Unless you’ve got a crystal ball or some potent tea leaves, predicting the future is never easy.
As Bill Gates put it in his classic phrase, most people “overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten”. But he also added the warning, “don’t let yourself be lulled into inaction”.
So on the basis that our all-too human behavioural biases blind us to accurately predicting even the next couple of years, what can we deduce from some of the current market trends?
In terms of products, it probably won’t look that different - people will still want to save their money and buy a home. But in terms of how consumers increasingly want to book a holiday, open up a savings account or get a mortgage, digital innovation could mean the process increasingly looks very different.
In terms of payments, there has already been major transformation from even 10 years ago.
At the beginning of the year, the historian Mary Beard was asked on Jeremy Vine’s BBC Radio 2 show to reflect on the last decade and how life in the West had changed since 2010.
"It struck me that this was the decade in which in the UK digital transactions in buying and selling outnumbered coins and notes,” Beard told Vine. “In 50 to 100 years’ time we’re going to look back to this as the moment that money as we know it, started to disappear."
In terms of the difference this makes to our everyday lives, she made the point that it will impact not just how we do things but the language we use and how we think about cash and money.
“All those phrases like ‘I’m going to cash that in’, ‘I’m going to spend a penny’, ‘heads or tail’,” she added. “We’re going to live in a world where that type of cash economy seems as remote as the Romans.”
Will the next decade have an equally transformative impact on mortgages and savings?
Building societies are actively working on their own digital roadmaps. The BSA will showcase some of that innovation at the Digital Mutual section of the BSA’s Annual Conference on 5 - 6 May in Liverpool.
The BSA will also be holding its second Understanding Fintech course in conjunction with IFF on 17 - 18 March.
The two day event is taught by Richard Johnson, who has worked in banking for 20 years and digital banking/payments/commerce for 10 years. He now advises a range of businesses on their digital and fintech strategies as well as publishing industry research for a leading market analysis business and delivering executive education.
The BSA asked Richard for some of his insights into the market trends for digital innovation and where building societies could use digital technology to leverage the social purpose that sits at the heart of everything they do.
What do you think UK financial services will look like in 10 years’ time?
RJ: There’s no doubt that it will look radically different. The primary interface for financial services will be smart digital assistants which take a holistic view of a customer’s financial affairs and have delegated authority from the customer to carry out routine transactions automatically. The big question is, who will be providing these services? Can the traditional financial institutions adapt to this role, or will it be the digital giants? If the latter, then I anticipate major consolidation of traditional intermediaries. The infrastructural layer will also have been transformed, with real-time global digital payment networks and a digital identify framework.
AI, Open Finance or blockchain (or something else!) – what’s going to be the game changer in the UK?
RJ: The transition towards Open Finance, whether driven by regulation or market forces, is inevitable and results in a fundamental reshaping of the financial ecosystem. One of the very interesting aspects of this will be a redefining of the boundary between collaborative and competitive space in financial services. The emerging “API economy” is going to be the basis for interaction between different “actors” in the future ecosystem, so all businesses in the sector need to work out how they are going to position themselves in it. I don’t think true AI will exist in 10 years, but machine learning will continue its advances and become a widely accepted, and more regulated, feature of our digital lives, including in financial services.
How do you think building societies could leverage their social purpose using digital technology?
RJ: I think there are two particularly interesting aspects to this question. Firstly, how can the traditional focus on the local community be re-interpreted for the digital era? Are there perhaps local digital ecosystems which can provide sustainable niche opportunities? Secondly, we have seen examples of how alternative business models can flourish in the digital space – Lemonade’s approach in insurance is a good example. Could building societies’ mutual structure be re-cast in a similar way?
To book your tickets on the Understanding Fintech course, click here.