Cedar Vision | Banking Tech ’22: What’s in Store?

Summary

In 2022, the financial services industry is expected to undergo significant transformation, with key areas of focus on digital payments, digital lending, and digital banking. The rise of next-gen instant payments, B2B cross-border transactions, and tech-driven alternative lending models like Buy Now Pay Later (BNPL) are set to redefine the sector. Digital-only banks, open banking, and API integration will drive a shift towards self-service banking, enhancing convenience for users. The emphasis on operational resilience and ESG (environmental, social, and governance) concerns will also shape the future of the industry.

Takeaways

• 😀 2022 will see significant traction in technology spending by banks, with a focus on digital services across banking and financial sectors.
• 😀 The three key areas of growth in 2022 are digital payments, digital lending, and digital banking.
• 😀 Digital payments will be revolutionized by next-gen instant payments, with a projected 25% of non-cash transactions being powered by e-money.
• 😀 Cross-border payments and B2B payments are expected to grow significantly, driven by big tech companies and the integration of APIs.
• 😀 AI and machine learning will play a critical role in advancing digital lending, particularly in alternative lending methods like Buy Now, Pay Later (BNPL).
• 😀 BNPL will continue to grow, with countries like the UK already seeing a significant percentage of consumer spending directed towards these services.
• 😀 Digital-only banks, including neo-banks and challenger banks, are expected to become more prominent, offering a fully digital banking experience.
• 😀 Open banking and API banking will receive major investments from banks, with estimates suggesting that at least 25% more banks will adopt API banking in the next year.
• 😀 There will be a strong focus on operational resilience, with banks needing to comply with Basel norms to ensure stability and security.
• 😀 Sustainability (ESG) will become increasingly important in the financial services sector, influencing both operational practices and consumer-facing products.
• 😀 The future of banking will be more self-service oriented, with customers increasingly handling their banking needs digitally, from the comfort of their homes.

Q & A

What are the three main areas of focus for the financial services industry in 2022?

The three main areas of focus for 2022 are digital payments, digital lending, and digital banking. These areas are expected to see significant traction due to increased technological investments by banks and financial institutions.

How are digital payments expected to evolve in 2022?

Digital payments are expected to see significant growth in next-gen **instant payments**. It is projected that at least 25% of non-cash transactions will come from e-money. Cross-border and B2B payments will become increasingly important, driven by big tech companies, with a focus on APIs and enhanced cybersecurity.

What role will big tech play in the evolution of digital payments?

Big tech companies are expected to play a significant role in driving **cross-border payments** and **B2B payments**. Their involvement will contribute to greater efficiency and scalability in the digital payments space, pushing the adoption of new technologies and systems.

What is Buy Now, Pay Later (BNPL), and how is it impacting digital lending?

BNPL is a digital lending model that allows consumers to purchase goods and services immediately and pay for them over time. In 2022, BNPL is expected to gain further traction, especially in markets like the UK, where it already accounts for a significant portion of consumer spending. The alternative lending market is expected to reach $300-$340 billion, driven by BNPL and other tech-enabled solutions.

How will AI and ML technologies influence digital lending in 2022?

AI and ML technologies will power the next generation of digital lending platforms, enabling more accurate credit scoring, faster loan processing, and better risk management. These technologies are seen as crucial in scaling alternative lending models like BNPL.

What is the significance of digital-only banks in 2022?

Digital-only banks, including neo-banks and challenger banks, will continue to rise in 2022. These banks operate without physical branches, offering a fully digital banking experience. They are expected to disrupt traditional banking models and increase competition within the financial services sector.

What are open banking and API banking, and why are they important for digital banking in 2022?

Open banking and API banking refer to the use of open APIs to share financial data between institutions, allowing for more transparent and efficient financial services. In 2022, banks are investing heavily in these technologies, with around 25% of banks already building APIs, and an additional 25% expected to do so in the next year. These developments are critical for fostering innovation and improving customer experiences in digital banking.

What are Basel norms, and how do they relate to digital banking?

Basel norms are a set of international regulatory standards for banking, focusing on risk management and operational resilience. As digital banking grows, banks must ensure they meet these standards, especially in the context of new technologies and digital systems, to ensure stability and security in the financial system.

How is ESG (Environmental, Social, Governance) impacting the banking sector?

ESG considerations are becoming increasingly important for banks, as customers and investors alike demand more focus on sustainability, social responsibility, and ethical governance. In 2022, the banking sector is expected to place a higher emphasis on ESG factors in their operations and investments.

What is the concept of 'self-service banking,' and how will it affect customers in 2022?

Self-service banking refers to the ability of customers to perform banking tasks and transactions independently, without the need for in-person interactions with bank staff. In 2022, self-service banking will become more prevalent, with more people accessing and managing their finances digitally, whether from home or on-the-go, as part of the broader shift towards more automated and on-demand financial services.