Emerging Trends in Financial Services
Every industry today is grappling with technology change and the financial services sector is no exception. A recent report revealed that 70% of business leaders in the financial services sector find the speed of technological change as one of their biggest challenges. This development is not new and expected to sustain in a continued phase of digital transformation. As we step into the new year, it’s time to ask the obvious question – will 2019 be another year of change for the financial services sector?
Experts believe so, and it’s not hard to see why. Customer behavior has changed drastically over the last few years and the new wave of technological transformation is being driven by the digital habits of a new generation of connected consumers. The legacy-era brick and mortar mindset is long gone, and technology has taken over. Customers access their accounts through their mobile devices, make payments through a tap on their screens, and plan their investments via interactive online dashboards. The digital evolution of the financial services sector is expected to continue. Here are six of the most important emerging trends in financial services as we head into 2019.
1. FinTech will play a big role
After a long struggle, FinTech startups have managed to make inroads into the financial services industry. From mobile payments to insurance, the innovation from these new entrants has already caused a visible disruption in the industry. And the trend is not expected to subside anytime soon. As the first wave of innovators gets ready to establish their presence, there are many others waiting to make the plunge. Industry insiders believe they have been attacking some of the most profitable elements of the financial services value chain. This has been particularly damaging to the established businesses who have traditionally subsidized the less profitable service offerings. While this may be good news for consumers, it’s certainly a cause of concern for traditional players. In a recent survey, industry respondents said that at least a quarter of their business could be at risk of being lost to standalone FinTech companies over the next five years.
2. Data-driven marketing will drive personalization
Big data has become an integral part of the financial services industry and will continue to drive innovation in 2019. Financial firms today leverage big data for multiple objectives such as generating new revenue streams through personalized recommendations and providing services that improve the overall customer experience. A recent survey revealed that 96% of finance markets said data management is a priority for their organization. It’s no surprise that more and more businesses are embracing data-driven marketing and analytics to change transforming their customer experience. But the journey to data-driven personalization is not easy. Most financial firms are challenged with skilled resources, with 46% of finance marketers saying this is the top challenge to improving data management. For those who can overcome these challenges, the results will be staggering. Not only would they be able to serve their customers better, they would also be more adept at driving better returns on investments. And the trend is still nascent. While some financial services organizations may not be tapping into the power of big data, the fact remains that big data is here to stay.
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3. Cognition-driven customer experience
The biggest names in the financial services sector are already experimenting with multiple use cases of AI in their operations. From using AI driven chatbots to provide round-the-clock, agile customer services to utilizing Artificial Intelligence for anti-fraud measures and regulatory compliance, banks are embracing and implementing a machine learning driven cognitive approach to optimize costs while improving operations. That’s not all. Technologies such as Robotic Process Automation and machine-learning are helping banks replace labor-intensive tasks with highly reliable, cost-efficient and swift robotic operations.
Biometric-based authentications and voice commerce are additional advantages that these technologies are triggering. This is also having a drastic impact on workforce and human resource. While banks will need a new pool of technically skilled resources with techno-functional skillsets, they may see redundancy in many of their existing roles.
4. A re-emergence of cryptocurrencies
After rapidly skyrocketing to new heights, the price of major cryptocurrencies like Bitcoin and Ethereum started dropping and ended the year with precipitous declines. While many experts question the long term viability of these currencies, we believe they will show an upward trend this year and witness a rebirth. Blockchain is silently heralding a revolution, questioning the conventional economic value offered by the traditional players. It is shaking up the very foundations of traditional business models with peer-to-peer lending and digital payments, eliminating intermediaries and speeding up underlying processes. It’s important to note that major players like Goldman Sachs and J.P. Morgan are still exploring the applications of blockchain technology and cryptocurrencies.
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