How Is the Financial Services Industry Changing?

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The financial services industry operates in a rapidly changing world, but one it can help shape. Banking, insurance, capital markets, commercial real estate, investment management – 2022 represents a pivotal opportunity for all these businesses to create their own future.

There needs to be a lot of focus on digital transformation and ESG initiatives across the industry, as well as investments in talent and in finding new ways to work together and boost efficiency. The time has come to rethink traditional bottom-line metrics and develop strategies that address both corporate and societal demands by placing purpose and trust at the forefront.

Investments in technology between 2020 and 2021 have been mostly aimed at surviving and recovering from the consequences of the COVID-19 pandemic. And it took a lot of work to keep up with the growing demand for digitalisation.

Most companies in the financial services industry have spent a lot of time digitising their core products and services to reduce in-branch business losses and make sure they're ready for the future. And, while not everyone has regained their footing, key industry players are prepared to move forward. The following trends should help them succeed in the coming year.

Localising Digitised Experiences

Over the past two years, most large and mid-sized companies in this sector have worked on their core digital products, such as their websites or apps. According to data from financial services research, it looks like most banks will use digital platforms as their main business model in the future. However, if digitisation becomes standard, how can banks stand out from their competitors?

While consumers appreciate the speed and mobility associated with going digital, research indicates that they crave the feeling that comes from dealing with a real person. Having a local in-branch experience has become highly valued, especially in Europe and among patrons of regional banks. They enjoy having close, first-name-basis relationships with personnel and promptly getting help when needed. Recreating this in the digital world would be a game-changer for the industry.  

This will not only allow banks to close some of their branches and reduce costs, but it will also allow them to combine convenience with the sense of satisfaction consumers feel when they can build rapport with their service providers.

Hyper-Personalisation

With the growing demand for localisation comes the desire for a smooth and personalised customer experience. Every customer has their preferences and manages their funds differently. Hyper-personalization offers them the tailored and comfortable experience they seek.

Whether it's an option to automate recurring transactions or offering specialised products for various consumer groups, the AI-enabled effort to put each customer first is exceeding expectations. In the long term, learning more about their customers can help financial institutions build a stronger relationship with each of them.

Enhancing IDV

Identity Verification (IDV) is another area where the financial industry can expect substantial improvements in customer experience. Studies have consistently shown that ease of registration or application is a critical component in the growth of online banking and fintech. As a result, we can expect the secure and seamless IDV via open banking or data sharing to be extremely popular with consumers.

Regulators from Europe, Australia and Hong Kong are pushing for open banking and data sharing, with the trend spreading to neighbouring markets and convincing the industry of IDV's value. We now have digital IDV solutions that can verify a wide range of official documents in mere seconds and analyse comprehensive user records from approved databases in minutes.

Not only do such advancements help businesses avoid alienating on-the-go consumers, but they also dramatically accelerate complete consumer conversion by reducing the period between application and approval — a dangerous window of opportunity for faster competitors to steal your prospects.

Cross-Platform Services

Digital finance transactions typically spill over into other sectors like retail and healthcare. This is what led to the success of third-party payment providers like PayPal and AliPay.

Many consumers are turning to these third-party providers that have already established themselves in booming sectors such as e-commerce in order to avoid the typically longer transfer times and the inconvenience of switching between banking apps.

But banks can turn this around by incorporating payment services like mobile pay or hybrid wallets that can be used for cross-platform transactions. For instance, many financial service providers have increased their overall revenue outside of interbank and intra-fintech transfers by incorporating services like payments and transfers in the WeChat app.

Responding to Consumer Micro-Moments

Micro-moments arise when consumers reach for their devices to find a quick solution to a problem or to address an immediate need. This could mean searching for a piece of information, watching something for entertainment or buying something. Given that 96% of people turn to their smartphones whenever they want to find information on any given topic, this represents a sizable portion of the population for marketers to reach out to.

How? By anticipating these moments and creating content tailored for them. They can research what type of information people look for during these micro-moments and develop marketing campaigns around them. This also will give them insight into consumer expectations, market trends and areas of improvement.

Predictive Analytics & Machine Learning

Artificial intelligence and machine learning, in particular, are already widely used in security, algorithmic trading and process automation but less so in marketing. However, this is an area where predictive analytics and machine learning have great potential because they allow marketers to tailor messaging, so the right customer gets the right message at the perfect time.

Marketers can seek out powerful analytics tools capable of correctly predicting which messages will be the most effective. These tools can assist them in reducing wasteful advertising expenditures and determining whether prospects are worth pursuing.

Cross-Departmental Integration

Because of the prevalence of data silos, companies in the financial services industry frequently lack complete insight into their data. The reasons for this include a rise in the number of mergers and acquisitions, variable levels of data authority, and a decentralised approach to data collection. As a result, financial institutions face significant challenges in effectively analysing all of their data. However, precise, centralised data analysis is needed to deliver good customer experience and develop targeted marketing campaigns.

Building bridges between departments would ensure that all of the company's marketing data is consistent. A centralised data analytics platform allows each team to keep marketing data in one place. This will break down data silos and lead to smarter decision-making that will benefit the overall organisation's success.

By Cynthia Madison

© 2021 Copyright Cynthia Madison - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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