2021 Financial Trends: The Experts Weigh In
2021 financial trends have been a hot topic for some time.
The industry is experiencing immense growth and change due to technology advancements and the impacts of COVID-19. Understanding the trends can help both financial and technology businesses make the right decisions.
Today, we’ll examine the 2021 financial trends the top experts are debating.
The Top Impacts on the Financial Industry
What exactly is shaping the development of the financial industry? Business Insider lays out some of the fundamental forces that are impacting the industry, including:
- Tech-savvy consumers with changing expectations.
- The looming threat of big tech companies.
- Shifting attitudes of regulators toward new tech.
If there’s one prevailing trend in the financial industry, it’s this. The digital transformation impacts every aspect of financial organizations, and it fuels many of the trends we will discuss later on. One of the most prominent underlying mechanisms for the changes in the industry is digital transformation. We’ve already seen the digital transformation taking hold in several industries, including eCommerce, and the financial services industry is no different.
Whether directly or indirectly, all of the top sources on 2021 financial trends mentioned the importance of digital transformation.
Kognitiv discusses how financial organizations are aggressively adopting new technologies to increase customer experience and service efficiency. They explain how banks are dedicating tons of resources to invest in digital channels that customers want.
Fiserv discusses the top digital transformation trends impacting the financial industry. They mention that the digital transformation was already taking place and was further accelerated by the pandemic. Cash, check, and ATM use have declined, while mobile deposits, contactless cards, and mobile payment apps have risen. Specifically, Fiserv talks about the importance of creating a seamless customer experience across all channels, including digital channels and the branch.
While some experts, like Fiserv, seem to think the retail branch will still be an essential part of the equation alongside digital channels, Entrepreneur and Vilmate believe digital-only banks are soon to come. They point out common consumer pain points, like long lines and inconvenience. Before the pandemic, it still seemed like the digital-only banks were ways in the future. However, virtual access to funds became essential, a feature with which many traditional banks struggled. Digital-only banks provide immense flexibility and innovative services that are often more affordable than legacy banks.
The COVID-19 pandemic exposed the dated core systems on which many financial institutions rely. The current systems were unable to address the agility needed to handle changing demands. Many banks recognized severe manual bottlenecks that slowed their processes and prevented the response time that customers need.
Forbes states that “the need for modern, agile, scalable, secure, resilient technology infrastructures became abundantly clear—and the new imperative in 2021.”
A big part of modernizing core systems is establishing a foundation in the cloud. According to Fiserv, the cloud is the key to consumer insights and instant transactions. The cloud provides agility and beneficial insights, all as part of a broader ecosystem that can offer better online experiences.
Open Banking and Integration
Another key trend that both Fiserv and Entrepreneur mention is open banking/integration. In the past, banks were known for safekeeping money. Now, many people are looking to invest rather than have money sit in the bank. Open banking gives third-party financial service providers access to consumer banking data for consumer investment.
This allows consumers to move their money where they want when they want. Following the pandemic, this will be incredibly important. It provides flexibility to consumers, which can enrich their experience and increase their loyalty.
TearSheet calls attention to a tremendous insight that many other sources only mention in passing: cashless. Prior to the pandemic, cashless payment methods were already in the talks, but social distancing accelerated the conversation.
Paper cash can carry bacteria and germs. Social distancing made cash payments, and even credit card use, challenging to manage. Contactless payment thrived during COVID-19, and it only shows signs of continuing to grow. Sweden plans to become cashless by 2023 by introducing its digital currency this year.
Several banks already use digital payment tools, but the future of a cashless world is ominous for traditional banks. If deposits no longer need to happen in person, the need for retail bank branches drops. There are also questions about digital transaction services like PayPal and Zelle, but it is clear that the financial industry is quickly moving away from cash.
Robotics and AI
The pressure for banks to adopt digital methods is incredibly high. Robotics and AI are effectively helping banks to meet the demands of emerging technology. TearSheet describes Robotic Process Automation as “a standard term of a virtual robotic workforce that automatically performs mundane, repetitive tasks alongside humans.” It’s a powerful tool to maximize employee efficiency and workflow operations.
As Kognitiv points out, banks use AI to power chatbots and provide 24/7 customer service, but they also leverage it for compliance and anti-fraud. Ultimately, robotics and AI yield incredible benefits for cost efficiency and productivity.
Gen Z is the next wave of rising consumers. Their demands and expectations shape many of the changes we see for the digital transformation. One key trend making its way into the finance industry is voice tech. The rise of voice assistants and AI-powered voice technology is sure to impact the financial landscape.
In the financial industry, institutions can leverage voice tech as an automated support agent. Furthermore, the customer’s voice may be used as biometric data to authorize payments or log-ins. Voice tech provides convenience and simplicity for financial services.
Another strong trend that Entrepreneur points out is financial literacy. Consumers need financial literacy to make informed decisions. The more educated a consumer is about financial solutions and services, especially FinTech.
As Vilmate reminds us, “People who are good with money are advantageous for fintech services providers in the first place. Investing in their financial literacy, these companies can earn loyal customers for the long term.” For those reasons, services to support financial literacy are on the rise. Financial institutions can incorporate financial literacy tools into their main applications to educate customers on wide spending practicing and intelligent investing.
The financial services industry is rapidly changing and evolving with the digital transformation. Digital transformation is the central overarching theme that underlies all of the primary trends in the industry. All of the trends we discussed today are part of the digital transformation, and the primary focus is on user experience.
The pandemic shook the financial industry, forcing many organizations to adjust to the demands for digital solutions quickly. Moving forward, they will look for ways to leverage digital tools for more efficient and cost-effective services that meet consumer demands. Consumers want the ability to do more with their finances, and financial institutions must adjust quickly.
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