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2020 banking and capital markets outlook

Fortifying the core for the next wave of disruption

​Disruptive forces are changing how banking is done. Banks can add customer value by fortifying their foundation and staying true to their core identity as financial intermediaries, matching demand with supply of capital.

Read the latest report published by Deloitte Insights, the 2020 Banking and Capital Markets Outlook . This report explores how forces of disruption are changing the way the banking industry defines success.

Key Findings

  • A new wave of disruption more forceful and more pervasive than what we have seen in recent years will likely unfold in the next decade. With this disruption, though, comes endless opportunity.
  • The combined effects of technological disruption, sweeping changes to the nature of work, demographic shifts, climate change, and possible Japanification could have serious implications for the banking industry.
  • These forces may also change how banking is done. Banking will be more open, transparent, real-time, intelligent, tailored, secure, seamless, and deeply integrated into consumers’ lives and institutional clients’ operations.
  • But while the way banking is done might change, banks’ role will likely not. Despite what happens, banks should remain true to their core identity as financial intermediaries: matching demand with supply of capital.
  • As we enter a new decade, banks should also fortify their core foundation on multiple dimensions, including technology infrastructure, data management, talent, and risk management.

2020 Banking and Capital Markets Outlook

Read the Deloitte Insights Report

Riding the next wave of disruption

A new wave of disruption more forceful and more pervasive than what we have seen in recent years will likely unfold in the next decade. While the roots of this disruption—technological, economic, geopolitical, demographic or environmental—may remain the same, the unique convergence of these factors should unleash unprecedented change in the broader society and economy, and, consequently, in the banking industry as well.

Foremost among the drivers of disruption should still be technology. The fusion of current technologies, such as machine learning and blockchain, and emerging ones such as quantum computing, could not only create new opportunities, perhaps greater in scale than ever before, but also engender new risks. Additionally, technology will also radically change work as we know it, as well as who is doing the work, and where it gets done.

Explore the effects technological disruption could have on the banking industry.

Regulations: Complex as ever

The European Parliament’s recent revisions to the Capital Requirements Directive and Regulation (commonly known as CRD5 and CRR2) are considered to be a win for the banking union. CRD5 and CRR2 will revise capital requirements and could, therefore, strengthen the capital and liquidity positions of EU banks. While these revisions implement some parts of Basel III, rules in Basel IV are excluded.

Many financial institutions, however, have made compliance progress after the EU implementation of the General Data Protection Regulation (GDPR) in 2018. GDPR has brought sweeping protections to the personal data of EU citizens and standardised data rules across the European Union.

Technology: Fixing the basics

Last year, we highlighted the need for banks to excel at data management, modernise core infrastructure, embrace artificial intelligence (AI), and migrate to the cloud. However, most banks are far from where they’d like to be in their digital transformation, despite an increase in new technology investment in recent years. This trend is expected to continue in the foreseeable future. For instance, in 2022, North American banks are expected to spend nearly one-half of their total information technology (IT) budget on new technology, while European banks would spend about one-third, a figure higher than the current level (27 percent).

Challenged with legacy technology and data quality issues, most banks are unable to achieve the desired returns on their modernisation initiatives. As a result, there might be a need to shift attention and adopt a back-to-basics approach in 2020 before banks can fully reap the rewards from advanced technologies.

Discover more of the 2020 banking industry outlooks, read the original report on Deloitte Insights.

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