The fifth annual Lloyds Bank Payment Innovation Conference brought together participants from across the financial services ecosystem, from Lloyds’ clients to delivery partners and industry experts. There could be no better place to learn about the current state of the financial services sector and the challenges and opportunities on the minds of the industry’s key decision makers.

In this blog, I’ll talk about the five key themes that emerged from the discussions at the conference, as well as what they mean for financial services businesses.

1. UK Economic outlook for 2023 stronger than expected

The UK is now looking at a shallow recession and, contrary to prior forecasts, the economic outlook is stronger than expected for rest of 2023. The Bank of England and OBR are currently forecasting inflation to fall below 2% in the first quarter of 2024.

And while interest rates and inflation remain the largest areas of concern for businesses, given the unprecedented speed of change in recent times, there is a mood of optimism for the coming twelve months.

What are the focus areas for businesses?

• Investment in evolving product offerings.
• Attracting and retaining talent, given the tight labour market conditions and high levels of vacancies across the industry.
• Expansion and investment in new markets.
• Investing in new technology that could positively influence your business’ carbon impact.

2. Wider economic volatility highlights need for modernisation of platforms and processes

The recent Silicon Valley Bank crisis highlighted the need for flexibility to be able to respond to liquidity crunches. Increased volatility puts pressure on Treasury and Finance teams to be able to proactively manage funding and liquidity and modernise processes, platforms, and models to provide stability and predictability. Digital transformation will therefore be a key driver of dynamic forecasting and automation capabilities to enable more cost-effective treasury management.

Interestingly, recent events have opened opportunities for exploring more non-traditional methods for liquidity, such as an increased use of corporate cards for payments instead of BACS.

What are the focus areas for businesses?

• Digital transformation projects should bake in three key factors:
  1. Robustness - assessing treasury maturity and being strong on financial counterparty risk
  2. Bolstering controls - carrying out assurance on systems, people, and cybersecurity
  3. Resilience - maintaining flexibility to respond to ongoing uncertainty.
• Solidifying the basics of cash management, forecasting and payments processing, for example, sweeping balances to the most cost-efficient accounts.
• Centralisation and standardisation of data to drive automation and to give teams more time to draw insights and understand the data (e.g., standardisation through ISO 20022).

3. Exploration of Enterprise Use Cases for Blockchain In Full Swing

The financial services industry is in a key phase of experimentation to explore the use cases and benefits that blockchain technologies and tokenisation of assets can bring. Despite the hype around crypto assets, there is growing evidence across the sector of the value the underlying technology can bring, such as smart contracts, app development, and digital ID solutions. We now see a range of enterprise pilots underway, from digital currency settlements to revolving collateral to central bank digital currencies.

What are the focus areas for businesses?

While mass adoption is still a way off, trust in blockchain-based technologies is growing - the next few years will be the time to experiment and prove value in this space.

4. Embedded Finance Momentum Continues Supported By An Evolving Regulatory Framework

Now that the initial regulatory targets set by the Competition and Markets Authority to establish open banking in the UK have been met, the focus is on opportunities for discretionary offerings based on open finance protocols. This encompasses not only innovation in the payments space but also the notion of data sharing to evolve and enhance financial service offerings. For example, if more data is known about transaction patterns, offerings can be better tailored to customer needs.

The UK has a vaunted position in terms of innovation in the Open Finance sector, and the recent Joint Regulatory Oversight Committee report supports a roadmap to continue this growth and adoption trajectory over the next two years.

What are the focus areas for businesses?

• Leveraging the customer-centric benefits - enrich choice, drive down cost, and enhance experience.
• Driving up availability and performance of open finance services.
• Bolstering consumer protection and tackling the ever-present risks of sophisticated financial criminal actors.
• Enabling and enhancing data and information flows across the ecosystem within a secure and trusted framework of customer consent, to drive innovation opportunities.

5. Industry Collaboration And Partnerships Are Key To Driving Innovation Success

As the payments landscape continues to evolve, there is growing recognition across the industry that collaboration is not only preferred, but an absolute necessity to achieve innovation at scale. Fundamental changes in consumer behaviour, coupled with new opportunities offered by technology, are impacting all participants in the ecosystem – from end consumers, to small businesses, to start-ups, to large institutional incumbents – and the possibilities of working together towards mutual benefit now present far more potential value than potential risk.

What are the focus areas for businesses?

• Supercharge co-creation and partnership initiatives to leverage talent and ideas at the scale and pace necessary to provide benefits to customers.
• Customer consent to drive innovation opportunities.

Want to know more?

We regularly hold sessions with financial services leaders on the best way to leverage digital solutions to achieve faster sales and profit growth. Get in touch if you’d like to know more about our areas of expertise in financial services. Click here to learn more about our work, or download our recent white paper, which explains how banks can realise the value of the public cloud.