Brexit, fintechs threaten the survival of finance and payment incumbents
More than a decade on from the global financial crisis of 2008, the financial services and payment industries are far from settled.
As many as 80% of financial firms may go out of business as consumers look for more convenient solutions, according to David Furlonger, a vice president at Gartner. If this prediction is correct, the next five years will be filled with challenges and disruptions.
That means financial companies and traditional card issuers face cybersecurity issues, political upheaval, compliance data management challenges and other headwinds in the very near future.
New technologies and evolving consumer expectations have brought new dangers in the form of cybercrime. From hackers leveraging public cloud offerings to mine cryptocurrency in distributed denial of service attacks to hacking ATMs, cybercrime has shot to the top of the business agenda and planning for cyber threats is crucial.
The Future of Financial Services report found that global financial services decision makers view cybersecurity as the biggest challenge the industry will face over the next five years. While many institutions have already improved their cyber hygiene by aligning and leveraging their security capabilities, they will need to continue to follow best practices if they are to stay compliant and resilient to threats.
McAfee estimated the cost of cybercrimes was around $600 billion in 2018 alone. The cost of failure is clearly too great, and businesses risk not only losing money and information but also reputation, which can be the hardest to repair. Enterprises need to ensure they are getting the right solutions and processes in place to protect not only their individual businesses, but also their customers, which means having an incident response plan in place should their organization be the target of a cyberattack.
The Future of Financial Services report also found that 24% of U.S. respondents believe political changes will cause them disruption, and over half (54%) of U.K. respondents are expecting disruption, undoubtedly due to Brexit. More than a third of the U.K.’s largest financial services firms have announced they will be migrating staff and operations to other EU cities and markets such as Dublin, Luxembourg, Frankfurt and Paris.
Additionally, banks from the United States have relocated around 1,000 employees from London, but the number could grow to 5,000 as the March 29 deadline approaches, according to many analysts. This will shake up the way the financial industry does business around the globe. London has been seen by many as the financial hub of Europe, and that standing is now in question.
Regulation and compliance have been a huge challenge. Laws such as GDPR, PSD2, MiFID II, IFRS9/15/16/17 have focused on better safeguarding consumers and investors’ data privacy, ensuring financial stability across the industry and promoting the responsible development of technology.
There are serious financial penalties for organizations that aren’t meeting these laws and regulations, yet we’re still seeing businesses all around the world struggle to meet regulatory requirements and stay compliant. Regulation and compliance are the biggest potential disruptor to the space over the next five years, which is not surprising. There are plenty of technology solutions out there to help with the complexity and challenges posed by regulation and compliance, but all too often businesses are hamstrung by siloed and outdated legacy solutions.