With the global economy recovering faster than expected and markets improving, banks had a good year in 2021.

In 2022, leading banks are aiming to embrace a more cutting edge technology strategy and accelerate their digital transformation to compete in an increasingly unpredictable, post-pandemic world where the Ukraine war, spiralling energy costs and the worst inflation figures for 30 years have conspired to slow the growth of the UK economy, something that will now be remedied through 2022 and 2023.

psd’s sense is that banks will spend lavishly on technology, talent, and fintech. After a big drop in 2020 and uncertainty in much of 2021, technology spending by banks will comfortably achieve double-digit growth in 2022, with the UK, US and China taking the lead. Banks, who are in competition with technology companies and other sectors for top technical talent will also invest in their technology workforce and become more flexible with inventive recruitment processes. The FCA, PRA and Bank of England have made a particular commitment to enhancing diversity & inclusion in all regulated business. This is a vital initiative as the sector seeks to show that it can move in line with wider societal thinking. However, competition for candidates remains tough and we have seen the return to signing on bonuses and guaranteed payments in certain specialist areas.

The digital surge in finance has also accelerated and psd expects 2022 to be a big year for investment in fintech. Banks will continue their deal-making activities regardless of the geo-political issues and will invest in and acquire fintech businesses.

psd also expects banks to expand their range of sustainable finance products. The spotlight shines on sustainability and environmental, social, and governance (ESG) principles, as consumers and regulators call for sustainable transformation in the aftermath of the pandemic. In 2022, financial services firms are keen to accelerate the speed to market for their ESG products and services including green loans, mortgages, as well as accounts with sustainability/carbon-tracking features. However, a raft of sustainable finance regulations and taxonomies with Mainland Europe leading the way (other geographies are following suit) will create opportunities for genuine products, innovative providers, and ESG service providers.

psd also believes that 2022 will see the boundaries of open finance being pushed out. Banks are most certainly waking up to the opportunities and threats that open finance represents. With regulators in the EU and UK implementing measures to extend data sharing principles across a wider set of financial and non-financial products, and parts of the world paving the way for similar open finance initiatives, 2022 is seeing a growing number of banks experimenting with business models towards a more open platform approach. While some banks try to join the race to build the world’s next lifestyle super-app, others are leveraging their open-banking connectivity and focusing their efforts on delivering select capabilities as a service, powering the growth of embedded finance.

According to recent research, senior decision-makers within banks confirmed that the majority of them (60%) launched a new digital product over the past 18 months in response to increased demand for fintech. When asked about recent trends within the fintech market, more than half (55%) agreed that embedded finance was the most significant in terms of elevating the customer experience. 44% of banking and financial services firms plan to invest in buy-now, pay-later (BNPL), or other embedded finance solutions in 2022. The vast majority (63%) intend to leverage open banking opportunities. The research also showed sustainability and financial inclusion are high priority. Just under 70% of respondents said their company are investing in new eco-conscious tools, whilst 64% will invest in products that drive financial inclusion. 58% plan to invest in Banking-as-a-Service (BaaS) solutions. As a backdrop to this, Banks do seem to want to see better regulation with many companies feeling that the UK regulators are not responding quickly enough to new trends, thereby hindering innovation within the sector. Some 77% of those banks surveyed said the growing popularity of new fintech offerings must be supported with better regulation and compliance measures.

In summary 2022 is shaping up to be a transformative year for the UK Banking & Financial Services sector. Investment in technology and ESG will be vital, but this needs to be supported by regulation that gives confidence both to banks and investors that what they offer is fit for purpose.

psd has been involved in Banking & Financial Services recruitment across all part of the sector for over 30 years. psd has had a long track record of resourcing senior management and board level positions for clients across all sub-sectors including Commercial Banking, Retail Banking, Digital Assets, Crypto Currency, Consumer Credit, Specialist Lending and Asset Management. Contact Peter Hardy, Managing Director on 020 7970 9701 or mail to: peter.hardy@psdgroup.com