As investment soars, unemployment declines and Europe’s economy soars, financial institutions should have a strong 2022. But with changing consumer behavior post-pandemic, banks will need to adopt new online strategies and scale up their digital transformations to stay competitive in the new digital world. To help your organization prepare for essential innovation, here are my top predictions for the financial services industry in 2022.
The continued rise of open finance
The shift to digital banking throughout the COVID-19 shutdowns will accelerate open funding in 2022 – with customers now much more willing to share their data with third-party apps, online trading platforms and other non- traditional.
These new consumer attitudes will continue to fuel the growth of digital challengers and provoke a response from legacy institutions. Many Tier 1 banks will upgrade their internal data systems and infrastructure and begin to launch banking-as-a-service offerings to access new markets and recoup lost revenue. They will also begin selling the benefits of data sharing to more hesitant customers, explaining how the resulting new services can help them better manage their finances while demonstrating their efforts to protect consumer information.
As open banking standards such as PSD2 develop and strengthen, the adoption of banking services for the unbanked and underbanked will also increase. Fintechs have shown that it is possible to offer basic banking services to people with little or no credit history. Traditional banks will start introducing similar services in a bid to grow the market and regain their lost share.
Open data ecosystems will continue to evolve – albeit slowly
As digital banking and open finance expand, companies will capture massive amounts of data that potentially contains crucial customer information. Storing, sorting and analyzing the value of this information requires access to an ecosystem of open data – but such ecosystems will not yet transform the financial sector.
Unlike other software industries using open data ecosystems, financial services companies are highly regulated and the data stored is particularly sensitive and personal. First, banks and the entire data-sharing ecosystem will need to develop protocols that protect data security and privacy before focusing on customer analytics. Consumers trust banks with their financial data far more than other big tech platforms, but that goodwill could easily be wasted without the proper care.
In the meantime, open data ecosystems will continue to improve to the point where, for financial institutions, the wait will be worth it. New tools will emerge to help engineers manage and extract value from data faster than ever. And companies will be able to adopt open source data formats, allowing their data to be compatible across programming languages and future analytics tools, removing the need for costly data transformations.
Hyper-personalization will become an imperative
With more and more fintech companies emerging throughout 2022, existing banks will find ways to differentiate themselves from the competition – and take advantage of new advances in personalization.
Customers are accustomed to enjoying products and features tailored to their tastes, from Netflix-suggested TV shows to Amazon-tailored discounts. Now they expect the same from their financial services. For banks, that could mean sending customers relevant offers from partner retailers, offering AI-powered budgeting advice if a user overspends, or even creating loan agreements instantly tailored to a user’s needs. consumer.
To achieve hyper-personalization, banks will upgrade their databases and architecture, and shift to predictive/prescriptive analytics that allow their services to be personalized in a way that resonates with customers.
Digital startups will boost customer experience and industry collaboration
Digital challenger banks have revolutionized the customer experience in recent years, with smooth interfaces, fast sign-ups and new services like commission-free securities trading, driving masses of consumers away from Tier 1s. In 2022, incumbents will start backtracking, improving the customer experience for basic banking transactions and complex transactions like mortgages by offering quick self-service tools as standard practice. In turn, digitizing and automating these processes will reduce manual workloads for back-office staff, freeing up resources to further maximize profit potential.
Large financial institutions will also recruit CTOs and CIOs from technology vendors and outside industries to open up new perspectives on how to compete with challengers. These new leaders will be more open than traditional bank leaders to collaborating with outsiders, including rivals, and will push to integrate third-party services into the bank’s suite of offerings to drive innovation and customer attraction. consumers.
Financial institutions will then move from creating and managing databases – which are very capital intensive – to agile cloud-based data architectures and applications. Legacy infrastructure and the inability to connect data systems have long stifled innovation and customer experience. However, under the influence of technology-centric CTOs and CIOs, financial services firms will modernize their outdated IT models by embracing cloud migration. As a result, I expect innovation from incumbent financial institutions to increase throughout 2022 and beyond.