Fortifying the core for the next wave of disruption, Risk: Leveraging technology to elevate risk management, Talent: Focusing on the human side of transformation, Payments: Remaining relevant as further disruption looms, Wealth management: The new core of the banking relationship, Investment banking: More pain before any gain, Corporate banking: Enhancing value streams beyond lending, Market infrastructure: The ongoing search for a new identity. Please see About Deloitte to learn more about our global network of member firms. Next, improving client experience will likely be paramount as clients expect seamless, real-time advice. However, ROC for China was strong at 14.4 percent14, though below last year’s 15.6 percent15. In a similar vein, upgrading and digitizing KYC and client onboarding processes, as well as AML transaction monitoring is critical. To enable insights-driven offerings to clients, attain a leaner cost structure, and ultimately unlock future success, core modernization is key. To figure out how this shift might impact talent, and—most important—what to do about it, bank leaders will need to understand not just changes to the nature of work (the what and the how) but also the workforce (the who) and the workplace (the where)—all of which are greatly interrelated.57, When it comes to the future of work, many banks have started to explore automating manual, routine tasks by scaling technology from siloed use cases to larger processes across the enterprise. Despite the US fintech charter challenges, regulators’ attitudes globally have also never been so favorable. Failure to modernize the related core legacy systems—whether cash management and treasury or securities reconciliation systems—could be a missed opportunity. View in article, Irena Gecas-McCarthy et al., “Federal Reserve Board proposes tailoring Prudential Standards,” Deloitte, October 31, 2018. That didn’t change in the second quarter of 2020. Take, for instance, the perennial problem of delayed settlement in business-to-consumer payments. Discover Deloitte and learn more about our people and culture. Climate change is arguably the defining challenge of our times.181 In addition to the possible adverse impact on the environment, human life, and economies, the staggering cost of dealing with climate change is mounting. Payment providers will also be forced to expand alternative revenue streams. And the ultra-wealthy are fueling the rise of family offices globally, simultaneously increasing investments into alternative asset classes, enabled by (private) feeder funds solutions of the likes of Artivest or iCapital Network.95, Meanwhile, the competitive differentiation among offshore wealth centers has been shifting from regulation and tax factors to, more recently, provider capability and digital maturity, where countries such as the United States, United Kingdom, and Switzerland typically have an advantage. But thanks to recent advances, it can now help banks reshape their risk management program in more meaningful ways. This leaves banks that provide cannabis-related banking services in a precarious position. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. Banking industry executives must feel like they’re in for a roller-coaster ride on the regulatory front in 2020. Regulatory divergence, geopolitical instability, and the possibility of a downturn have created a host of impending risks, requiring financial institutions to rethink traditional approaches to risk management.48 Additionally, nonfinancial risks remain top of mind for regulators and banks alike, and many have begun to sharpen their focus on this emerging subset of risks. Most other G-7 countries, such as Japan, Germany, Italy, and the United Kingdom, are in a similar situation or worse. To attract and retain clients, online trading of stocks and exchange-traded funds in the United States will increasingly be offered for no fee. On the regulatory front, wealth managers are grappling with the rising cost of compliance and increasing focus on KYC/AML and data protection.88 But more importantly, the implementation of the SEC’s new rules on fiduciary standards is set to increase the compliance requirements and drive additional changes to the business models and platforms of wealth firms operating in the United States.89, As expected, robo-advice has become table stakes. 3 While losses can be expected in every loan category, they may be most acute within credit cards, commercial real estate, and small business loans. View in article, David Tabaka, “Exchange global share & segment sizing 2019,” Burton Taylor Consulting LLC, 2019. Technology has played a significant role in risk management for a long time. 3 (2015): pp. Banking should become more open, transparent, real-time, intelligent, tailored, secure, seamless, and deeply integrated into consumers’ lives and institutional clients’ operations. View in article, Federal Reserve Bank of St. Louis, “10-year treasury constant maturity minus 2-year treasury constant maturity,” October 28, 2019. The United States recently introduced the Illicit Cash Act to streamline the requirements and transparency for reporting suspicious activity, which is expected to increase banks’ regulatory challenges.37 Similarly, in the aftermath of various money-laundering scandals in 2018, EU regulators are also overhauling their rules.38, Finally, in Asia Pacific (APAC), there are few prospects for major new regulations for the finance industry on the horizon. The ARRC has also held extensive consultations with industry groups, including the International Swaps and Derivatives Association (ISDA), the Structured Finance Association (SFA, formerly SFIG), and Loan Syndications and Trading Association (LSTA). Banks should continue to increase their fee-based income, as well as focus on cost management, but should not lose focus on their digitization efforts and regulatory obligations. View in article, Yuka Hayashi, “Judge denies federal agency’s authority to issue fintech bank charters,” Wall Street Journal, October 22, 2019. Talent will become more important for banks as the blend of capabilities in complex finance, coding, and soft skills necessary to drive deals forward will likely be in short supply.107 Banks should revisit their talent model, accordingly. In the short term, shifting client demands, increases in the cost to serve, and the threat from new market entrants will likely put pressure on banks to rethink their current strategies while it continues to strengthen relationships with clients. Payments incumbents are pursuing M&A to gain complementary capabilities and expand into new markets.81 In 2019, we saw several notable M&A deals, such as Fiserv-First Data and FIS-Worldpay, in the US$1.6 trillion global payments processing business,82 attesting to the global growth ambitions of these players.83. View in article, Bank of England, Financial stability report, Financial Policy Committee, July 2019. On the positive side, the state of banks globally has again become more resilient, with the tier 1 ratio edging to 6.75 percent, up from 6.66 percent in 2017. has been saved, 2020 banking and capital markets outlook High on the priority list are provisions for taxation of global intangible low-taxed income (GILTI) and the base erosion and anti-abuse tax (BEAT). View in article, Sean McMahon, “FIA voices concerns about market fragmentation,” SmartBrief, March 13, 2019. Globally, banks account for approximately 55 percent of the US$3.2 trillion leveraged loan market,128 and it continues to be a major concern for regulators and analysts worldwide, given the increasing risks. View in article, Robert Armstrong, “Investment bank job cuts near 30,000 as outlook sours,” Financial Times, August 11, 2019. View in article, Alexander Osipovich, “Exchanges face higher hurdles in boosting data fees,” Wall Street Journal, May 21, 2019; John McCrank, “Exclusive: SEC scrutinizes fairness of stock exchange pricing,” Reuters, March 7, 2019. One thing is certain: rapid change will be the new constant. US tax reform lowered the US statutory tax rate and included numerous provisions that impact multinational financial institutions, whether domiciled in the United States or abroad. Increasingly, differentiation and premium pricing will be driven by “payments+” services. Furthermore, increasing platform sophistication among buy-side and corporate clients is threatening money-making opportunities. After applying for a job in this country, you can access/update your candidate profile at any time. The Banking Industry Will Face A Range Of Challenges In 2021. Lastly, wealth managers should follow the money to attain long-term growth. View in article, Dan Cooper and Nicholas Shepherd, “European Commission issues report on the implementation of the GDPR,” Inside Privacy, July 25, 2019. “The new EU law on intermediate holding companies for third-country banking groups,” March 26, 2019. For instance, while almost every bank in the United States offers a digital mortgage application, only 7 percent manage end-to-end digital loan disbursement.76 This is material since traditional lenders have operating expenses that are three times those of digital lending players for their services.77. To unlock AI’s promise for growth and for banks to evolve from a product-centric to a customer-first organization, harnessing the potential of data will be a key focus in 2020 and beyond. Secured Overnight Funding Rate (SOFR), the proposed rate in the United States, has been increasingly accepted as a viable alternative. As corporate clients start to adjust their financing needs in response to a potential global slowdown in 2020, transaction banks can add more value to their clients. Near-zero and negative central bank interest rates also did not help the cause. But who would lead this augmented workforce? (See Reimagining customer privacy for the digital age for more information.). Breaking down this year’s federal banking regulations, Banking, commercial real estate, investment management, and insurance. View in article, Rochelle Toplensky, “Technology is banks’ new battleground,” Wall Street Journal, September 10, 2019. An example is DBS Bank’s Rapid, an API-driven banking solution that integrates its functionalities directly with corporate clients’ IT systems.120. The European Parliament’s recent revisions to the Capital Requirements Directive and Regulation (commonly known as CRD5 and CRR2) are considered to be a win for the banking union. View in article, Pymnts.com, “Fiserv-First Data merger is complete,” July 29, 2019. 0. News & Events / Insights Highlights from the Deloitte 2020 banking industry outlook 25.03.2020 Banks have come up against numerous challenges in the last decade, with slow recovery following the financial crisis, and a new wave of disruptors changing the way banking is done. View in article, Umar Faruqui, Wenqian Huang, and Előd Takáts, “Clearing risks in OTC derivatives markets: the CCP-bank nexus,” BIS, December 16, 2018. Additionally, privacy-enhancing techniques can help banks derive value from data-sharing without compromising privacy.46. View in article, Colacito, Hoffman, and Phan, “Temperature and growth.” View in article, Michael S. Derby, “Fed readying financial system for climate-change shocks,” Wall Street Journal, May 7, 2019; Jana Randow and Piotr Skolimowski, “Central banks are thinking greener as climate change hits policy,” Bloomberg, April 2, 2019. 8 Emerging Trends of Banking Industry – Major Transformation in 2020. by Ryan North November 20, 2019. written by Ryan North November 20, 2019. Amid global regulatory fragmentation, financial institutions—especially those with large global operations—are under significant pressure to reconcile local jurisdiction demands and their home country regulations. The Kingdom’s banking sector started 2020 on a promising note, with lending to the private sector increasing by 8.5% y-o-y in January, supported by the … 4. Postcrisis structural shifts continue to impede investment banks from achieving stable returns. Payments remains one of the most dynamic and exciting businesses in banking. In 2019, banking and financial services witnessed 32 M&A (merger and acquisition) activities worth US$ 1.72 billion. He leads the development of our thought leadership initiatives in the industry, coordinat... More, Jim is the managing director of the Deloitte Center for Financial Services, where he is responsible for defining the marketplace positioning and development of the Center’s eminence and key activities... More. While the potential upside is vast, the stakes are high. Do not delete! Change is on the horizon, and the future landscape for corporate banks will likely be marked by evolving client expectations, business model and workforce shifts, and disruptive technologies.130 Demand for real-time liquidity and funding is expected to grow. JPMorgan Chase, for instance, has said it will merge its corporate banking team with its middle-market technology division to better serve clients in that space.129. Deloitte's 2020 Banking Industry Outlook explores the imperative—and opportunity—of strategic transformation in regulations, technology, risk, and talent. Disruptive forces are changing how banking is done. Scott Baret is a vice chairman of Deloitte LLP and the leader of Deloitte’s US Banking and Capital Markets practice, which provides a broad spectrum of services to each of the banks and capital market... More, Val Srinivas is the banking and capital markets research leader at the Deloitte Center for Financial Services. As the cusp of the next decade nears, bank leaders should reexamine their aspirations in light of this new reality and fortify their banks’ core foundation. In an open data environment, privacy concerns will also be a factor. With any of the above strategies, partnerships, both traditional and nontraditional, will be critical to drive value from acquisitions and take advantage of broader market trends. View in article, World Economic Forum, The global risks report 2019, January 15, 2019. View in article, Ranina Sanglap and Baby Verma, “Indonesian M&A to still prove attractive for Asian banks in 2019,” S&P Global Market Intelligence, January 29, 2019. Email a customized link that shows your highlighted text. However, most banks are far from where they’d like to be in their digital transformation,41 despite an increase in new technology investment in recent years. What are the key trends, challenges, and opportunities that may affect your business and influence your strategy? Some firms, for instance, are using machine learning to free up advisers’ time on routine tasks, such as providing operational alerts and client updates.98. The pressure is on, as the 2021 deadline for the global LIBOR transition approaches. In North America, payments providers should be mindful of actions by the Fed and Payments Canada to determine potential strategies and learn from initial adoption. 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