With the shift in the global financial landscape due to the pandemic, fast-changing technology, and the emergence of tech-driven startups, there has been a shift in the ever-growing number of customers who expect instant access to services from anywhere via their smartphones. As it gets crucial for businesses to adapt to the new environment, there are strong trends that are predicted to impact every institution, big or small, over the next 12 months.
Banks and financial services institutions have always kept an eye on new technologies as the key to the growth of digital banking. With the Covid 19 pandemic, the importance of committing to digital transformation accelerated and financial services organizations had to evolve their operations to meet new demands and expectations of customers and employees too. Financial service providers are redefining their technology platforms to help customers with their financial goals, making it easier for them to manage their money when and how they want.
Today, consumers increasingly expect a digital-first experience and financial service providers are reinventing the market and meeting the growing digital expectations. Let’s look at five of the biggest financial technology trends that will impact and transform financial services in 2022.
With over six billion mobile phones in the world today, it is an important device that financial service providers can use to place their products and services in the hands of the consumer, literally. Customers are demanding access to services instantly, through their smartphones, anytime anywhere with the younger generation preferring to use their mobile devices for all their daily transactions and activities. Consumers are making online or offline purchases without using cash or cards, through a phone, or using mobile payment services.
As phones become the primary interface between the digital and real-world, banks and insurance companies are constantly prompting consumers to download and install their apps. Besides being economically cheaper for banks to provide digital services, it also provides customers with a better experience as they have constant access to their banks. Service providers also get access to vast data on customers’ lifestyles and behaviour which allows them to offer customized products and services, including biometric security. 2022 will see banks and financial service providers use mobile phones to deploy chatbots, cardless banking and personalized communications. Customers anticipate 61% of their business with banks to be digital by 2024.
Banks and financial services providers had already been moving to the cloud, but the Covid 19 pandemic accelerated the move as digital services were increasingly in demand, along with security and resilience. Cloud technology is simpler and cost-effective for projects based on other breakthrough technologies like mobile, blockchain, and artificial intelligence.
This sector used multi-cloud infrastructure, which has more than one cloud service provider and a hybrid cloud where banks invest in a mix of public and private cloud services. Cloud services also allow financial companies to meet their environmental, social, and governance commitments, as per their adopted robust policies on sustainability and decarbonization.
The financial services sector has adopted AI early for automation of repetitive processes, risk assessment and prevention of fraud. Of all the emerging technologies, AI and ML have the potential to help financial services move into the future by mitigating risk better, optimizing portfolios, combating financial crimes, delivering personalized customer experiences and more. AI allows for analyzing huge amounts of data and making genuinely informed decisions.
The pandemic pushed customers to make significant changes in the way they bank. In the coming year, there will be increasing use cases of understanding and responding to changing behaviour of customers. Today, fintech startups, mega-retailers, and tech titans like Google, Amazon and Apple are competing with well-established banks by providing services that were traditionally the banks’ domain. AI and data-driven technologies can enable customer access to financial tools, advice, and embedded solutions and also provide privacy and security.
The financial services industry is predicted to spend nearly 14% of $204 billion on AI between 2021 and 2025. AI will also be used extensively to ensure fair and unbiased treatment of credit applicants with algorithms becoming more efficient.
Blockchains with their special characteristics are hugely disruptive to the financial services industry. Firstly, they are distributed across different computers with no single person having control. Secondly, they are encrypted and can only be altered by people with cryptographic keys. Thirdly, they are governed by a common consensus. They have huge potential benefits as they can streamline infrastructure by controlling fraud, creating transparency, speeding up core processes and increasing security.
Banks and other financial services have been experimenting with blockchain projects for some time now, and many have implemented pilot or specific use cases. 2022 will see more innovative use cases for blockchain in financial services beyond cryptocurrencies and digital money.
Mobile, cloud services, AI, and blockchain can create transformation when used together to create solutions for customers. Banking apps are common and their purpose is to deliver a great customer experience by giving customers access to banking services from anywhere. Service providers are now competing to differentiate themselves and further improve customer experience by effectively leveraging technology trends. Many apps already have built-in AI assistants for tasks like helping customers manage their money more effectively by analyzing spending patterns and automatically suggesting the next steps. AI also facilitates personalization, where data is used to match customers perfectly with products and services suited for them. Another must-have that will make an appearance during the year is sophisticated voice interfaces and chatbots.
Banks thus rank customer digital experience as their most important business challenge and priority to work on for the coming year. To elevate their customer experience, financial services providers should not just meet customer expectations now but also anticipate future expectations and be prepared to meet them.
These are just part of the huge number of technology trends that are reshaping financial services. They are bringing new and innovative solutions to consumers while providing new opportunities to banks and the financial sector. In the future, it will be organizations that adopt these trends the fastest, that will future proof their institutions and will appeal to the next generation of customers.