While the global pandemic disrupted businesses worldwide, for the financial services sector where the need for digitalization has never been more urgent, it unleashed an unrivaled tidal wave of transformational efforts. More than 90 percent of financial service providers doubled the pace of their transformation during 2020, and the faster they moved, the more they benefited.
In fact, companies that accelerated their digital transformation rate in that year by five times saw year-on-year profits up by 4.6 percentage points. Will this upsurge continue to build into 2022? The short answer is yes. And what’s to emerge will evolve and drive a whole new generation of progress in the industry.
Trend 1: From digital transactions to human experiences
The move to contactless, online-only, and self-service became non-negotiable in the past year, and financial services firms did all they could to make transactions easier and safer for banking customers. While several of their initiatives were responses motivated by an unprecedented business environment, these changes have proved immensely valuable and financial institutions are already making the investments to ensure they become a more permanent feature of their signature experience landscape. However, underlying it all, are still the processes that were laid decades ago to serve financial institutions and deliver what they find most convenient to conduct business – not necessarily how customers prefer to have their needs met.
As these firms continue to accelerate their experimenting and innovations with digital, they will seek to reengineer their process environment and build experiences that have the customer in the heart and center of it all. The outcomes will be innovative digital solutions, but the experience for customers will be intuitive, human and holistic.
To make this possible, service providers will make continuous investments in mining for and harnessing data insights to understand not just what customers want, and also how and when they want it. Financial services operations of the future will be data-first, cloud-first and will feed into every critical component of the business to deliver human experiences.
Trend 2: From efficient operations to opportunities and growth
Speaking of operations, the year that went by also saw financial services firms more broadly embrace a combination of automation and digital conveniences. These tools amplified remote workers as they performed dozens of routine operations ranging from reviewing customer disputes in the context of credit and debit cards, to processing loans, payments and so on. The benefits, in addition to improved cost discipline included reduced errors, faster customer issue resolution and reduced human bias in decision-making.
Fewer human interventions, and greater automation also translated into better security and compliance hygiene. Financial institutions are clearly seeing what this can mean for them on the path forward – greater operational agility, employees – freed from routine – applying themselves to solve stubborn customer problems, data aiding in the discovery of new market-relevant solutions, and new avenues for growth and value-creation. Increasingly evident is the fact that strong digital operations can lay the groundwork for service providers to gear their outfit for differentiation and growth.
Trend 3: From tech partnerships to digital runways
For financial service providers, in recent times, several digital partnerships have been quickly forged and deepened with a range of firms – from industry giants such as Infosys to small, innovative startups and fintechs. Jointly packaged offerings, shared data, and innovative solutions that helped served customers during the pandemic – have been the happy outcome.
Going forward, coming together with these same partners and others in the platform economy, will allow businesses in the financial services space to create ecosystems that deliver more value. Platforms will create the digital runway to accelerate their pace of innovation and allow for the faster generation of new ideas with greater efficiency, flexibility, and scalability.
At the same time, their own digital architecture will be amplified to enable continuous infusions and upgrades of technology with zero disruption to business continuity. The platforms will unbundle, re-bundle, and churn solutions that benefit both service providers and their customers.
Trend 4: Revenue growth and social impact will drive FSIs into 2022 and beyond.
While profit has been king in the past, financial services firms will emphasize revenue growth and social impact in a post-pandemic era. Understanding personal goals, capturing real-time interactions, and connecting with customers through intelligence-led operating models will increase revenues through banking services beyond standard fees and loan servicing. Particularly when challenger banks and FinTechs offer free and no-fee solutions, next-generation data architecture and advanced analytics capabilities are critical to helping institutions offer consumers products they need and want — at the right place and time in-context.
Led by client demands, financial wellness and inclusion remain a top priority. Millennials, for example, want their money placed in sustainable assets, driving investments in ESG assets. They are also willing to pay more for something that aligns with their social beliefs. Balancing revenue growth and increasing social goals requires a shift in culture and a shift to digital. Both can be achieved when leaders across business and IT prioritize productivity, evolution, and long-term growth.
Security, compliance, and regulatory issues will always remain critical in FSIs. The inherent value of the information that banks and other firms keep makes even the most prepared a target for cyberattacks. Advances in cloud security, both public and on-prem, hold infinite promise for financial institutions to safeguard customer information better while employing automated “reg-tech” to facilitate regulation and compliance at a lower cost with better outcomes than relying solely on human capital.
Forging ahead and preparing for the future
Financial services firms face ongoing challenges, but also have endless opportunities to reinvent themselves and their offerings to cater to changing consumer demands. Multiple technologies exist now that answer those needs yet preparing for the future requires firms to advance and evolve well beyond what the pandemic necessitated. How prepared institutions are to adapt and make these changes? The answer lies in the foundation of their existing infrastructure and their ability to quickly adapt to new technologies. The leaders will surely not allow their legacy systems to drag them down. As they say, “it’s time to welcome the change, or get forgotten.”