Just before Christmas, I held discussions with many retail, commercial and investment bankers in London about their thoughts for the New Year. Here are the headlines:
In the UK, 2014 is the year of the next general election which must be called on or before May 2015, and that factor will be a key part of the decision making process of government. There is also the question of devolution in Scotland, with the referendum taking place on 18 September 2014.
In Europe, the regulators and central banks think the issues in the banking system are stabilising, but unwinding their support will be the challenge.
America is leading up to an election year in 2016, and the ability for the Obama administration to do more will slow down.
China has an issue with non-performing loans. If their economy does not continue to grow, the question is how big is China’s fall?
Generally, the economic outlook is still uncertain, but it does look as though the macro-economy will improve and that 2014 should be better than the last five years.
The Banking Union, the Banking Reform Bill, the European Markets Infrastructure Regulation (EMIR), MiFID2, Basel III, SEPA end-dates and more are turning the industry upside down.
In the UK, the Vickers reforms separating investment and retail banking will be the big topic for 2014. Equally, some specific directives are in conflict, such as the Mortgage Market Review (MMR). On the one hand, the regulator is restricting the advice banks can give mortgage applicants under MMR at the same time as trying to promote increased lending through Help-to-Buy.
A big focus in 2014 will be innovation with the introduction of Zapp mobile payments in April, and an increase in the use of contactless payments as Transport for London (TFL) move from their proprietary contactless system (Oyster) to the acceptance of any contactless payment via a bank card or mobile app.
The government and industry are also discussing the infrastructure of payments in the UK. Some of the infrastructure has not been renewed for years and so the Payments Council will release a review in Q2 2014 of the requirements for infrastructure renewal to improve the retail and commercial processing of payments. Part of this review will include how people and businesses see payments developing, from mobile to NFC to QR codes to security.
The demands from customers are much greater, fuelled by digitisation and 2014 will see the digitisation of the customer relationship explode. That will cut across everything from corporate to consumer, and covers everything from mobile and tablet computing to social media, crowdsourcing and social funding to Bitcoin.
Technology is also disrupting commercial banking, and will be talking a lot more about 3D printing this year. 3D printing collapses the supply chain and, for some, destroys it. That will be a huge learning curve for businesses, and will have a big impact on the corporate customer.
As corporates are impacted in the supply chain or challenged by consumers, many are moving far further ahead in the drive to digital than their banks. This has led to some corporate clients testing their banks in their ability to keep up.
It is clear that the way in which banks used to make money is not the way they will make money in the future. 2014 will be about restructuring bank product and service lines to find new ways to make money and comply with regulatory change and banks will focus upon cost reduction and innovation to evolve their business model to manage in this new world.
Cloud and outsourcing will be focal points for efficiency in banks, and mobile and contactless will be the focus for innovation. Banks cannot lead these changes, but will look for support from vendors.
If that is the case, then 2014 is the year of the vendor.