With only a few days left of 2019, it’s time to get the crystal ball out and gaze into what 2020 holds for the wide world of financial technology.

As ever, we’ve asked a range of experts from across the industry for their thoughts about what’s to come in the next 12 months, so here we go:

Cloud hosting growth

While most definitely not a new technology, cloud hosting has accelerated within financial services in recent years, leading to competition between the big providers and facilitators.

Sankar Krishnan, executive vice president for banking and capital markets at Capgemini, said: “We are seeing significant growth across both cloud consulting and cloud implementation – the larger global banks are following a multi-cloud strategy and the medium-sized banks are choosing a single or dual provider.”

Marcus Treacher, senior vice president of customer success at Ripple, suggested that pioneers of such cloud services - like 10X and Thought Machine - will be the ones to watch in 2020.

“Because cloud-hosted banking technology providers have developed new platforms with modern methods, they are ideally placed to easily and cheaply plug into emerging blockchain networks, AI engines and other categories of FinTech,” he commented. “This means the competitive advantage of innovative banks over slower-moving rivals will be intensified.”

Treacher added that the long-awaited tipping point from on-premise ‘museum’ banking technology to agile, cheap cloud-hosted bank technology is getting closer.

Laura Crozier, senior director for financial services at Software AG, agreed that banks will accelerate moving to the cloud and taking on value-add partnerships in response to the Asian titans Alibaba and Tencent.

“They are leading the world in financial services and payments products and have discovered the secret sauce for creating value out of data: cloud for scalability and AI for perishable insights,” she stated.

“Separately, neither big tech nor banks have this capability, but together, they do - and the West is taking note - witness the recent announcement of the Citi and Google partnership.”

Mergers and acquisitions?

With incumbent institutions finally responding to digital disruptors, could this be the year that they wield their financial might and buy-up some of those startups struggling in an increasingly saturated ‘me-too’ market?

Jayakumar Venkataraman, partner for banking, financial services and insurance at Infosys Consulting, said that the way banks think about the FinTech players has undergone a significant shift.

“While they were once seen as fringe players, this year, banks will be looking at using FinTech to fill gaps in their own offerings, giving much richer propositions to their customers.

“Banks have set aside formal bandwidth to engage with the fintech community to identify the upcoming stars, to understand how their capabilities can be integrated into their product propositions, and to ensure they don’t fall behind their competitors,” he continued, adding: “In some cases, banks have also bought out the firms outright, as a move to gain competitive advantage over their competitors.

“Santander’s acquisition of Ebury is one such example, and we will see many more acquisitions of FinTechs by banks in 2020.”

Or ecosystems and partnerships?

At the same time, Venkataraman suggested that the second Payment Services Directive (PSD2) and Open Banking have given rise of the ecosystem approach in creating new propositions and delivering financial services to customers.

“Globally, they have enabled newer players to enter the market and gain access to customers’ data that was previously the sole preserve of the banks.

“All of this will be underpinned by rapid growth of the ‘API economy’, where banks and other players in the ecosystem are exposing APIs [Application Programming Interfaces] for all their key capabilities, to integrate and orchestrate new products and services for their customers.”

Alan Donnelly, head of financial services at Salesforce, agreed that the industry is starting to wake up to the idea of ecosystems and partnerships between challengers and traditional banks. “In the coming year we will see the discussion evolve from old vs new and see real-world examples of financial services organisations of all shapes and sizes working together.

“Challenger banks are booming due to agility, ease and convenience of their platforms – they are digitally native, designed from the bottom-up for a customer base which is increasingly becoming reliant on mobile,” he said, adding: “But these organisations are young, and do not necessarily have the wealth of data that traditional banks do; which can be a vital differentiator.”

Donnelly pointed out that movement towards ecosystems are already evident with concepts such as Facebook Pay, which is consolidating payments across all of its apps. “The race is now on to provide platforms that consumers will go to for every aspect of their financial lives – competition in financial services will shift from individual banking products to shared marketplaces.”

Personalisation and customer experience

Andrew Stevens, global banking and financial services specialist at Quadient, suggested that neo-banks will continue to differentiate themselves by the experience they offer to customers.

“As a result, these banks will begin to pick up the critical minimum number of customers to become profitable, taking away share of wallet from the incumbents – this is set to unsettle traditional, incumbent banks, forcing the realisation that it’s no longer viable to just put a thin customer experience marketing veneer over traditional cost saving and revenue generation projects.”

Doug Gross, chief executive at NGDATA, said that the challenge for the financial services sector in 2020 will be to see beyond their often-gimmicky appearance and branding, to truly understand underlying customer desires.

“This could lead to an exciting new suite of services for customers, where the bank acts as a facilitator for a range of activities outside of hardcore banking – think of the way you currently buy tickets for public transport or find offers for specific events – banks could make these interactions less painful and more enjoyable for customers.”

Will LaSala, director of security solutions at OneSpan, argued that last year banks started to evaluate how to simplify their infrastructures, increase customer retention and ease the process of onboarding new customers, all while still balancing security.

“In 2020, we will see the move to frictionless login, where customers are only prompted for elevated biometric authentication during login if risk is detected,” he commented. “Banks will have a heightened level of insight and the ability to control the security surrounding their offerings by implementing continuous authentication behind the scenes.”

Stuart Dobbie, product owner at Callsign, added that personalisation is top of mind for today’s consumer-focused enterprises, with FinTechs able to design solutions especially well to meet these demands.

“For example, many of today’s new payments platforms heighten the personalisation aspect of security, enabling users to increasingly take charge of their security preferences, such as being able to turn on and off the mag strip ability with their bank card.”

Artificial intelligence integration

Steve Haighway, chief operating officer for Europe at IPsoft, predicted that within five years the desk-based workforce will be 50:50 human and digital workers – with a rapid adoption of AI-powered digital workers to create this hybrid workplace.

“Digital workers are already transforming the way that we interact with technology at work, for example, with Allstate using Amelia as a whisper agent to support customer service representatives in finding the right information to respond to customer queries.

“In 2020, expect to see digital workers acting as your mortgage advisor or as a recruitment specialist in your office,” he continued. “These digital workers will take on time and information intensive tasks, improving the speed and experience of customer interactions, while reducing the administrative burden on employees.”

Crozier said that with the speed of 5G data transmission and the ever-increasing sophistication of AI, banks will cease to interact with their retail or commercial clients in a reactive fashion.

“By analysing cash flows, behaviours and trends, banks will step forward as partners in financial management – they will proactively assess if, for example, your utility bill that will be automatically paid is appropriate given your historical consumption and the weather patterns, and either pay it or flag it accordingly.”

However, Mark Crichton, senior director of security product management at OneSpan, said financial institutions will need help embracing AI to its full potential.

“Many are still holding back from providing enough data to use AI in its most complete from in the effort to prevent fraud – currently a lot of banks have siloed data pools which can’t be pulled, however over the next year, it will be rare to see banks not using AI in an efficient way.”

Alessandro Tonchia, co-founder and head of strategy at Finantix, envisaged two key areas where AI could cause significant change.

“Firstly, around client intelligence and using AI to discover more around things such as events, and secondly, using AI to support extreme personalisation – for this it’s important to understand client needs, build a wholesome client profile and then configure work around this, with sophisticated personalisation about their risk preferences, investments and so on.”

Data transparency and compliance

Emma Kendrew, intelligent engineering services lead for Accenture Technology, stated that 2020 will require that companies make transparency a reality.

“If they don’t pull back the curtain on their business, they will lose trust and ultimately loyalty,” she said, adding: “The reason more transparency will be really important is because demand for it is growing, and the technology/tools are available, so we’re on the verge of someone being able to do it really well.”

Tonchia said it a key differentiating factor in the market will be use of data. “As we enter a new decade, clients know the type of customer experience they want to generate, but they are getting to the point where they say, ‘all of this is great, but I don’t have enough data, or the right data’.”

He continued that one crucial task over the next year will be to fill those containers of data. “Because, with that data, you can have client intelligence and also compliance intelligence, you have a better fitting suitability model that not only supplies intelligence, but can produce tailored proposals to the client and react to certain events, based on explicit or implicit client preference.”

Venkataraman cited the Treasury Committee and Financial Conduct Authority’s increased focus on operational resilience as something that will need the right RegTech approach in 2020.

“Modernisation and transformation of the IT infrastructure in banks is emerging as a major strategic direction,” he stated. “Regulatory compliance will continue to be a top spend area, as the need to comply with existing and emergent regulatory and industry initiatives continue.”

A Kaspersky report warned that FinTech will increasingly become under attack from cyber criminals in 2020, in line with the rise in popularity of mobile investment and savings apps. “Not all of these apps utilise best security practices, like multi-factor authentication or protection of the app connection, which may give cyber criminals a potential way to target users of such applications.”

The security specialist’s monitoring of underground forums suggested that the source code of some popular mobile banking Trojans was actually leaked into the public domain. “Previous similar cases of malware source code leakage (e.g. Zeus, SpyEye) resulted in an increased number of new variations of these Trojans."

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