Such is the calm refrain in a Chinese parable of a wise elder upon hearing various prognosticative cries from the town’s villagers. It is also a chorus that can be applied to the banking industry for 2018, as the world of banking continues to (r)evolve. Based on my interactions with bank leaders over the last 12 months and without the benefit of a crystal ball, here are 10 key trends, predictions and best guesses that we think our retail and commercial banking clients should pay attention to in 2018. These 10 are among many topics being driven by a mix of regulatory, competitive and technology issues. Some are continuations of trends from the last few years, while others represent some new dynamics in the industry. Many are also congruent, interconnecting in ways that could cross-amplify their impact on the industry.
The fact that there are exactly ten predictions owes more to comedian David Letterman and the Billboard charts than it does to any fortuitous alignment between the decimal system and the current state of the global retail and commercial banking industry. I will undoubtedly miss the mark some on what will matter most in 2018, and expect you will find plenty within the list to debate. At least, it will be a catalyst for good conversation about the future of banking.
USHERING OPEN BANKING INTO THE MAINSTREAM.
It took Commodore Perry’s American fleet sailing into Tokyo Bay in 1853 to open up trade in Japan after 200 years of economic and cultural isolation. While the Japanese economy had stagnated, the promiscuous traders of the Dutch East India Company were busy creating the most valuable business ever by establishing and exploiting new commercial partnerships. In banking, PSD2 is forcing European banks to make certain banking services available for third parties to incorporate into their offerings. In other markets, like the U.S., competitive pressures are driving fragmentation of the traditional vertically integrated bank value chain. A decade ago, there were a handful of open APIs exposed by banks to enable third parties to work with them. That number has now exploded to thousands and is growing every week. We are also seeing specialist banks being created for the sole purpose of enabling partners, like retailers and telecoms players, offering banking services. 2018 will be the year in which attitudes toward Open Banking start to separate those who want to differentiate themselves through being good trading partners from those still hunkering down behind trade barriers, seeking to harvest diminishing profits from old business models.