The coming year will be a “critical” for regulation, EY has predicted, as Open Banking allows third parties to access consumers’ banking information, while GDPR gives people greater data protection, among a host of binding rule changes.
At the same time, investment in digital change is forecast to ramp up in 2018, as banks adapt to the shifting landscape.
The likes of Artificial Intelligence (AI), robotics and advanced analytics will sweep through the market in a torrent of technology-led disruption.
As a result, the UK banking industry will next year lead the charge into “the heart of the digital economy” – and the European Union (EU) will be watching closely, EY added.
Dan Cooper, UK banking leader at EY, said: “Open Banking is only one part of the technological revolution sweeping across the industry.
“In 2017, both retail and investment banks increasingly adopted new technologies, for example, Robotics Process Automation (RPA) to reduce costs across front, middle and back office functions.
“The pace of disruptive change will only increase going forward, and this will be very much a theme of 2018, as the adoption of other emerging technologies like AI, advanced analytics, Cloud, and machine learning start to really help banks achieve their strategic objectives, while also safeguarding them from new cyber security threats.
“The impact of new regulation may take the headlines next year, but 2018 may also mark the real beginning of an innovation-led recovery for the sector.”
Critical to plan for disruptive forces
Firms were warned that planning for the looming changes is essential.
A scramble to adapt to new regulation is now underway, according to John Liver, banking partner at EY.
He said: “We are observing heroic attempts across the industry to become as compliant as possible ahead of January, but given the scale of the regulation and the lateness of some key guidance, there will clearly be work to do in the first half of 2018.
“Some – but not all – regulators have recognised the reality of this and are looking to take a pragmatic approach to assessing compliance, so long as firms are continuing to progress with urgency and focus.”
Open Banking and PDS2 could combine to create a new competitive landscape in retail banking, Liver added.
He said: “Both incumbent banks and new players are developing their responses, which will go live in 2018.
“Consumers’ early experience of new service offerings, and their related security, particularly as GDPR increases the potential consequences of error, will be critical to building confidence.”