The financial services industry has gone through a rapid and significant digital transformation journey in the fiscal year 2020-21 viz. Digital adoption, cognitive automation, conversational services, video KYC and open banking, etc. The need for digital technologies is growing in the financial services industry and innovation will play an important role in accelerating the creation of new digital financial products. Financial institutions have expanded their market share through open finance and open data strategy. New business models have been introduced, such as banking as a service, payments as a service, insurance as a service. In 2022, they will continue innovations with targeted initiatives such as global sustainability practices and ESG. This blog will highlight ideas that will transform the financial services industry such as banking, insurance, wealth and retirement in 2022.
Open Data Economy
New business models will evolve with investments in open banking and ecosystem play. Financial services institutions will also customize and design new product features to sell through other marketplaces and channels. The open data economy will help organizations provide contextualized and personalized services to their customers through the sharing of data between financial and non-financial institutions. Retail digital marketplace service providers will make financial services products more accessible to their consumers as part of their buying journey by integrating features such as car insurance, contents insurance, personal loan, car loan, mortgage and buy now pay later. This will lead to new business model innovations, essentially cross-industry leveraging of capabilities.
Digital Innovation in Small Business Banking
Banks continue to be one of the main sources of credit for small and medium-sized enterprises (SMEs) around the world. However, increased competition from fintech and neo-banks in recent years is forcing traditional banks to explore ways to make themselves more relevant to their SME customers. Some of the small business owners have been hit on cash flow by the latest market slump and declining sales due to consumer adoption of digital adoption channels. Banks need to rethink their digital innovation journey to seize opportunities in small business banking. With digital capabilities, small business owners can manage their cash flow and forecasting. Additionally, the provision of instant financial and non-financial services query facilities through conversational technologies, digital marketing assistance for a personalized campaign to target their consumer segments, an integrated framework to capture upcoming regulatory requirements in ESG issues will significantly improve the experience of SME clients. . Managing the carbon footprint of purchases and waste and supporting mental health through AI-enabled digital tools are other areas where banks can help small business owners.
Product innovation in sustainable finance
In 2022, banks will accelerate their journey towards ESG products and offers, like green loans, mortgages, bank accounts with carbon tracking features. Insurers will extend existing telematics-based usage-based insurance to eco-driving. Insurers will include ESG factors in risk assessment and underwriting to target new types of risks such as coverage of renewable energy generation equipment. Financial services will measure the impact of climate risks to meet obligations to depositors, policyholders and pension fund members.
Digital, AI and Cloud
There are potential opportunities to digitize onboarding, underwriting, maintenance, and back-office operations through Low Code No Code platforms. Vendors will compete to provide industry-specific cloud solutions to banks, insurers and investment firms. Wealth and pension management companies will have enhanced AI-powered decision-making capabilities for funds and their clients. Targeted marketing, personalized communications to improve customer support, financial literacy for responsible investing, and omnichannel experience are top priorities for wealth and retirement management.
In 2022, the financial services industry will be more collaborative, intuitive and focused.