In the decade since the global financial crisis, much of the financial services industry has made a strong recovery. While many governments are still nursing large debts, most banks, investment management firms, and insurance companies have long since returned to good health. Growing economies, rising interest rates, and increased trading activity have delivered strong earnings for many financial firms.

But there are dark clouds on the horizon. Climate change, volatile politics, trade wars, and relentless cyberattacks all threaten the economic stability on which most financial firms thrive. As they prepare to weather the inevitable storms that will disrupt their businesses in 2019, this coming year will show which financial firms continue with a short-term focus on business as usual and which firms have truly learned the lessons of the financial crisis.

Here are three of our 2019 financial services predictions:

  • Innovation will finally come to the back office. After a decade of focus on customer experience, overhauling back-office processes will become fashionable again. Margin pressure in core businesses such as lending, investment management, motor insurance, and in various areas of corporate banking will spark budget cuts at many financial firms in 2019. As budget cuts start to bite, senior executives will tire of innovation with no ROI. As the returns on digital customer experience plateau, firms will shift their focus to reducing the cost to serve customers through greater operational efficiency.[i] In 2019, financial firms will focus on digitizing operations that deliver productivity improvements and improve customer outcomes. However, the mandatory need for too-often-postponed back-end transformation will continue to create tension.
  • Several prominent digital investment managers will fold. Too many consumer fintechs are chasing the same customers, and few sectors are more overcrowded than digital investment management.[ii] The combination of a complex proposition and the rapid response of incumbents such as Charles Schwab, JPMorgan Chase, OCBC Bank, and Vanguard has left many startup digital investment managers struggling to win and retain customers and assets — or further venture capital funding.[iii] Even embracing a hybrid model — combining humans with automation — won’t help startups win customers and assets fast enough to reach breakeven.[iv] Many have already sold out to larger companies or pivoted to become software providers. With costs that are still far greater than revenues, venture capital funding will run out and once-prominent startups will quietly stop taking new business and disappear.[v]
  • Established firms will realize that disruptors have crept into their place in ecosystems. Financial services firms are waking up to the opportunities to serve retail and business customers more effectively by partnering with other companies in digital ecosystems.[vi] Many will find that they are already too late. For example, digital business ecosystems have already formed around disruptors such as PayPal, Paytm, Square, Stripe, and Xero, each of which orchestrates a suite of services for small businesses using APIs.[vii] Banks are already losing small-business customers to new digital lenders like Funding Circle and Kabbage.[viii] As fintechs such as Starling Bank, digital giants like Ant Financial, and fast-moving incumbents such as Capital One work with each other to form ecosystems, many traditional financial firms will be left on the sidelines.

2019 is the year that transformation goes pragmatic. To understand the 14 major dynamics that will impact firms next year, download Forrester’s Predictions 2019 guide



[i] Banks, investment management firms, and insurance companies in many countries are struggling to improve their Customer Experience Index™ (CX Index) scores year on year. See the following Forrester reports: “The US Banking Customer Experience Index, 2018,” “The US Brokerage Customer Experience Index, 2018,” “The US Auto And Home Insurers Customer Experience Index, 2018,” “The France Banking Customer Experience Index, 2017,” “The India Banking Customer Experience Index, 2017,” and “The UK Banking Customer Experience Index, 2017.”

[ii] See the Forrester report “Disrupting Finance: Digital Investment Managers.”

[iii] Customer retention is as important a metric for startup businesses as customer acquisition. To retain customers, digital investment management providers must prove that they can deliver both decent investment performance and lower fees. Customers who switch to a new investment management provider, by definition, are less loyal and more willing to move their business than other customers.

[iv] A hybrid model that combines automated advice with a human advisor to provide “higher-touch” service and advice, while an appealing strategy for firms with sufficient scale, will add higher operational costs without necessarily accelerating customer acquisition and assets fast enough to break even or drive profitable growth.

[v] For example, costs remain far larger than revenues at digital investment management startups operating in the UK such as Moneyfarm, Netwealth, and Nutmeg. Source: “Fintech Financial Fantasy,” SCM Direct blog, October 2, 2017 (

[vi] See the Forrester report “Europe Lays The Foundations Of Open Banking.”

[vii] Disruptors such as cloud-based accounting platform Xero, small-business lender Kabbage, and payment service provider Stripe have partnered with hundreds of other service providers to create a large ecosystem of small-business services. See the Forrester report “The Digital Banking Imperative.”

[viii] See the Forrester report “Disrupting Finance: Digital Small Business Lenders.”