In recent years, the story of financial services has largely been dominated by organisations’ incredible response to the operational and service challenges presented by the global pandemic.
Whether in banking, insurance, payments or life savings, the financial world has never seen quite so much change in quite such a short period of time.
In 2022, as the pace of change continues, we expect organisations across the financial services spectrum to continue to build on the progress made.
Let’s look at our top digital predictions for the coming year….
Digital breaks the bank
New rules for customer experience
We’re fast approaching an impasse in the world of banking. Old models continue to creak under the weight of new customer expectations in a post-pandemic world. When 7/10 millennials would rather see a dentist than visit their bank, the future is, arguably, in the palms of their hands, when it comes to their finances. From frictionless account sign-ups to well-mapped fintech integrations, many challenger-banks are on a mission to drive this change by relentlessly challenging the status quo.
Finances have never been so paperless, contactless and controlled by the ubiquitous-ness of mobile devices.
Many years after it was first uttered by banks, people are yet again talking about a drive towards being ”mobile-first”. This change in the winds probably comes from looking at the “mobile-only” banks who have stood up their operation with the most modern digital tech stack.
Undoubtedly, incumbents and big banks feel the pressure, but are they really at risk from the ‘fintechs’ of the world? Not really.
Yet, in 2022, by embracing the challenger ethos, a continuous improvement process and leveraging the benefits of the APi marketplaces… legacy players can begin to build more product and customer-centric offerings at speed and scale.
Cash is… trash?
A new world of payments
If you’re an avid purveyor of most technology blogs, this mantra may ring true. Certainly, looking at headline stats, it’s hard to argue with.
Usage of digital wallets surged 83% in 2020 & 2021 and pundits project the industry will be worth over $10 trillion by 2025. Whilst the foundations of digital payments have been apparent for some time, it took a global pandemic to see serious mass adoption.
In consumer payments… where, how and when we pay is evolving. Customers want payments in real-time, spread over months, linked to their favourite creators (Twitter Tips for instance) or even in-the-moment microtransactions.
In business payments, a burgeoning e-commerce market, driven by mobile, is giving rise to a wealth of new SMEs demanding value-add merchant services that improve common issues like chargebacks and payment security. And as such, traditional banks are rethinking payment models, stripping out the low margin functions to create new value or wholly outsourcing.
In 2022, we expect to see cash lose even more stock. Looking at the data, there is undoubtedly a geographical cadence to the cashless economy. However, in the UK, cash remained the second most frequently used payment method behind debit cards last year, suggesting this Isle is not keen to part with its paper tender, just yet.
Blockchain permeates the inner circle
Technology with business utility
For a technology with such a brief history, Blockchain has caused quite a stir.
Yet, in the coming year, we expect it to show signs of utility as a mainstream business solution. Away from the hype of cryptocurrency, many are still unaware that, at its core, it’s a decentralised platform that has the potential to completely alter the flow of information.
Its speed, global reach and low costs will see it continue to reshape the mould of financial interactions. PWC even estimates that it has the potential to boost the economy by $1.76trn over the coming decades, with the US and China most likely to benefit. In the midst of a recovering economy, such growth will be welcomed.
Similarly, the ability to decentralise data and applications, whilst establishing strong global networks is a necessity for decision-makers who have faced the worst supply chain disruption since a world war.
IDC estimates that the banking sector has the highest distribution of blockchain market value… and with Ukraine announcing that it will trial a new central bank digital currency built on stellar blockchain network to deliver it… digital currencies may become mainstream much quicker than we think.
Elementary, my IBM Watson
AI augmentation drives cost savings
A cursory glance at most financial institution strategy documents will have you come across “cost savings” or “efficiencies” as a strategic goal in 2022. When applying technology to that problem, our minds see artificial intelligence (AI) with the best use case potential.
Almost every player, fintech or incumbent, is in an intelligent automation, machine learning & AI arms race. Following a pandemic, un-forecasted rises in customer demand married with displaced workforces initiated a step-change in adoption and deployment. For instance, NatWest, the UK’s biggest provider of Bounce Back Loans, deployed AI-powered chatbots to great effect to deal with a surge in applications.
Looking forward, we expect to see AI play a role in everything from augmenting the workforce with automation in repeatable back-office processes to model-managhed advanced analytics in contact centres.
Further, it will be working diligently to reduce the risks of rising fraud and cybersecurity, whilst creating new avenues of engagement via natural language processing through voice. All whilst driving down the cost to serve.
Will increasing regulation be punitive or positive?
Financial services is a heavily regulated sector. Depending on your fondness for decentralized monetary utopias, you’ll consider this just or, perhaps, sometimes punitive. This year, almost 50% of Brits tried digital Buy Now, Pay Later (which we covered in-depth here), governments said no to monopolistic mergers (like Visa and Plaid), open banking attracted 4 million new users, and fintech felt the continued complexities of exporting to Europe and beyond in a Brexit world.
Issues tend to arise when we attempt to plug new solutions into existing frameworks and behaviours. Thus, it’s not surprising that regulation is struggling to keep up. As regulators recover from COVID-19 where many struggled with a lack of on-site visits or access to timely data. We expect increased scrutiny and global differentiation related to the regulation of financial technologies, which is why working with an expert partner will be essential.
Whilst our crystal ball is not usually too far off the mark, if recent years have taught us anything, it’s to expect the unexpected. Financial services organisations are looking to consolidate and innovate, two things that don’t always go hand in hand. So regardless of what sub segment of the financial services sector you are in, we can help you.
So get in touch and give us your take on the hottest financial technology trends for next year.