Unprecedented change

In the next decade, a new and very powerful wave of disruption will unfold, due to technological, economic, geopolitical, demographic and environmental factors. The convergence of these factors will bring unprecedented change to society as well as to the banking industry. For instance, technology will engender new risks and change the way of working. Also, persistent low growth and near-zero or negative interest rates will impact many advanced economies. Growth dynamics will also significantly be altered by fundamental demographic changes. And finally, concern about climate change and social impact will force banks to rethink their role in society.

Riding the next wave of disruption

In order to ride this next wave of disruption, banking needs to become more open, transparent, real-time, intelligent, tailored, secure, and deeply integrated into consumers’ lives and institutional clients’ operations. Also, banks should remain true to their core identity: matching demand with supply of capital. Yet their purpose might change, caring for the greater good and tackling large socioeconomic issues such as social equity and climate change.

Imagining the opportunities

With this disruption comes endless opportunity. Leaders should start imagining those now, as well as hyperscale their transformation and actively engage with the ecosystem. Next to this, it is pivotal to fortify their core foundation on multiple dimensions, including technology infrastructure, data management, risk management, and talent.

Technology – fixing the basics
Most banks already know they need to excel at data management, modernize their core infrastructure, embrace AI and migrate to the cloud. However, many of them are not quite there yet. So what to do? In the field of core infrastructure, it will be helpful to establish a new, parallel, cloud-native core banking platform. To achieve scale in AI, it is crucial to build tight governance structures, bring the workforce along the journey and fortify cybersecurity defenses. In order to harness the potential of data, banks should rethink their data architecture. Lastly, the human side of technology needs addressing, learning how to use technology to develop new customer insights and building a collaborative and innovative culture.

Risk – leveraging technology
While banks have recently made notable strides in assessing and mitigating risk across the enterprise, the next decade will test their ability to continue to modernize the risk function. It is crucial to contemplate what might be an optimal risk management model, including a reevaluation of the lines of defence. Next, consider how best to leverage the power of new technologies, to increase efficiency, identify emerging threats, and predict where risks (including new risks, created by new technologies) might occur. In order to do so, banks need to access and use high-quality, timely data.

Talent – focusing on the human side of transformation
New technologies do not only change the nature of work (the what and how), but also the workforce (who) and workplace (where). A focus on redefining and redesigning jobs will empower the higher-order work that humans can handle best, based on intuitive, creative, interpretative, and problem-solving skills. Reskilling the internal talent pool might be the best option, as new (tech) talent is more scarce than ever before. Talent management also requires new profiles for leaders (with e.g. strong interpersonal skills and the aptitude to balance business knowledge with tech fluency), as well as workplaces that offer more open and collaborative structures.  

2020 banking and capital markets outlook

This article is based on the 2020 banking and capital markets outlook, a Deloitte report that offers profound perspectives on 2020 and beyond across seven primary business segments: retail banking, payments, wealth management, investment banking, transaction banking, corporate banking, and market infrastructure. It also lays out Deloitte’s expectations across the domains of regulation, technology, risk, and talent, and offers a ‘deeper dive’ into e.g. cyber risks, M&A trends, Fintechs, privacy in the digital age, and climate change as an opportunity to make an impact.

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