What will 2017 bring for the Dutch Financial Services market?
The last days of 2016 and the start of 2017 are generally also a period for reflections and predictions for the new year. Though we do not have the crystal ball in our Amsterdam office we like to share some predictions on the Dutch Financial Services sector in 2017.
2017 looks promising, although many people will probably call it uncertain and turbulent times. In that perspective 2017 is probably a year part of a larger period of change. New elections in The Netherlands, Germany and France are expected to have an impact, same as the large shifts in 2016: election of Trump and the Brexit. Especially the Brexit will require attention of the Financial Services industry due to the negotiations between UK and Europe in 2017 on topics like EU Passporting.
To share the highlights in the predictions for 2017 we have categorized them in 4 topics:
- New regulation
- Market developments
- Potential issues for trust
- Trends & Hypes
In the aftermath of the Financial Crisis new regulations have been announced. The first wave of these new regulations will be effective in 2018 like a.o. IFRS 9, IORP II, Recovery and Resolution Regime Insurers, GDPR and AnaCredit. In 2017 all parties will spend a lot of time, effort and money to realize IT, business and process changes to comply in time. Implementation of the mass bundle of impactful regulation in such a short timeframe is challenging and will ask a lot of the staff, experts and (program) management, involved to ensure that realization will be on track to finish on time in 2018.
And looking beyond 2017 and 2018, new regulation is on the horizon. One can not only focus on the regulation for the next year, a more holistic, long term vision is required. Also new developments can not be disregarded. Outcome of the current discussions on capital requirements and floors in internal models for banking are expected to have impact financially, on business models and therefore also on the competition in the market.
2016 was the year in which the Payment Services Directive 2 (PSD2) was established in the EU. Currently banks, Payment Institutions and Fintechs are preparing to comply and look for new opportunities. It is beyond doubt that PSD 2 will impact the relation between the bank and its client dramatically, but it is unsure who will be the gamechanger. Fintechs are obviously the challenger of the banks, but also other Financial players and third parties can come into play. Innovation will be the key word for everyone. New offerings need to be developed by everyone who wants to take the opportunity, but also by the ones that do not want to get behind on their competition. PSD 2 should be on everybody’s agenda in 2017.
Also in 2016 we see an interesting consolidation happening in the Financial Services industry. In Private banking, Insurance (NN Group & Delta Lloyd) and Pension Funds acquisitions took place. For these parties integration will be key to harvest success from the deal, both financially and commercially, We expect further consolidation in 2017, especially in Insurance & pensions. Also the Fintech & Payments sectors looks ready for consolidation.
Potential issues for trust
Public trust has been an important topic in the last 10 years for Financial Services. Issues like product misselling, “woekerpolissen”, bonus schemes have been dominant in the public and political debate. Unfortunately we foresee that 2017 will not be different. Current files like SME-derivatives and “woekerpolis” are not solved and due to the elections the sector will probably get more attention than wanted. It is easy to bully on the financial services industry. Next to that we expect that the future of the pension scheme will play a role in the political debate, creating uncertainty and a generic feeling unease in the public.
If we look at potential new areas of reputational risks we are worried for three topics:
1. Pensions as an outcome of the political debate; we can foresee that the sector is forced to explain in more detail decisions of the past (both investments and level of pension benefits) and cost levels
2. Relative new developments like crowdfunding and payment service providers; do parties (consumers and SME’s) really understand the financial risks they accept using these new products? Also if the lender is non-performing or the provider (platform) is not capable to run its business economically?
3. Data privacy; the public is becoming more aware of data privacy issues while the availability and use of data is still growing exponentially. Every data breach is a potential reputational disaster both for the organization and the sector. In our view the industry is vulnerable.
Trends & Hypes
Next to all serious topics above it is also fun to predict the hypes and buzzwords of 2017. Last years Fintech, Blockchain, crowdfunding, agile and Data Analytics/Big Data were the most important ones.
In our view this list shows that the hypes are not particularly negative or do not bring value. The development in itself is interesting, promising in terms of business value. However when more and more people tend to speak and write about these topics, the term gets inflated. And we have seen this leads to problems if it is treated like the holy grail and real arguments and facts are put aside because the buzz word is mentioned.
So be careful how and when to use words, we predict to be the buzz words of 2017:
- API banking/Open Banking
- Responsive Organisations
But please do take notice of the topics itself, because these are important areas of innovation of business & operating models.
We wish you a happy and successful 2017!