Few of us would have predicted the 2020 we have all experienced. Which is why projecting forward a decade and asking what the financial services industry will look like in 2030 is an almost impossible task.
But we have given it a go.
KPMG has brought together 30 distinguished leaders in financial services and beyond – insiders, outsiders and challengers – to piece together what the industry landscape of 2030 could look like.
In our report, 30 Voices on 2030 – The New Reality for Financial Services, our industry experts explore a broad range of issues, such as changing societal expectations, emerging business models and regulatory frameworks. Their predictions for the industry span the six areas in which KPMG also envisages dramatic change.
Six areas of disruption
Subscription-based lifestyle bundles proliferate – anticipating consumers’ needs as they evolve
Trust is the key differentiator in the CDR world
Financial services are absorbed into immersive customer episodes
The consumer of 2030 is not only more socially and environmentally conscious than ever, but with consumer data right (CDR) widespread, they will also be more data-aware and discerning in what data they share, with whom, how and for what purpose. Trust that a firm will do the right thing by them emerged as the key differentiator.
In return for trusting firms with their data, customers expect products and services that seamlessly integrate into and enable their evolving lifestyle needs.
To deliver that, the financial services industry has embraced platformification, which will absorb activities like payments, insurance policy procurement and mortgage origination into broader and more immersive customer episodes, orchestrated by financial services providers. No longer tied to a single provider, multi-bank relationships are commonplace.
There are three sustainable business positions: scale, specialised verticals, and brand
Partnerships between FS and non-FS players proliferate, forming to compete for customer loyalty
New streams of revenue make up half of the income of financial services firms
To achieve platformification, traditional FS providers, fintechs, supermarkets, utilities and manufacturers now cooperate within partnership models to provide personalised and rewarding experiences. The FS CEO of 2030 is now required to be an orchestrator of partnerships.
Amongst the winning providers, three sustainable business models exist in 2030: 1. Scale players, the core of the industry, derive competitive advantage from their large balance sheets and capacity to conduct business globally. 2. Specialised verticals seek to own highly profitable specialised segments 3. Historical brands 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, so have the economics underpinning the financial services industry. Certain services are expected as a given and available for free. 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% of the revenue of a bank or insurer.
FS has driven the transition to a zero-emission economy
Significant investments have been made to design trustworthy AI
Regtech has enabled near-real-time supervision
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) to counter privacy violations, unintended biases and discrimination, and inappropriate customer outcomes.
Meanwhile, regulators are partnering with regtechs to monitor the activities and conduct of firms in near-real-time thanks to the wave of digital transformation that accelerated through the 2020s.
A premium is placed on emotionally intelligent employees with inquisitive, curious and perceptive mindsets
All employees are required to be digital natives and data dextrous
A people-centred approach has replaced command and control
The arms race to secure the best talent continues to be fierce as technology and innovation continue to disrupt the industry.
Driven by AI and data, traditional business and financial acumen is now augmented with digital skillsets and the ability to be data dextrous. While recruits are not required to understand specific coding languages, 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, slimming down and adopting the skills and practices traditionally aligned with technology companies that have enabled them to become more nimble and entrepreneurial.
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.
Data is the currency of growth
Increasingly, AI is making decisions for customers: our digital twin is becoming a reality
Quantum computing has profoundly revolutionised the industry
Data is the currency of growth: successful firms continue to be those that maximise their access to data to more accurately and competitively price risk and credit and provide personalised services to their customers.
To protect that data, financial services products and services are accessed using biometrics and behavioural technologies, augmented by AI security profiling to provide constant, real-time user identity validation. Physically inputting PINs and passwords is a thing of the past and two-factor authentication has largely disappeared.
Quantum computing has had a profound impact on both data protection and opportunities. It accelerated the pace at which AI learns and advanced quantum algorithms and analytics can price more effectively and optimise portfolios for return and risk.
Central bank and corporate-issued digital currencies have redefined the FS landscape
A universe of parallel inter-bank payments networks has formed
Purpose-built digital units of exchange now facilitate new products and services
Despite it already being the direction of travel, COVID-19 sounded the death knell of cash and cheques — and the adoption of digital payments by many of the last pockets of resistance proved that. In its place we saw the rise of the central bank digital currency (CBDC) and corporate coins.
Corporations also developed purpose-built asset collateralised stable coins to handle specific tasks, which gave rise to new products, services and sources of revenue.
More broadly, the distributed ledger technology (DLT) upon which digital units of exchange are built, also provided the infrastructure upon which customer, transaction and trade information is now shared between institutions and across borders. Traditional risk assessments were relegated to the past. DLT is now playing a fundamental role in upholding the core objectives of the financial system: driving efficiencies, ensuring stability and maintaining a competitive environment through innovation.
Find out what the 30 voices have to say:
The upshot? Write your future now
The views of our featured experts have influenced this list of ten key considerations you should address now.
- Get clear on your purpose. Will it align to the likely consumer and stakeholder expectations of 2030? How are you aligning your strategy, investments, systems and processes to underpin and live your purpose? If you are trusted, you will succeed.
- Protect and remediate your data environment. How you manage customer data and privacy will be your Achilles heel. Build a robust security architecture, hire the best talent and partner where required to give you and your customers assurance that their data is safe in your hands.
- Tackle your technology environment. How will your legacy systems prevent you from being a player in the new reality? Will you invest to upgrade your existing systems or will you turbo-charge your transformation by acquiring an existing capability in the market or establishing a new stand-alone entity?
- Determine the role you will play in the ecosystem. Are you going to be the orchestrator of an alliance between partners or will you be a participant enhancing the overall customer experience? Determine the criteria you’ll be enforcing to decide who you partner with — this will be influenced by how you balance the capability of an alliance partner with their purpose and values.
- Determine how you will bridge the capability gap. Will you build, buy or partner? What is the path of least resistance to achieving your strategy? Who and what do you need to help you achieve it? What parts of your business or operating model would benefit the most from partnering rather than continuing to exclusively build in-house?
- Simplify and become more nimble. How are you creating a culture that embraces radical simplicity? What elements of your business will continue to be core in 2030? What measures are you taking to build agility into your business and create an entrepreneurial spirit?
- Articulate your strategy to develop new sources of revenue and begin pivoting your organisation’s people, processes and technology around them. How will you derive and deliver the kind of value your customers will pay for? How can partnerships and alliances become a new source of revenue? Are fee and subscription-based models within the realm of possibility?
- Go hard after the best talent globally. How will you retain this talent once you’ve got it? What skill sets will you prioritise to succeed in an industry that will be dominated by technology, the quality of its customer experience and the need to cooperate effectively with partners?
- Begin experimenting with digital currencies and blockchain to broaden understanding of the technology and its capabilities. Engage globally to maintain a finger on the pulse of international developments. Determine what role, if any, your organisation will play in the digital currency ecosystem.
- Continue to reimagine the future. The past year has taught us just how uncertain the future might be. Are you prepared for the scale of change required? Do you have the organisational appetite to adapt your business model? What is your rhythm for understanding industry signals and gaming out scenarios?
KPMG knows that the future can be designed, prepared for, solved for and aspired to. 30 Voices on 2030: The New Reality for Financial Services aims to provide you with the impetus you need to act today to build the future we all want for tomorrow.
Would you like to discuss the report or the ten key considerations to see how you can get ready for 2030? Contact one of our leaders or authors below.