most trade takes place at the regional level. Similarly, successful global banks will in future be characterized by high service standards and long-standing customer relationships.
The Balance Between Nationalism and Globalism
The global banking model is likely to face resistance as new economic challenges push countries to adopt protectionist trade policies. This will effectively constrain ownership structures, affect banking industry’s ability to enter or exit markets and the repatriation of profits.
The Emergence of New Markets
Most of the markets that are currently characterized as emerging will soon reach maturity. In Latin America, Asia and Africa, a new set of high growth markets will ultimately take their place. Global banks will have the opportunity to compete in these markets but will have to navigate local needs and regulations carefully.
Demographics will greatly affect the future of banking. It is predicted that the global population will exceed eight billion by 2030 with the majority being older and urban. New banking business models will have to come up with ways of serving this elderly and urban population.
Transformation in the Energy Sector
New technology coupled with political and environmental factors related to energy production will necessitate new financial products encompassing fundraising support and financing of large energy projects.