The financial services industry has fast-tracked the adoption of today’s digital technology. Using cash, debit cards, and attending in-person meetings will soon become a thing of the past.
Some of these changes were predicted to start in 2020 but the pandemic overshadowed everything. Acting as a catalyst, the pandemic accelerated digital changes in the finance sector.
Thanks to the pandemic, individuals are conducting simple activities like purchasing groceries online. Certain financial matters are also handled remotely. This helped speed up the adoption of certain trends that were already knocking on our doors.
With the emergence of the 24-hour digital customer, comes higher expectations. These expectations include seamless and quick digital services across all channels used today.
Below are some insights into what to expect in the financial service sector in 2021:
1. Everything Will Be Digitized
Financial services’ digital transformation was fast-tracked by the onset of the pandemic. In 2020, businesses achieved more digital advancement than in the last few years.
As employees adapted to working from home, businesses were forced to remain resilient. This means they had to continue offering services to their clients without any gaps. This led to companies digitizing most of their work processes, including financial services.
Businesses were looking at financial institutions for simple and functional solutions. With this much pressure placed on them, financial institutions had to step up.
They started by separating back-office data from the outer presentation layer. This was instrumental in enhancing the customers’ experience. Unfortunately, digitization of the financial sector also comes with challenges which include:
Cybersecurity has always been a major focus during digitization. As financial services embrace digitization, they face the risk of cybercrime. This is because cybercriminals are always inventing new ways to penetrate security systems.
Fortunately, firms are also expected to invest more in cybersecurity. This will educate them about data security and how to better protect themselves.
The FCA has stated that it will take action on firms that don’t have adequate security protocols to protect the consumer
It’s predicted that there will be an increase in fraudulent activities. This is because the less tech-savvy consumer is not conversant with a digitized world. However, financial firms should take action to protect at-risk consumers from fraud.
Increased Service Gaps
Digitization is one of the biggest ways for firms to save costs. However, most firms are pushing their cost-saving initiatives. This could lead to potential service and regulatory gaps.
If not handled well, regulatory gaps could lead to future enforcement risk.
2. Increase in Businesses With a Social Purpose
The pandemic left many businesses and communities facing challenges. This motivated businesses to shift from a profit-oriented culture to a purpose-oriented one.
Financial service firms were among the first organizations to make this shift. Through this, they helped communities deal with the pandemic’s economic and social effects. This brought back the spirit of goodwill that was lost after the financial crisis in 2008.
The shift has also seen financial firms choose to be part of the solution instead of the problem. This trend is likely to push through to 2021. Fortunately, the focus is most likely to be on Environmental, Social, and Governance issues (ESG).
Businesses will adopt ESG as part of their company culture due to:
- The push for improved governance
- The threat of legal action
- Pressure from activist shareholders
In the past, organizations used ESG as a reputation boost. But it’s predicted that come 2021, ESG issues will affect how companies will conduct their business.
Causes such as climate issues will push companies to consider the impact of their day-to-day activities. Even banks are becoming socially responsible. This will pressure them to move from brown to green.
Moving from brown to green will transform:
- How businesses offer their services
- How they manufacture their products
- How they market themselves to customers.
Businesses will also stand up for social injustices and take steps to improve diversity. They will do this by adopting policies that allow for everyone’s inclusion. This is a culture that most firms will adapt to improve themselves and use as a marketing strategy.
3. Changes in Government Regulations and Laws
Financial regulators have taken more steps to protect businesses from the pandemic effects as seen in 2020. However, everyone must avoid poor behavior which may overshadow noble ingenuities’ benefits after the pandemic.
However, financial regulators such as FCA will remain watchful for any transgressions. These misconducts include:
- Consumer abuse
- Market abuse
- Taking advantage of investors
- Failure to fulfill promises made to consumers
Most regulators have always looked out for the consumer’s best interest. However, more strict steps will be taken in 2021 as customers embrace the “new” normal.
Financial service firms will also be expected to be fair when dealing with clients in the future. This includes clients who may have had breaks on their credit products due to the pandemic.
4. New Self-Service Tools
New self-service tools are among the biggest digital trends for financial services in 2021. In today’s world of demanding consumers and instant communication, everyone wants a quick solution to their issues.
When accessing any online services, consumers always encounter problems or have questions. To enable real-time responses, financial service firms have automated Chatbots and phone systems.
Customers can now get faster responses when accessing financial service provider websites. In 2021, many banks are expected to install self-service Chatbots to help their customers. This is the best way to reduce incoming inquiries at the call center and enhance customer satisfaction.
Are You Prepared for the 2021 Financial Services Trends?
The financial services landscape has shifted in the past year. This is mostly attributed to the global pandemic. However, organizations’ resilience and agility are also contributing factors. To survive the 2021 financial market, businesses must embrace digital and regulatory changes.
For more business, marketing, and financial advice, check out other posts on our blog.