Unsurprisingly, it was the interest rate environment that was front of everyone’s mind. The consensus of our Advisory Board is that inflation will fall, notwithstanding central bank nervousness around geopolitical forces, especially in the Middle East. As interest rates fall in turn, competition must ramp up, and the requirement for banks to innovate their product offerings and pricing will become more pressing. This competition, according to our Board, is obvious in retail banking but less clear in business banking, although certain members suggested that they were seeing competition starting to ramp up in this space, too.

A key driver of this increase in competition is the fragmentation of the value chain, itself enabled by broader changes in customer behaviour. Although acknowledging that this is a controversial topic, some of our Board argued that the aggressive reduction in branch usage will continue, and that the concept of a universal bank – which is ‘all things to all people’ – will evaporate. Furthermore, access to a customer’s financial information through open banking means that players no longer need to control a significant part of a customer’s finance to have access to the data that enables innovative financial solutions. Customers, no longer choosing a bank based on mere proximity to a branch, are free to shop around for products, liberating the value chain for new entrants – who are empowered by open banking.

With this being said, our Board warned that the hype around FinTech – which had said that nimble, tech-driven startups would take down the established players – is waning. FinTech has been buoyed by favourable rates environments, but as this fades, the relationship between incumbents and FinTechs must be reassessed. The real vulnerability of established players, according to our Board, is to challengers who do one thing very well – with the example being given of Wise, who disrupted international transfers – where it was suggested that banks have traditionally made too much money through too high fees.