February 2017
2017’s Business Banking Trends and Outlook
Banks and financial service providers globally can expect 2017 to be an uncharacteristically fast moving and turbulent year for the industry.

Among key factors and trends that will impact profitability are: transformation in transaction banking; digitisation and innovation; volatile markets caused by geo-political uncertainty; increased dependence on cyber-security and risk management; and a shift in payments receivables streams.

Transaction banking

Today, retail banking customers have come to expect a 24/7 omni-channel digital experience. As night follows day, very soon so too will business owners, CFOs and treasurers. That shift has led banks to heavily invest in digital platforms – not only internally, but also to establish partnerships with niche providers and third parties. Business clients are also expecting their transaction bank to provide additional value outside of their core product offerings – including data driven market insights and analysis, peer benchmarking, advisory or consultant services.

Businesses increasingly perceive their core banking relationships as transaction-based, rather than lending-based, a trend not seen since the global financial crisis almost a decade ago. Banks must embrace the shift in customer interaction drivers by providing tailored products to meet their transaction banking clients’ higher expectations from a service, product and satisfaction perspective.

Although digital innovation is on all the banks’ lips, East’s research demonstrates that industry knowledge and expertise remains a highly valuable asset from the client perspective. Across business banking products, the importance of industry knowledge is paramount to businesses. The paramount importance of this service factor is trending steadily higher and emerges as not only a key determinant in awarding providers their business but higher share of wallet for incumbent providers.

Business Foreign Exchange

Of particular note in 2017 will be a distinct shift in the global business foreign exchange (BFX) market. Last year, market volatility dramatically impacted businesses – particularly those in the Micro and SME segments, who had little to no form of currency risk mitigation in place and continue to remain heavily exposed. In the UK, where small businesses were hit with the record breaking devaluation of the British Pound following the Brexit vote, only 19 percent engaged with FX Options, while that figure increased to 24 percent for Forward FX. That trend is also replicated in other markets including Australia, where small business engagement with derivatives runs at a similar rate (22 percent and 20 percent respectively).

Although Spot FX will remain a mainstay for cross-border payment execution, businesses are encouraged to limit the market’s influence on their bottom line. Banks, established non-banks and fintechs will be jostling for BFX market share through digital innovation and aggressive pricing however the question must be asked – how much further can spreads and consequently margins be tightened? Although non-bank providers are winning market share in select regions, they are generally struggling to overcome the big banks’ dominance. As such, East predicts that the year ahead will see a significant acquisition or merger in the market.


Payment markets are being impacted by both regulatory changes, and the introduction of new entrants. Open data sharing measures or application programming interfaces (APIs) are being mandated in Europe and Australia by 2018 and will undoubtedly see the payments market open-up even further to disrupters such as Tyro, Mint, PayPal, Apple Pay and Android Pay.
  The industry is ripe for its “Uber-isation”. Platforms such as Apple Pay and point-of-sale merchant payment products are rapidly usurping more traditional options customers and businesses have had access to. This is further highlighted by East’s research which shows that more than 91 percent of Australian businesses choose contactless payments, while 69.7 percent choose mobile phone payments as a key technology priority over the next two years.

East’s UK and Australian merchant payment reports provide fascinating international comparisons of merchant acquirer dynamics and consumer behavioural trends, linking both core sets of analysis.

The enriched merchant payments technology reporting provides new insight into online payment gateway acceptance, digital wallets, mobile payments, integrated payments systems (cloud based accounting) and upgrade costs.


Having enjoyed three to four years of prosperity from venture capitalists (VC) keen to get in early, the global fintech community will discover an exceptionally more challenging operating environment for attracting new investors and seed funding in the near future.

While VCs have thus far been responsible for the injection of money into establishing and growing disruptors to the banking and finance markets, East sees corporates playing a much larger role in 2017.

In leading markets such as the UK, Asia and Australia, where finance start-ups have a relatively strong presence, around 60 percent of corporates expected to increase investment in fintech firms by an average of 11.3 percent.

Established industry players will pursue opportunities to scale their business, while new entrants will adopt a “sink or swim” mentality. The industry should expect to see consolidation via several mergers and acquisitions, especially in the over-crowded small-business online lending space, and within payment service providers.

Considering the 18 percent year-on-year growth of Apple’s services division, which includes Apple Pay, and the technology giant’s cash on hand, it would not be unexpected for it to tap into other areas of the global payment market.

Risk, cyber-security and corporates

In 2016, nearly 1,100 data breaches were reported globally, with under five percent of those in the banking and finance sector.

As cyber-criminals increase their levels of sophistication and rapidly develop new ways to attack businesses – from mum and dad eCommerce shops to multinational corporations, it is imperative for all organisations to ensure they have cyber risk mitigation processes firmly in place.

Financial service providers will also need to look inwardly as the proliferation of cloud software, the internet of things (IoT), third party apps, open data schemes and accessibility leave their systems and processes vulnerable to attack.

Banks, technology companies and compliance firms will increasingly be presented with lucrative growth opportunities as they seek to play a much larger role alleviating clients’ concerns. Businesses are crying out for more support for risk mitigation and reducing inherent commercial threats associated with online security, fraud and breaches.

Click here for the 2017 Outlook, or to discuss any of our research reports, contact East & Partners.
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