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The financial services industry, just as any other, experienced a series of unexpected changes during the pandemic. With a sudden acceleration in digitization, trading floors were replaced with remote trading, mobile banking transactions saw unprecedented peaks, personal trading apps experienced record transaction volumes, and call centers operated as actively as ever from the comfort of the staff’s living rooms.
While the industry managed to weather the digital hurricane, these changes are not just a passing storm. Financial institutions have to embrace the new technology trends as part of their strategy, and evaluate whether the tools they have relied on in the past are still working for them.
All in all, the banking and financial services industry is centering its focus on innovative solutions that will lay the groundwork for a future driven by technology. To help you navigate through the evolving demands of the industry, we have outlined four major trends shaping the current landscape.
Operational Transformation
2020 put the infrastructure of financial institutions to the test and challenged any pre-existing assumptions about operational planning. With many internal systems not being architected to address the volume and pace of change that bubbled up, the financial services industry will have to rely on emerging technologies that can improve operational efficiency, increase speed-to-market and deliver outstanding customer experiences.
These tools include services like banking benchmarking, which measures their performance against other banks across dimensions like consumer, business, or talent management. By relying on data and digital tools, financial institutions can re-define themselves as technology companies in the financial services industry – not the other way around – and successfully pave their way towards a technology-built future.
Cashless Transactions
The use of cash in everyday transactions was already dropping before 2020, with contactless payments becoming a way of life across Europe, Asia, and the States. That trend, however, was only further intensified as a result of the pandemic and has permanently shifted consumer habits in the modern era. Even in the earlier stages of the pandemic, about 74% of global consumers said they plan to continue using contactless payment methods after its dissolution.
This trend of contactless financial activity extends to banking, as retail banking customers increasingly rely on mobile apps to conduct business. Traditional players and financial tech companies created new finance applications or upgraded their existing ones to expand their services and programs to match consumer needs. Unsurprisingly, as downloads for these apps soared, transaction volumes exploded.
Collaboration With The FinTech Sector
Banks’ legacy systems pose the strictest barriers to growth and innovation. To overcome these obstacles, many banks are now partnering with FinTech leaders to improve their digital experience. This was a surprising turn of events as FinTechs were initially regarded as competitors taking advantage of the areas where the financial services industry was unable to keep up with technological advancements.
However, today partnerships between banks and FinTech companies are quickly becoming the norm – as the new partners provide marketing, administration, and other services that enable banks to offer tech-enabled banking products and benefits. At the same time, FinTechs are leveraging the opportunity to transform the broader banking ecosystem, not just support a single bank. As a result, these collaborations are on their way to re-shape the financial services landscape.
Hyper-Personalization
The new emerging generation of consumers will soon become the mainstream customers of banks. To address their evolving needs, financial institutions will have to treat them as individuals rather than segments. That will require a much more potent form of personalization, commonly referred to as hyper-personalization.
This trend is likely to take shape in allowing customers to design their banking products based on personal circumstances, needs, and preferences or having the option of selecting from a wide range of benefits that might suit their situation. This is different and, in fact, the opposite of the one-size-fits-all approach that has shaped banking services in the past.
Creating this level of personalization for customers will undoubtedly necessitate a technology infrastructure that allows for real-time insights from vast amounts of data sourced from numerous channels. Powered by AI, the data and analytics will enable contextualized interactions across industry verticals, from insurance to sales to mobile banking.
Final Words
A look at some of the key trends shaping the financial services industry today sheds light on the transformations that financial institutions are undertaking to stay relevant in the future. These trends include operational transformation, cashless transactions, collaborations with the FinTech sector, and hyper-personalization.
As banks and other financial institutions cope with the developments that the COVID-19 pandemic and the twenty-first-century technological boom have introduced, their future strategies for digital innovation will separate the losers from the winners in this technology-driven future.
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