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  1. Analysis
December 10, 2019

Nordlund of Nets: Trust will be key in 2020

By Sirpa Nordlund

Sirpa Nordlund, SVP, Issuer & eSecurity Services, Nets, predicts that Trust will be the overarching theme of 2020 financial services, because that’s where the battle between banks and BigTech will rage.

2019 in review

There’s been a lot of noise about banking disruption in 2019. Fintechs have raised more capital than ever before and, although there have been constant announcements about AI, open banking, blockchain, instant payments and the IoT over the last few years, it’s only in the last 12 months that we’ve started to see implementations at scale.

The real star of 2019, though, is data. With interest rates still at record-breaking lows across Europe, the threats to banks are growing, and this is being compounded by BigTech really starting to step on financial institutions’ toes.

These players are not only launching products that directly compete with traditional banks, but also acquiring companies in financial services – and all these initiatives ride on the effective use of big data.

This is creating new business models, where data is the commodity. Facebook Pay will be free for consumers and Marketplace sellers because it makes commercial sense – a lack of fees will support increased adoption and the programme will be monetised by using purchase data for advertising.

Google is taking a slightly different tack; it won’t sell its customers’ data, but will use it to offer loyalty programmes and other value added services to consumers and banks.

It will be interesting to see how consumers react to the ongoing monetisation of their data. As has been said many times, when something that was charged for suddenly becomes free, it’s probably because you are the product – and despite the personalised, value-added services this enables, some will find it invasive.”

A look to 2020

Trust will be the overarching theme of 2020 financial services, because that’s where the battle between banks and BigTech will rage. Banks are trusted more by consumers than any of the BigTechs – particularly Facebook in the light of the Cambridge Analytica scandal and the intense regulatory attention Libra is attracting.

In 2020 and beyond, banks will need to indirectly monetise this trust by providing convenient services with seamless user experiences within their highly regulated environment.

Financial institutions shouldn’t fear legislation like GDPR – if they let their customers control their own data while providing services that they value, they will thrive.

Banks are in a strong position to do this, as opposition is growing to BigTech, particularly in Europe, as Germany’s attempts to force Apple to open up its NFC chip shows. While this was unsuccessful in Australia, Apple shouldn’t count on the same in Germany.

An opportunity for banks

Furthermore, BigTechs like Apple are generally using banks’ existing infrastructure, rather than becoming banks themselves – in effect, acting as a data layer – so there’s an opportunity for banks to combat the growing influence of their new competitors by pipping them to the post.

In addition, years of discussion about a pan-European payment scheme to compete with the global schemes may finally come to fruition with PEPSI.

Fundamentally, payments are not about politics, they are about consumers’ trust and preferences. European payments players will do well to avoid an ‘Ok, boomer’ approach, and instead focus on making 2020 a success by launching the best products and services quickly as markets evolve.

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