SunTec, the world’s #1 relationship-based pricing and billing company, today announced six key trends for the global banking and financial sector in 2021. The trends are distilled from SunTec’s conversations with its banking and financial services customers located around the world.
SunTec has over 100 banking and financial services clients in more than 45 countries. The company’s clients include seven of the top 25 banks in the world by assets.
Nanda Kumar, Founder and CEO of SunTec Business Solutions said, “2021 is going to be a very busy and transformative year for the banking and financial services industry around the world. Banks will have to reinvent their business and revenue models on account of the recent disruption caused by the pandemic. A fallout has also been falling interest rates – in some countries going into negative – and tightening of the regulatory framework.”
As per SunTec, the key trends are:
1. Asia will lead global recovery from the pandemic
An economic turnaround is on the horizon for most significant economies around the world. The Asian economies including India will go into recovery and positive growth come the new fiscal year starting April 2021. Being cognizant of the fact that India and China have been coping with the pandemic better than many other countries, economic recovery is expected to pick up, notwithstanding newer strains of the virus now entering the market. Further, the positive outcomes from the vaccine mean that India along with most other countries will most likely reach an epidemiological end to the pandemic (or herd immunity) by the end of 2021 or early 2022. Also, banks in countries like India will continue to implement MSME friendly policies to hasten the recovery process, in recognition of the fact that this segment contributes almost a third to the overall GDP, and further provide livelihood to well over a hundred million people.
2. Banks will be forced to find alternate revenue sources
The honeymoon of cheap loans may soon end as recovery happens, but loan demand will remain poor through the better part of 2021. Corporates and the general public will be wary of borrowing in adverse conditions. Further, a much more stringent regulatory regime is likely to prevail to mainly ensure that customers are protected. As a result, banks will be forced to re-evaluate their loan exposures to customers and even their customer relationships, as they move from benevolence [mainly Government enforced] in 2020 to prudent risk management in 2021. Consequently, banks sitting on huge and unproductive cash reserves, while also facing the prospects of lower or near-zero interest rates will see thinner margins. Institutions will need to invest in rebuilding trust and most importantly in technology to augment revenue, as they prepare to launch newer and more innovative products – delivering seamless customer experience through third-party interconnected providers in the background.
3. Business models will see a significant change
As banks look to reduce costs, automate, and simplify their business in order to gain more efficiencies, the role of bank branches will likely need to change post pandemic. One possibility will be to create ‘experience centers’ where customers can get intelligence and transact to build their own wealth portfolio. Banks will also invest in getting better customer intelligence to enable this transition and personalize their offerings for customers. Consequently, as banks gain valuable intelligence there will also be a proliferation of banking apps, enabling banks to identify profitable businesses and offer them credit. For instance, in India, we have a rich heritage in handicrafts, and therefore have the potential to build an Amazon-scale platform just for local handicrafts. This can be done within the ecosystem connecting buyers and sellers effectively.
Given the demand for better service, banks will have to up their game in providing seamless digital banking experiences. Transactions for instance to open accounts will have to reduce significantly as also routine activity that customers perform. This will be enabled by smarter technology that is well integrated.
4. Remote collaboration will determine successful workplaces
Over the next decade, enterprises will improve their capacity to work remotely. As ‘work anywhere’ and collaborative models become popular, banking and financial services organizations will start pulling together teams and resources from different parts of the country, or even the world. Remote work will allow front-end workers and even customer care representatives to stay settled in their hometowns or nearby hubs.
5. Partnerships will determine the future of banks
Platformification will become even more important in 2021, to offer more credit and flexible payment options with ecommerce players, or to help boost financial wellness given economic conditions. With banks keenly looking for new partners, the fintech firms with mature products and technologies will make for natural targets – both for collaborations as well as technology licensing deals or in some cases even acquisitions.
6. FinTech, Small banks and Neo-banks will grow their foothold while also facing stiffer competition
Smaller community banks in developed economies like the USA have outperformed larger banks in supporting local businesses and communities during the pandemic and they will continue to grow strong on the back of loyal relationships. In India and other emerging markets, neo-banks will continue to gain more ground in 2021, as they are both cost-effective and faster than conventional banks. With better technology capabilities and more agile structures, they will continue to complement larger banks and will emerge as attractive partnership or M&A targets for established Indian banks in 2021. Specific to India, the neobanks are also likely to face more competition with the moot proposals to grant additional banking licenses to large corporate or industrial houses and allowing the conversion of Payment Banks to Small Finance Banks.
“Banks in India will have their tasks cut out in dealing with a rapidly evolving regulatory environment on the top of ever-increasing competition. We believe that they can position themselves well for success by ensuring an unwavering focus on value creation for customers, and on developing the ecosystem through partnerships, collaboration or even M&As,” Nanda Kumar added.