What does 2030 look like for financial services?
By 2030 the financial services landscape looks fundamentally different to what it did ten years ago. Digital transformation, evolving customer expectations and new entrants have long been disruptive forces in the financial services landscape.
However, the COVID-19 pandemic accelerated the speed of change and the impact of these forces in many ways, making the years ahead particularly uncertain. Predicting the future is no mean feat. To piece together a picture of the potential future industry landscape, KPMG spoke to 30 industry experts – chief executives, policy makers, entrepreneurs, industry representatives, technologists, lawyers, and academics – on issues such as changing societal expectations, emerging business models and regulatory frameworks. These leaders have some very clear visions for the future. Their predictions for the industry span the six areas in which KPMG also envisages dramatic change: Purpose driven and predictive: the customer experience of 2030
Ahead of the curve: new business models
- Socially conscious: regulation and trust in 2030
- The key battleground: people & talent
- Technology confluence: the rise of the digital twin
- A transformed landscape: industry fundamentals
While the experts featured in this research bring a variety of experiences, backgrounds, perspectives and ideas about the future, they are crystal clear on one thing: financial services will need to be different in 2030.
According to KPMG’s 30 Voices, customers will not want seamless services from their financial services provider – they will expect it. Data will be the oil that makes the industry function. Customers will only grant access to service providers they trust and from who they are deriving a clear benefit for doing so.
Successful businesses will have purpose at their core. And the firms that have thrived are those who foresaw the change – and acted early on it.
The consumer of 2030 is more socially and environmentally conscious than at any other point in history. In this reality, earning and maintaining a licence to operate is dependent on having a clear social and commercial purpose that extends beyond serving the immediate needs of the customer to solving deeper societal challenges our community faces.
One of these challenges is data privacy. With the application of the Consumer Data Right (CDR) widespread in 2030; it provides the means for consumers to manage, control and share the thousands of data points collected about them by service providers. As consumers became more data-aware and discerning in what data they share, with who, how and for what purpose, trust emerged as the key differentiator.
Protecting customer data and valuing their privacy is non-negotiable. In return for trusting firms with their data, customers expect products and services that deliver value and satisfy their lifestyle needs as they evolve and change. Customer experience in 2030, therefore, is characterised by services and offerings that seamlessly integrate and enable the lives of customers.
On the road to those seamless customer experiences, the financial services industry has done away with traditional boundaries and embraced platformification to enable the orchestration of a diverse range of services and capabilities.
Direct engagement by consumers with their financial services providers is largely history as activities like payments, insurance policy procurement and mortgage origination are now absorbed into broader and more immersive customer episodes.
No longer tied to a single provider, multi-bank relationships are commonplace. Weeks long approvals and six-week settlement periods may become entirely redundant by 2030 as the process of purchasing a home becomes part of a much broader digital customer episode that seamlessly incorporates conveyancing, government services and finance across multiple agencies and institutions.
Products and services will have to evolve as customers expect faster response times. The battle over who will be the orchestrator of services and hold primacy over the customer relationship has been fought and won. A few clear winners emerged as the dominant platform providers. A universe of traditional FS providers, fintechs, supermarkets, utilities and manufacturers now cooperate within partnership models to provide personalised and rewarding experiences to customers. No single firm ‘owns’ the customer, and the FS CEO of 2030 is now required to be an orchestrator of partnerships. Amongst the winners, there are three sustainable business models in 2030: scale players, specialised verticals, and trusted brands. At the core of the industry, large dominant firms derive competitive advantage from the sheer scale of their balance sheets and capacity to conduct business globally. On the periphery, others seek to own specialised segments of the market that are highly profitable and deliver value to their customers.
Firms with strong historical consumer brand affinity survive by proactively engaging with partners to deliver the services their loyal base demands. As the customer and their expectations have changed, the economics underpinning the financial services industry have shifted substantially. Certain services are expected as a given and available for free as customers only pay for services from which they believe they are deriving real value.
Instead, new business models, revenue sharing arrangements, subscription-based services and fee structures now generate 50 per cent of the revenue of a bank or insurer. This is still a brave new world for many, where adaptability, innovation and hedging smart bets is imperative. In this new reality, radical simplicity prevails. The days of monolithic organisations are over, and the notion of product personalisation does not mean increased complexity.
consumers are not the only group to whom companies need to prove their social purpose. Stakeholder capitalism has become a deeply entrenched mode of operation for the industry with firms being judged by the action they are taking to address climate change, how they treat vulnerable customers, and how they address inequality in society.
Recognising this, the financial services industry has deployed its vast resources to accelerate the transition to a zero-emission economy, driving outcomes that far exceed government targets. Being dependent on customer data to derive value and generate revenue, the industry has also made significant investments to design trustworthy artificial intelligence (AI) as privacy violations, unintended biases and discrimination, and inappropriate customer outcomes fuelled a wave of consumer mistrust in AI.
The wave of digital transformation that accelerated through the 2020s has also revolutionised regulators and their capacity to supervise market participants. The regulatory burden has eased as regulators monitor the activities and conduct of firms in near-real-time having partnered with regtechs and availed themselves of supervisory technology platforms integrated with firm data. Conscious of their dependency on consumer trust, firms have also deployed the capabilities of regtech partners to protect customer data and enhance their capacity in areas such as Know Your Customer (KYC)/ Customer Due Diligence (CDD). As traditional verticals disintegrated and the data-driven ecosystem evolved, regulatory focus shifted from product supervision to adopting a greater focus on customer outcomes and interests.
The arms race to secure the best talent and their desirable sets of skills continues to be fierce. As technology and innovation continue to disrupt the industry, the war for talent – particularly for skills that are limited – is accelerating.
Organisations depend on their talent to find growth in a protracted low-growth environment, to consciously consider the needs of the customer, to think creatively about the delivery of the customer experience and to construct partnerships that deliver those services. Consequently, a premium is now paid for emotionally intelligent employees with inquisitive, curious and perceptive mindsets.
Organisational culture and leadership will be critical elements of the employee value proposition – particularly for attracting, developing, and retaining talent. In an industry driven by AI and data, traditional business and financial acumen is now augmented with digital skills sets and the ability to be data dextrous.
This is a key criterion of employment. Recruits are not required to understand specific coding languages, but they are required to understand the logic and algorithms that underpin and impact customer outcomes – and to challenge whether they have been ethically constructed. Firms employ fewer people overall. In the early 2020s, there was a surge of risk and regulatory expertise into the industry to address the outcomes of the Royal Commission.
By 2030, this has been unwound. The adoption of technology enabled firms to slim down and adopt the skills and practices that have enabled them to become nimbler and more entrepreneurial. A people-centred approach has replaced bureaucracy and broken down traditional siloes.
With people and firms refusing to go back to the old way of working, the hybrid working revolution sparked by the COVID-19 pandemic has endured, broadening the potential talent pool as employees continue to work from any location in any time zone – a truly global workforce has now arisen.