Top Trends in Banking 2021: Five strategies intelligent banks will prioritize to accelerate digitalization and boost resiliency and CX in 2021

As the financial services industry bids adieu to the black-swan events of 2020, businesses, individuals, and governments speculate about what’s next. Capgemini Top Trends in Banking 2021 eBook analyzes the drivers, opportunities and risks driving the banking industry this year and beyond.

Top Trends in Banking 2021: Five strategies intelligent banks will prioritize to accelerate digitalization and boost resiliency and CX in 2021

Within a historically transformative and highly dynamic environment, the banking industry landed on its virtual feet in 2020. For the most part, the transition to an entirely virtual environment has been smooth. Employee productivity remains healthy. And, despite some hiccups, technology enabled banks to sustain customer service and support non-cash transactions as e-commerce became even more prevalent.

Perhaps most importantly, the global pandemic was not a banking crisis but an opportunity! Financial institutions played a fundamental stabilizing role in several countries by distributing government stimuli totaling more than USD10-trillion overall. Compared to the context of the 2007-08 global recession, financial institutions could now take charge by leveraging resilience and a strong capital position.

Despite these positives, the industry faces risk around severe and mounting credit losses and plummeting revenues due to continued low-interest rates and sluggish demand in some markets.

According to Capgemini’s 2021 Top Trends in Banking analyses – payments, wealth, and commercial and retail banking executives should prioritize these five strategic transformational goals:

1. Become an intelligent bank

2. Improve business resilience

3. Enhance customer centricity

4. Strengthen go-to-market agility

5. Create open ecosystems

Each goal aligns with individual trends identified within our segment-specific banking analyses.


Let’s take a bird’s eye view.


Become an intelligent bank


Amid today’s uncertainty, artificial intelligence (AI) can help banks achieve intelligent digital transformation to beef up risk management, operational excellence, and data strategies while heightening customer experience.


Across the value chain, AI is a critical component. It enables hyper-personalization, improves financial advisor effectiveness, and – as noted in Capgemini and Efma’s World FinTech Report 2020 – it unlocks efficiencies beyond the front end.

How can firms accelerate their transformational journey? By implementing intelligent processes, transitioning to the cloud, and integrating enterprise resource planning (ERP) systems with banking workflows.

Data-driven offerings complement artificial intelligence capabilities and enable new value-added propositions. What’s more, distributed ledger technology can unlock digital currency solutions and open doors to quantifiable efficiency and cost improvements.

Improve business resilience

Spurred by COVID-19, banks are now laser-focused on business resilience, with a shift in emphasis from financial risks to non-financial and operational risks. Risk reduction became a top priority during the pandemic, and it quickly became apparent that intelligent banks had an edge as they leveraged their technology investments to mitigate fraud and empower credit risk management.

In addition to a focus on business resilience, cost reduction came to the fore in 2020 amid continued low-interest rates and high pressure on revenues. Previously, many banks had earmarked technology for customer acquisition initiatives, while they often overlooked mid- and back-office processes. Now the impact of the back-office on the total operation – and customers’ last-mile experience – became unmistakable. Firms must respond with agility and speed.

Enhance customer centricity

Intelligent banks can adapt quickly to new-normal scenarios because they have built– or are building – omnichannel CX processes and engagement strategies around modern infrastructure and virtual support protocols. Similarly, future-focused banks can consider embedded finance offers and develop value-added API-based propositions by leveraging their ecosystem’s strength.[1]

New techniques are emerging in retail banking, such as segment-of-one, in which firms leverage data and technology to focus on each customer’s unique needs by delivering value at every life stage – throughout the banking relationship.

In B2B payments, treasury/corporate connectivity is another trend, reinforcing the importance of virtual account management (VAM). Instant data exchange and API connectivity are treasurers’ near-term top priorities.

Commercial banks are developing more agile solutions to enhance digital onboarding, to make lending seamless, and to support small- and medium-sized enterprises (SMEs) better.

In wealth management, the focus is on omnichannel capabilities, interactive client communications, and improved digital advisor tools.

Intelligent processes will enable firms to offer value-added services beyond banking and to bring those products/services to market more quickly and easily. New-normal capabilities are poised to offer customers relevance beyond investment advice, such as convenient one-stop shops filled with a range of products and payment options.

Strengthen go-to-market agility

Newfound agility will enable a rapid pivot to offerings that align with customers’ values, particularly sustainable investing. As investors become more aware of Environmental, Social, and Corporate Governance (ESG) considerations, and firms roll out more sustainable investing propositions, this trend will continue to gain ground.

Create open ecosystems

To accelerate their transformation journey, banks across the globe are exploring new ecosystems and collaborating with FinTechs.

The win-win success of partnerships between incumbents and FinTech firms has coaxed the industry to think beyond open banking – and transition to an open platform architecture we call Open X that includes seamless exchange of data and resources and expedited product innovation to generate improved customer experience.[2] The move is enabling banks to leverage the benefits of an open ecosystem filled with specialized expertise.

Banks, payment service providers, and wealth firms will finally be able to reimagine their operating models, deliver WOW-factor customer experience cost-effectively, and transform their businesses from a product-led, siloed model to an agile experiential proposition.

Finding the right balance between developing intelligent bank capabilities – focus on resiliency, superior CX, and swift go-to-market agility – while exploring ecosystem potential is not easy feat.

However, we believe banks that identify the right trade-offs will unleash growth opportunities in multiple areas by energizing customer acquisition, improving penetration in underserved segments, and fast-tracking digital technology adoption.

Are you charting your firm’s inventive bank path? Explore Capgemini's interactive Top Trends in Banking 2021 eBook or dig deeper into our 2021 Retail Banking, Payments, Commercial Banking, and Wealth Management trends books. Contact financialservices@capgemini.com.

[1] Forbes, “Embedded Finance: A Beginner’s Guide To The Growing Intersection Of Tech And Financial Services,” Dec 16, 2020
[2] Money 20/20 Europe, “FinTechs rebundling financial services in the era of Open X” Jun 4, 2019

Keywords

Bank Products & Services Business strategy/Model

Geography

International
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