The financial services landscape has been tumultuous since the intervention of fast-changing technologies. The digital transformation wave led to the ever-growing numbers of customers expecting instant access to services in this age of always-online lifestyle. With this emergence of digital financial solutions, financial institutions were forced to obtain a significant part of their technology from fintech companies as an integral part of their strategy.
The first half of 2021 witnessed a record-setting number—2,456 fintech deals with an investment of $98 billion. These numbers are likely to rise as financial institutions, and fintech companies continue to re-assess their operations to reach their customers in the most effective ways. Let’s look at some of the key digital trends that will change the world of financial services in the next few years.
6 Key Digital Trends Shaping the Future of Financial Services
E-wallets
E-wallets platforms are widely used mobile financial solutions that allow consumers to store and access funding sources on their mobile devices. Digital wallets will be at the front of the payment ecosystem as they will be pivotal in establishing Buy Now Pay Later (BNPL), cryptocurrencies, and central bank digital currencies.
Mobile financial services providers predict that e-wallets will account for more than half of the e-commerce payments as customers shift to account and QR code-based transactions. In response, banks and card companies are investing in e-wallet solutions to create payment platforms. This trend goes beyond retail payments to promote business-to-business (B2B) payments and digitization of the supply chain.
Robotics and Automation
The demand for end-to-end digitization compels financial institutions to reduce costs and maintain healthy operating margins. Robotic Process Automation (RPA) will help achieve this goal by automating the regulatory reporting process and document scanning with limited human supervision. Automation will significantly reduce financial losses due to errors and fraud by leveraging Artificial Intelligence and Machine Learning.
Robotics in the financial services industry will also introduce Robo-advisors that will assist with investment asset allocation with low fees and intuitive interfaces. This trend will help banks and financial institutions to focus on people by democratizing access to wealth management platforms.
Hyper-personalization
Generation Z will soon become mainstream customers of banks, and they will expect to be treated as individuals. Customers also expect their commercial banking experience to be the same as retail banking. Financial institutions will have to adopt a much more powerful form of personalization—hyper-personalization.
This approach will be the opposite of a one-size-fits-all strategy. Hyper-personalization will allow customers to customize their suite of financial services based on their needs and preferences. It will also enable omnichannel excellence where bankers can suggest accurate services by converting intensive customer data into actionable data using big data analytics tools.
Push to the Cloud
More than half of banks, capital markets, and insurance companies are expected to process their infrastructure and data into the cloud by the end of this year. Cloud-based Infrastructure-as-a-Service (IaaS) platforms will free financial institutions from capital expenditures and operating expenses while expanding their service apparatus.
The cloud ecosystem will unlock the capability to store large volumes of varied datasets integrated across various channels involving billions of transactions. Financial institutions can leverage this data on the cloud to introduce innovative digital financial solutions through Infrastructure-as-a-Service platforms. Some of its examples could be:
Streamlined self-service web app/portal
Giving feedback via different social channels
Auto-approval of insurance claims through automated photo inspection via mobile financial solutions
API-powered Open Banking
Open banking allows financial institutions to share their data and services with fintech companies and third-party apps, such as stock-trading apps. This data-sharing is done using public or open Application Programming Interfaces (APIs).
APIs facilitate seamless integration between traditional institutions’ internal systems to different vendors to provide consumers with Digital Financial solution. The Account Aggregator framework is one of its emerging examples that allows lenders to conduct a speedy evaluation of the borrower’s creditworthiness.
Decentralized Finance
Inefficient processes, high entry barriers, and high transaction costs limit core finance innovation. Decentralized finance (DeFi) is a bottom-up innovation that replaces paperwork with smart contracts, legal implementation with cryptographic implementation, and third-party audits with the public ledger. Decentralized finance is set to become ten times faster, cheaper, and better than current financial services. Decentralized finance constantly evolves with new-age assets like Stablecoins, Non-fungible Tokens (NFTs), and protocol native tokens, such as Ethereum, Synthetix, and Uniswap, in the form of cryptocurrencies.
Leverage Cutting-edge Digital Financial Solutions to be Future-ready
All financial institutions, including banks, credit unions, and insurers will inevitably face these key digital trends regardless of their size. Organizations need not go full-digital at once, but they must pull together their digital efforts in the above-mentioned areas to offer their customers a great experience.
Panamax offers best-in-class Digital Financial Services platform with the latest, cutting-edge technologies, from mobile financial services to smart biometrics.
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