From PwC's Financial Services Institute
There’s no doubt that the financial services industry is changing. It always does. But whether you think about shifts in technology, regulation, or global events, the changes can be dizzying. From the largest multinational firms to the smallest community institutions, it’s time to revisit your plans—because what has led to success until now may not work as well in the future.
In this report, PwC looks at 12 of the most important issues facing financial services firms in 2018 and puts them in perspective. For each topic, we look at the current landscape, share our view on what will likely come next, and offer our thoughts on how you can turn the situation to your advantage.
PwC’s Financial Services Institute (FSI) spotlights how companies can boost their competitiveness and meet challenges in digital tech, strategy, and governments and markets.
At most financial institutions, a digital future prompts both hope and concern. After all, legacy systems, processes, and relationships make innovation extremely difficult. Many firms still struggle with making a digital transformation, even as future growth may depend on it. But opportunities certainly do exist. Using data and analytics, firms may predict client needs and find new paths to profit. With artificial intelligence and digital labor, they can unlock powerful insights and move staff to higher-value work. And blockchain, or distributed ledger technology, may bring greater efficiency and security to custody, payments, securities trading, and more.
When facing change, flexibility and creativity matter. All firms have to manage expenses, but the easy cuts for cost containment have usually been made. Meanwhile, there are rapidly changing global trends and the effects of tightening monetary policy. For some firms, it’s time to turn to deals to shake up business models, acquire technology, and more. And effective people strategy can help them benefit from diversity, sustain trust, and prepare their workforce for the future.
Cybersecurity continues to threaten profit, data privacy, and reputation, and regulators have been paying attention. In other ways, government policy is leaning in a more favorable direction, with a new set of referees in place at key agencies as regulatory easing kicks in. This means firms have room to think about how to make compliance investments more efficient, particularly given recent advances in RegTech. And as Congress has worked on reforming the tax code, firms have been ramping up tax planning to adapt to what may be a very different set of rules.
For many US financial institutions, 2017 was a strong year. But the good news wasn’t distributed evenly. Many banks maintained rock-solid balance sheets and generated strong profits, despite limited growth in net interest margins. Meanwhile, some insurers and asset managers had it tougher, with underwriting losses and changing client preferences.
The past year’s big stories could reshape the financial services landscape, creating both obstacles and opportunities:
Plans by the Trump administration to soften post-crisis regulation, particularly through appointments across the agencies that regulate US finance.
An effort by Republicans to pass a massive tax overhaul bill, which could lead to the repatriation of billions of dollars in profits generated overseas.
Global uncertainty surrounding China’s mounting credit growth, the rise of European nationalism, and tensions between the US and large trading partners such as Canada, Mexico, and China.
Cybercriminals continuing to strike at the financial sector, with more speed and sophistication than before.
Technology offering insights into client preferences and drive down costs.
We see many reasons to be optimistic.
Leading firms are starting to reap the rewards of investments in emerging technology. They’re also taking steps to get ahead of regulatory changes, and they’re adapting their long-term strategies to reflect global and societal shifts. For those who are prepared, this may be a time to pull ahead of the pack.
Throughout 2018, we expect to see:
An intense focus on limiting costs, based on a clear understanding of an institution’s central mission.
Continued use of software bots and artificial intelligence to make operations more efficient and discover insights that can improve the customer experience.
A new round of deal-making as firms look to consolidate their position or step away from non-core activities.
For more than a century, PwC has worked with clients around the world to build trust in society and solve important problems. We’re pleased to share this outlook with you, and we look forward to helping you in the year ahead.
What does “digital” mean in today’s financial industry? PwC’s Scott Evoy says it can vary for each financial institution.
To build innovation as a part of their culture, financial services firms need to look beyond their normal business models, says PwC's Dean Nicolacakis and Marie Carr.
Our teams in asset and wealth management, banking and capital markets, and insurance are helping our clients tackle the biggest issues facing the financial services industry. With professionals across tax, assurance, and advisory practices, we can help you find ways to thrive even in a period of uncertainty. Whether you're preparing for regulatory changes, putting FinTech/InsurTech to work, or rethinking your human capital strategy, we work together with you to resolve complex issues, identify opportunities, and deliver value to your business.