Email a customized link that shows your highlighted text. Read the. This fusion of risks has been aptly named “CyFi.” Regulators are increasingly scrutinizing banks’ operational resilience and have begun to link cyber threats to financial stability as a result.157 To combat this emerging subset of risks, banks should consider fusing their cyber and financial intelligence frameworks so they can unify capabilities and improve threat visibility across cyber, fraud, and anti-money laundering domains. The Future of Pakistan Banking Markets to 2020- Trends, Outlook, Economic and Profitability Analysis, Key Ratios, Market Structure ... 4 OUTLOOK OF COMMERCIAL BANKING INDUSTRY IN PAKISTAN 4.1 Total Assets and Liabilities Forecast, 2005-2020 4.2 Aggregate Loans Forecast, 2005- 2020 Pervasive challenges included a structurally lower net interest margin (NIM) due to the continually fragmented European market and oversaturation of banks in key markets, such as Germany. Furthermore, fundamental demographic changes across the globe will likely alter growth dynamics significantly. Banking Regulatory Outlook in 2020. Do not delete! BICRA And Trends For Top 20 Banking Markets 4 *The list only includes a selection of the changes made so far in 2019. Similarly, as interest rates stay at current levels or drop further, asset growth could become more of a priority than deposit growth, especially in segments and markets such as commercial loans. DTTL and each of its member firms are legally separate and independent entities. View in article, Imani Moise, “Citi combines its stock trading and prime brokerage business,” Reuters, July 29, 2019. More often than not, the success or failure of a digital transformation effort may depend on cultural issues rather than technical ones.47 To make transformation happen, leaders may need to focus on developing a new mindset for how best to use technology, people, and processes. See something interesting? The story in Asia is mixed, with Chinese banks generally continuing to get bigger. Understanding the client and engaging with them appropriately can result in client sa… Nonbank players are ready for CECL - are banks? In this report, KPMG subject matter experts offer a number of predictions for the industry which also shed light on three broader trends. The Commercial, Business and Retail Banking Outlook for 2020 and Beyond. View in article, Daniel Kobler et al., The Deloitte International Wealth Management Centre Ranking 2018, Monitor Deloitte, May 15, 2018. The breakneck pace of change and the unprecedented scale of innovation are inspiring and testing established orthodoxies. The investment banker of tomorrow will likely be augmented by technology solutions and will be a banker epitomizing “less doing, but more thinking.”108, On the regulation side, CRD5 and CRR2 will increase banks’ capital and mandate large non-European banks to create holding companies in the European Union.109 This might slow US banks’ advance. AccessFintech, which specializes in collaboration, transparency, and control to the financial services industry, is an example. However, data that resides in banks’ siloed systems is just one piece of the puzzle. View in article, Kevin Nixon, Tony Wood, and Shiro Katsufuji, Asia-Pacific financial services regulatory outlook 2019, Deloitte, 2018. Because the United States doesn’t have a comprehensive federal privacy standard that protects all types of US consumer information (including financial data), some states such as California, New York, and Vermont have begun to craft their own mandates.31. Meanwhile, abundant customer data should enrich personalized experiences while increasing payment providers’ responsibilities in the areas of privacy and security. View in article, Connor Childs et al., “How Adyen is disrupting payment processing,” Medium, January 5, 2019. Open banking can amplify and accelerate banks’ digital transformation efforts and the emergence of new business models. Payment providers will also be forced to expand alternative revenue streams. This is because it is less risky, reduces time-to-market, brings results, and allows core banking functions to be migrated over time. This is due to a historic proliferation of disparate legacy systems, which has limited their ability to capture, measure, and report data.55 By enhancing their data architecture, banks could create new data tools and models that could readily sense and combat emerging risks. While concern still exists about fintechs’ growth and their impact on the financial system,169 regulators are encouraging innovation through sandboxes and new charters or licenses.170. Enhancing adviser productivity and experience will also be key to cope with margin pressure, meet compliance demands, and provide superior client service. 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. Cost mutualization is back in the air, but with a “Fintech 2.0” flavor. In the United States, total deal value reached US$16.5 billion as of August 2019, excluding the US$28.3 billion megamerger between BB&T and SunTrust announced in February.158 The number of deals year over year is roughly in line with the 259 deals reported in 2018.159 However, median price-to-tangible book value has declined over the year as expectations from both sellers and buyers have adjusted to reality (figure 8).160. And, of course, potential risks from geopolitical tensions, such as Brexit or the ongoing trade wars, warrant constant attention. This is important, as nearly four in 10 US consumers have experienced some friction with their credit card payments in the last year, with fraud being the most common complaint (figure 7). Banks should rethink privacy as a value exchange that mutually benefits consumers and companies without compromising trust, their reputation, or regulatory compliance. View in article, Judy Hua and Kevin Yao, “China's July new loans dip more than expected, further policy easing seen,” Reuters, August 12, 2019. View in article, Davis Polk, “Banking and cannabis—Updated briefing on the SAFE Banking Act and STATES Act,” April 16, 2019. Mobile Everything, But Same Old Banking View in article, Ivy Schmerken, “U.S. Banks should make climate risk management an independent and robust discipline, similar to credit risk or operational risk. As we enter a new decade, banks should also fortify their core foundation on multiple dimensions, including technology infrastructure, data management, talent, and risk management. It will be some time before we find out, and this year’s main tech trends offer technologies that can help banks to prepare for both scenarios at the same time. 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. A push toward less risky investment advisory models is expected in 2020. 2020 banking and capital markets outlook Fortifying the core for the next wave of disruption Disruptive forces are changing how banking is done. In its most recent report, the International credit rating agency Moody’s Investor Service (Moody’s), has assigned a negative outlook for the banking industry in Asia Pacific over the next 12 months as the US-China trade war continues on to 2020. Their actions include reducing their carbon footprint, financing low-carbon businesses, promoting green bonds, and being transparent about their environmental practices. Globally, the IMF has forecasted slower worldwide GDP growth of 3 percent in 2019, with no region unaffected (figure 3). Fullwidth SCC. In an open data environment, privacy concerns will also be a factor. View in article, Leo Lipis and R. Andrew Gómez, Get more from real time payments, ACI Universal Payments and Lipis Advisors, 2019. Technology can increase efficiency by automating manual processes, assist in identifying emerging threats, and provide insights into risks and their causal factors.52 Robotic process automation (RPA), for instance, can be used to reduce human error by flagging exceptions in large data sets. A new wave of disruption more forceful and more pervasive than what we have seen in recent years will likely unfold in the next decade. Independent Banker’s Community Bank CEO Outlook survey asked community bank leaders how they plan to grow their institutions this year. 8 Emerging Trends of Banking Industry – Major Transformation in 2020. by Ryan North November 20, 2019. written by Ryan North November 20, 2019. Lastly, the Indian banking industry is expected to undergo a massive wave of consolidation, as the government plans to merge 27 state-run banks into 12 well-capitalized, future-ready banks.164. No matter what, banks will remain trusted custodians of customers’ assets. Analyzing the impact of COVID-19 on Kuwait’s banking sector in 2020 The report titled ‘Kuwait Banking Outlook 2020’ examines Kuwait’s banking sector, provides an in-depth analysis of the industry and discusses about the challenges posed by the economic impact of COVID-19. Meanwhile, fintechs in Asia are becoming dominant players in retail banking. In the US mortgage and personal loan markets, nonbank players have captured a large market share already. View in article, Office of the Superintendent of Financial Institutions, “Financial data for banks,” accessed October 9, 2019. In Asia Pacific, tapering growth, declining credit quality, and eroding margins could prompt M&A. Global banking-industry performance has been lackluster. One thing is certain: rapid change will be the new constant. Banks in many parts of Asia, on the other hand, have increased their margins, with NIMs reaching 2 percent. Only those financial institutions that build a collaborative and innovative culture to drive change can achieve real returns on their technology investments in the next decade. Securities servicing firms, on the other hand, are expected to continue to provide data analytics and insights to enable their clients to make informed investment decisions. On the front end, account servicing, for instance, has long been a face-to-face business. Firms have two options: talent acquisition or reskilling. 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. 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. Consumer privacy has become an increasingly complex and contentious topic, as the tools and technologies capturing data about every facet of our lives have proliferated. View in article, Nichola Saminathe, “Canadian banks brace for tougher times as ‘Goldilocks' era winds down,” Reuters, August 30, 2019. In sales and trading, posttrade simplification is becoming an urgent priority, with the bigger players now willing to make investments to simplify and innovate around this infrastructure. Banks will likely increasingly cater to a greater good, placing themselves at the forefront of tackling large socioeconomic issues, such as climate change or social equity. 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. Foremost among the drivers of disruption should still be technology. As physical flows merge with digital flows, banks should go beyond their core offerings to offer new services, such as hedging against climate risk or insuring digital assets. Anticipating the wave of disruptions over the next decade, bank leaders should reimagine the possibilities for how banking is done with big, bold ideas. A study of the role of investment banker human capital in acquisitions,” Journal of Financial and Quantitative Analysis (2018). On the back end, loan origination and rationalization are ripe for automation. To enable insights-driven offerings to clients, attain a leaner cost structure, and ultimately unlock future success, core modernization is key. After some initial uncertainty, regulators around the world have worked fervently over the past year to find replacement rates and build out working groups that will support the transition program. View in article, FIA, “Special report: CFTC advances two proposals amending oversight of non-U.S. clearinghouses,” July 11, 2019. View in article, Rimma Kats, “The mobile payments series: China,” eMarketer, November 7, 2018; Rimma Kats, “The mobile payments series: The UK,” eMarketer, November 6, 2018; Rimma Kats, “The mobile payments series: US,” eMarketer, November 9, 2018. In addition, there has also been an increased focus/need for service externalization, with customers undertaking some service functions themselves. Mid-sized banks seek M&A shelter 2019 saw a lot of merger and acquisitions activity in the payments and brokerage sectors driven by fee compression. More than 80 percent of financial institutions surveyed believe their organization is not effective or only somewhat effective in developing leaders that can keep up with work’s rapid pace of change.60 Many highlighted the importance of skills that balance traditional expectations and new competencies.61 Thus, the profile of tomorrow’s banking leaders will likely need to evolve to include some essential core attributes, such as: the aptitude for balancing business knowledge with tech fluency; managing complexity; strong interpersonal skills; the ability to facilitate change with an inspiring, forward-looking vision; and the ability to empower a diverse and inclusive workforce across co-located and virtual environments (figure 6).62 By taking a fresh look at the context under which future leaders will thrive, banks can begin to cultivate those leaders today. View in article, Banque De France, “Network for greening the financial system,” accessed October 29, 2019. View in article, SIFMA and Deloitte, “A firm’s guide to the implementation of Regulation Best Interest and the form CRS relationship summary,” September 27, 2019. To address fiduciary responsibility, the US Securities and Exchange Commission (SEC) approved Regulation Best Interest (Reg BI) in 2019,29 which enhances conduct standards for broker-dealers and investment advisers when dealing with retail clients. Wealth management could become the core of the banking-customer relationship. Many banks, however, have begun to recognize that their risk controls are inadequate to address the shifts toward the cloud, APIs, more open architectures, and the reliance on other third parties. On the regulatory front, global regulatory fragmentation continues to be a reality. Open banking, in this context, is quickly becoming a differentiator and a way to lock in clients. Over the past year, the financial services industry has actively engaged with the US Treasury Department and the Internal Revenue Service (IRS) to request further clarity on how the new rules would apply to their business models. View in article, Sean Allocca, “Amazon, Netflix and now Schwab: The risks in subscription models,” Financial Planning, April 3, 2019. Outlook 2020 With a new decade comes new challenges and opportunities. © 2021. While most deals will likely remain domestic, markets such as Indonesia163 could attract foreign banks. View in article, Federal Reserve Bank of St. Louis, “10-year treasury constant maturity minus 2-year treasury constant maturity,” October 28, 2019. 2020 banking and capital markets outlook Disruptive forces are changing how banking is done. View in article, Business Wire, “Visa acquires control of Earthport,” May 8, 2019; Zach Miller, “Mastercard gears up for cross border payment growth with Transfast acquisition,” Tearsheet, August 6, 2019. Increasingly, differentiation and premium pricing will be driven by “payments+” services. Finally, on the accounting side in the United States, with the approaching replacement of an incurred loss model by a current expected credit loss (CECL) standard,134 and the wide variation in allowances set by banks, it is yet to be seen what impact, if any, the new standards might have on lending volume, pricing, terms, and underwriting criteria. Driven by a democratization of markets, technology, and demand for mass customization, the business is expected to split into “flow monsters,” which focus on execution services, and “client capturers,” which specialize in front-office functions.106 Mid-level players without scale will likely be squeezed. Last year, we urged banks to reimagine transformation as a multiyear process and “change how they change.” This message, of course, is still relevant, but as we enter a new decade, banks should also fortify their core foundation on multiple dimensions, including technology infrastructure, data management, talent, and risk management. However, in such times, banks, the backbone of the economy, have a fundamentally important role to play as they provide liquidity to And while banking is changing, so, too, could the purpose of banks. While still in the early stages of its evolution, it is most evident in Australia, the United Kingdom, and other countries in the European Union. 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. And, improving the customer experience for all products should be an overarching goal of core modernization. Thus, the corporate bank over the next decade could look very different than the one today, as it redefines its role in the new financial ecosystem. Another equally important aspect to consider will be culture. See Terms of Use for more information. But while the way banking is done changes, banks’ role will likely not. The US banking industry has shown modest improvement in most areas and remains strong. Equally concerning is central banks’ limited repertoire of monetary tools; rates are either at historically low levels or bordering on/in negative territory in key regions around the world.21 The recent move by the European Central Bank (ECB) to cut rates and reinstate quantitative easing could stir growth, but if it doesn’t, it could result in more pain. Redesigning customer experience by removing friction, enhancing value through rewards and access to other financial products, and bolstering security are expected to remain top priorities for payment providers. Some are exploring managed tax and technology services to keep costs low as they struggle to increase their budget so they can perform these activities in-house. In a similar vein, upgrading and digitizing KYC and client onboarding processes, as well as AML transaction monitoring is critical. The US-China tariff dispute appears to have weighed on asset growth, which, among other factors, has dampened the global economic outlook. Third-party relationships with external technology vendors, suppliers, or service providers could expose banks to information misuse and theft (insider risk), system failures, and business disruptions (operational risk), or regulatory noncompliance. Data as of Nov. 15, 2019. And the lack of a single, complete banking union and disparate political mandates could hinder any measurable cross-European M&A activity. As faster payments become a growing reality and offer richer, structured data and real-time tracking, banks should consider offering new liquidity solutions to clients. Progress on developing faster payments is expected to continue at a different pace globally. 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. For instance, by 2100, rising sea levels could cost the world US$14 trillion a year,182 and the US economy could shrink by as much as 10 percent.183, Unsurprisingly, for the third consecutive year, world leaders ranked environmental threats as the biggest risk to the world.184 The banking industry is not immune: A recent Fed report found that the effects of climate change have a “pervasive effect” across all sectors of the US economy, including the banking industry.185, As such, central banks around the world, including the Fed, the ECB, and the Bank of England, are examining the implications for monetary policy and are also seeking ways to “bolster banks’ resilience amid economic disruptions caused by extreme weather.”186 They have also organized the Network for Greening the Financial System (NGFS) to boost climate risk management.187 Additionally, the Financial Stability Board (FSB) established the Task Force on Climate-related Financial Disclosures (TCFD).188, Many banks are already committed to improving the environment and combatting climate change. The Office of the Comptroller of the Currency (OCC) announced in 2018 that it would begin accepting fintech bank charter applications, but a federal court recently ruled that it lacked the authority to issue a bank charter to any entity that does not have federal deposit insurance.32, Meanwhile, although cannabis has been legalized in numerous states, it remains illegal under federal law. Institutions now must contend with numerous requirements that are often unfinalized or under revision. What’s more, humans continue to be a weak link, as evidenced by recent events involving rogue employees or contractors. As industry convergence accelerates in the broader economy, the need for cross-industry knowledge could become more important. In this report, we offer perspectives on what to expect in 2020 and beyond across seven primary business segments: retail banking, payments, wealth management, investment banking, transaction banking, corporate banking, and market infrastructure. View in article, EuroMoney, “Americas private banking debate: Internationalization is the future,” May 23, 2019. Research Leader, Banking & Capital Markets, Managing director | Center for Financial Services, Telecommunications, Media & Entertainment. View in article, Reserve Bank of Australia, “Financial aggregates,” accessed October 9, 2019. Finally, the much-awaited go-live implementation of the Consolidated Audit Trail (CAT) reporting in April 2020 should reveal immediate benefits. (See Reimagining customer privacy for the digital age for more information.). As technology gets cheaper and is readily adopted by the industry, the initial advantages may decrease in the long term. As such, banks should be selective in how they implement open banking practices. Operational resilience is expected to remain on the regulators’ agenda globally.148 New regulations are forthcoming, such as the European Recovery and Resolution Regulation for central counterparties, with higher transparency rules being the result.149 However, the US equivalent of MiFID II seems less likely.150 But more active assessment and recommendations from regulators for digital asset trading could happen. 2019 Banking and Capital Markets Outlook: Reimagining transformation. Lastly, digital transformation is not limited to technology and data. This can put them on solid ground to fail fast, learn faster, reduce time-to-market, and revive their relevance. Postcrisis levels St. Louis, “ HSBC Bank USA launches digital lending is also a banking industry outlook 2020 operating model also... Participants will explore ways to foster connections for their virtual workers ( merger and acquisition activities... Banks, however, report that they have a handle on customer data is the... 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