The recent economic crisis has resulted not only in serious challenges to, but also significant transformation in, the financial services industry. The financial turmoil - along with the increasing complexity of the financial ecosystem - has placed unprecedented and new demands on financial services institutions. Yet severe market disruption and dislocation also present an opportunity for institutions to drive innovation, differentiate products and services and break away from the competition, opines Chandan Sharma, global managing director, Verizon Business Financial Services.

Technology advances, regulatory changes, demographic shifts, and mobile lifestyles and work styles revolution are all factors likely to significantly reshape the financial services landscape in the next decade. By indentifying some of the timely and key trends for the industry, financial institutions can prepare and look at ways to turn adverse market conditions into profitable business opportunities.

As the macroeconomic environment begins to stabilize somewhat, financial services institutions are shifting their focus from survival to growth. We are now seeing significant interest in consolidation, rationalization, and virtualization as financial organizations strive to become more effective and more adaptable businesses. Investment in IT and communication systems continues to contribute greatly to an agile and flexible operating model. However, IT innovation and delivery of ‘IT as a Service’ still involves challenges; not least in the legacy modernization and siloed infrastructures. Organizations are striving to match technology with fast changing business needs, but IT complexity remains the norm for most organizations.

Below is Verizon Business’ view of the key drivers that are likely to shape financial services delivery this coming decade:

1. Transactional self-service will become the norm: Mobile, online, and telephone banking channels will become channels of choice for personal banking. Branch network use will significantly shift towards advisory services – through both digital and human interactions. ATMs will morph into localized and mobile shared digital commerce kiosks and there will be an increased adoption of shared commerce kiosk provider networks

2. Applied intelligence at the point of sale and service is about the only thing that will matter: The ability to engender trust, develop superior relationship intelligence, and apply this knowledge effectively and consistently in sales, service, and advisory interactions across all channels will separate the financial leaders from the pack

3. Privacy and personalization will reach a truce, creating a win-win situation for both the consumers and financial institutions: Consumers will get more comfortable with the use of personal information for marketing and underwriting purposes, provided they see tangible reciprocal benefits through personalized and cost effective financial solutions. Financial institutions will use behavior and life style preference data expressed in multitude of every day digital transactions to supplement and significantly improve risk underwriting, creditworthiness scores, and implement fine-grained and/or usage-based pricing.

4. Liquidity will become more fluid or more volatile - it all depends on perspective: Financial markets’ liquidity will continue to fragment and become increasingly global. Competition between trading execution venues will intensify requiring continued diversification into services beyond trade execution and innovative business models. Liquidity will become more transient and migrate across execution venues requiring much more efficient means to access liquidity globally. A focus on shaving every millisecond and microsecond will continue in search for alpha.

5. Non-traditional competitors will emerge and create disruption - as feared. Strong alternative players will emerge both in retail and payments sectors, threatening current business models as we know it. Digital payments options will continue to grow at the expense of cash. The need to serve both the under-banked and un-banked will be a key innovation driver with plenty of reverse innovation opportunities in the developed financial markets using learnings from the emerging markets.

6. Multi-enterprise communications underpinning ecommerce will get a facelift: Next-generation business applications exchanges will deliver significant agility and efficiency in inter-enterprise messaging and communications within the financial ecosystem. Shared financial ecosystem infrastructures delivered on an as-a-service basis by independent and trusted global providers will gain resonance with the financial companies.

7. The network will become the business infrastructure platform: The network will no longer be viewed as a commodity. Security, identity, and IT services currently deployed at the network edge will increasingly migrate into the cloud. With embedded security, identity, intelligence, scalability, and resiliency, the network will become a strategic business infrastructure platform over which business and technology services delivery will be orchestrated locally, nationally and globally.

8. Information security will become increasingly risk-driven and measurable. Cyberthreats will become less and less risky as the decade unfolds. With stronger and more ubiquitous measures in place, we will see a significant decrease in e-mail spam, identity theft and much of the computer crime as we know it today. And those cyberattacks that continue will change in character to fewer, more targeted attacks. [insert hyperlink to Verizon’s predictions for Information Security for the next decade].

9. Sourcing models will be redefined: Passionate debate around outsourcing (to outsource or not) will become increasingly less important. As business, commerce, and organizations become increasingly digital, virtual, and service-based, the discourse will shift to consistent and verifiable controls across an extended digital virtual financial enterprise regardless of who or where the work is performed.

10. ‘Everything as a Service (EaaS)’ IT and information architectures will deliver efficiency dividends: Compliance, risk, and transparency initiatives will command significant share of resources and will weigh on efficiency. Financial institutions will however still show meaningful improvement in efficiency ratios as digitization, virtualization, standardization, and flexible services-oriented cloud architectures are increasingly adopted to drive business growth. This cloud-based delivery approach is much more than a fad, however – it has the potential to drive new waves of technology innovation, quickly and effectively open new markets, and essentially enable business strategies that help organizations practice better financial management and create a more sustainable model for the delivery of future IT services.

Essentially, underpinning all of these trends, are innovative business and technology solutions and services that will enable financial services organizations to compete (and comply) more effectively in the global market-place. They need a strong, secure IT and communications foundation that will enable business infrastructures and services to support the radical changes to business models that the markets, governments and customers will demand.

The bottom line is that these significant business challenges can only be effectively addressed through innovation in IT delivery models and reinvention of technology, and information architectures that enable on demand business, any time, any where, and on any device.