1. In 2021, we'll see the war of platforms continue.
The USA took moves to ban TikTok and WeChat in 2020, while the EU threatened to ban Facebook for sharing data outside of Europe. In turn, the social media giant threatened to leave EU operations behind. China of course has already blocked Facebook, YouTube, Instagram and Twitter for several years. These geo-political decisions have added to an increase of uncertainty.
Consequently, the importance and value of regional financial services has risen. Take the European Payments Initiative (EPI) for example. Launched in 2020, it aims to bring European payment providers together to create independence from non-European service providers.
Another example is in Norway's approach to mobile payments: the country’s own Vipps payment system, which combines identity and commerce with payments, is attracting huge investment and garnering strong public support. Expect others to follow suit.
2. The pandemic has increased people's desire for security and safety.
This is reflected in people's behaviour. The use of contactless payments has grown – not just in the Nordics where ‘being digital’ is just part of normal life – but also in countries like Germany, where the percentage of contactless payments has risen to be on par with the Nordics, rising from 50% in January to 73% by the end of the year. Contactless payments and eCommerce are likely to continue increasing in popularity due to the increased need for remote financial services and convenience.
Consumers are also looking for safety in savings. More money will be spent on housing and homes, which of course affects banks as the housing market rises. On the other hand, some loan-takers will unfortunately encounter trouble with payments and find themselves even more in debt.
3. Big Tech will continue its march into financial services.
Many banks are facing tough competition, particularly at the customer interface level. Customers increasingly demand the same ease-of-use and overall user experience as they find in other digital services, such as social media.
The aim of the Big Techs may not be to become banks, but they are going to disintermediate the customer with the bank. For example Google has already stepped into the bank account field in collaboration with Citi Bank and Apple has issued the Apple Card for payments.
Many banks, especially the smaller ones, lack the resources to maintain their back-end services and handle the vast amounts of data while simultaneously enhancing their customer experience. This will lead to more outsourcing of back-end solutions, because banks need to stay focused on what matters: their customers and the customer journey.
The harsh reality for banks is: will they just become the data pipe for financial services or will they evolve to be or stay an essential part of their customers' lives?