Evolving consumer expectations and the future of digital banking

The financial services industry has a long history of deploying new technology to respond to evolving customer expectations. The rise of digital banking in recent years represents a significant acceleration of technological change, fuelled by factors like the COVID-19 pandemic and shifting demographics. In the vanguard of sweeping industry changes are the FinTech providers. Advances such as cloud computing APIs and machine learning are being deployed to deliver seamless, 24/7 finance and banking services to consumers who now expect immediate, accessible digital solutions that provide both safety and convenience. Banks need to keep up with the incredible pace of change but face challenges in the form of entrenched legacy systems, siloed operations, a vast beachfront of propositional enhancements and compliance with regulations — issues that typical single-minded FinTechs are less burdened with. Many banks, however, are seeking to overcome these challenges, knowing that otherwise they face diminished market relevance. For many, the answer lies in partnering with existing FinTechs in mutually beneficial engagements that can deliver for increasingly digitally savvy users, such as a partnership between Barclays and TransferMate to deliver advanced cross-border payment services. Regulatory developments like Open Banking have set the scene for increased market competition as well as integrated disparate systems between multiple providers for the benefit of the end user. Onto this stage have entered traditional big-tech firms like Apple, Amazon Google and Meta, seeking opportunities to reshape the digital payments space. In parallel with these developments has emerged decentralised finance (DeFi) offerings that leverage concepts like Blockchain technology, smart contracts and distributed ledgers to provide solutions outside of the centralised processes of traditional finance. This paper explores the changing shape of digital banking; the potential for both competition and collaboration between banks, FinTechs and traditional tech companies; and examines how consumer demands are driving innovation.