The 5 Biggest Financial Services Tech Trends of 2022
The past few years have been tumultuous for financial services companies. Many of them have seen traditional work and business models disrupted by the current Covid-19 pandemic, the rapidly changing tech landscape, and a new breed of nimble, tech-driven startups.
On the contrary, the next few years will be even more critical, as we will see which companies are able to adapt and thrive in this changing environment.
Apart from the pandemic, major drivers of these trends include the ever-increasing number of customers who expect to access services instantly, from anywhere via their smartphones. As well as the vast explosion in the amount of data we generate thanks to our increasingly digital and always-online lifestyles.
So let’s take a look at some of the biggest trends that will impact the industry, from incumbent giants to the smallest and most nimble startups, over the next 12 months.
There are more than six billion cell phones in the world today, and of the 1.7 billion unbanked citizens, 66% own cell phones. That means these devices are a key target for banks and other financial services looking to put their services (literally) in the hands of customers.
Increasingly, when we make purchases, it will be done via phone – this is true both online and offline, as many of us are abandoning the habit of carrying plastic in our wallets in favor of mobile payment services. It’s just another way society is becoming increasingly digital and connected, and for most of us, our phones are the main interface between the digital world and the real world. Nowhere is this truer than in financial services, where every bank and insurance company wants us to download and install their apps.
There are many reasons for this – from customer experience (more on this below) to economics – it is often much cheaper for banks to provide service this way than bringing us into brick-and-mortar branches (which, by the way, are quickly disappearing). And of course, having a permanent connection with us that we carry in our pockets wherever we go gives them access to a wealth of data about our lifestyles and behaviors that can be used for many other purposes, from offering us bespoke products and services to reduce fraud through biometric security measures. Throughout 2022, we will see banks and insurers increasingly deploy chatbots, cardless banking (including ATM withdrawals) and personalized communications, and they will all come to us through our mobile phones.
Bank in the cloud
Banks and financial services firms were already migrating to the cloud in droves when covid hit, but the pandemic has been a huge accelerator to cloud adoption. This was due to the benefits it brings in scalability at a time when digital services were increasingly in demand by customers, as well as security and resilience. Cloud technology makes it easier and cheaper to launch projects based on other breakthrough technologies mentioned in this list, such as mobile, blockchain, and artificial intelligence (AI).
Multi-cloud infrastructure, where more than one cloud service provider is used, as well as hybrid cloud, where banks invest in a combination of public and private cloud services, are both well understood and used in the industry. . According to Accenture, 60% of its banking customers use more than one cloud provider, and more than half have adopted a multi-cloud strategy. Cloud services are also increasingly seen as a way for companies in the financial sector to meet their environmental, social and governance (ESG) commitments, as many large providers have adopted strong sustainability and decarbonization policies. .
Artificial intelligence and machine learning
The financial services industry has also been an early adopter of AI, where its role in automating repetitive processes, assessing risk and preventing fraud is well established. During the pandemic, almost half of us have made significant changes to the way we bank because of Covid-19. This means that as we approach 2022, we will see an increase in use cases related to understanding and responding to changing customer behavior.
Established banks are facing competition from more and more directions than ever before – with fintech startups, large retailers and tech giants like Google, Amazon and Apple all signing up customers for services that would traditionally have been their domain. Artificial intelligence and smart data-driven technologies are a key enabler for all of these competitors, which means traditional banks and insurance companies have no choice but to adopt them themselves if they hope to stay in the race. They have often shown themselves to be quite adept at integrating these technologies into backend operations to create robotic process automations (RPAs) that can streamline repetitive tasks. Now the challenge is to achieve this with less predictable tasks such as selling to individual customers or creating bespoke service packages.
Worldwide, IDC predicts that the financial services industry will be second only to retail in AI spending between 2021 and 2025, accounting for nearly 14% of the $204 billion that will be spent each year. by the end of this period. Another area where growth will be apparent is the use of AI to ensure fair and equitable treatment of credit applicants. Algorithms will become more effective at determining where biases are applied in these processes, with the aim of ensuring that all segments of the population have fair access to business lending and financing opportunities.
Blockchains are basically just databases that have a few special characteristics; First, they are distributed, which means they are stored on many different computers without a single person having overall control. Second, they are encrypted, which means they can only be changed or updated by people who have the cryptographic keys that allow them to do so. Third, they are governed by consensus, which means that changes to the data can only be made if everyone who has a say in the matter agrees that they should be made. These characteristics mean that they are a major disruptor to the financial services industry, which has traditionally been centralized and governed by bank owners alongside regulators, such as governments and national banks. They are also potentially hugely beneficial, providing the opportunity to streamline infrastructure while reducing fraud, creating transparency, speeding up core processes such as transaction settlement and clearing, and increasing security.
Banks and other financial services have been testing and piloting blockchain projects for some time now, and many have gone mainstream. HSBC and Wells Fargo use technology to settle foreign exchange transactions; Mastercard and Paypal allow payments to be made on their networks in blockchain currencies (cryptocurrencies), as does JP Morgan, which has created its own cryptocurrency. And insurance giant AXA has created its own blockchain platform to automate the payment process for customers whose flights are delayed.
In 2022, it is inevitable that we will see more innovative use cases for this hugely transformational technology. While initially limited to cryptocurrencies and digital currency, its potential in financial services now clearly goes beyond that.
Improving the customer experience through technology
We know that all of the trends mentioned above have been successfully used by financial services companies to automate and streamline back-office functions such as transaction processing and fraud detection. Now, companies are comfortable with these technologies; they will feel increasingly confident deploying them to solve problems related to their most important asset: their customers.
This is where I expect to see real growth and innovation in 2022. AI, cloud services, blockchain and mobile are the most transformative when they come together to create solutions that improve lives client. Banking apps are commonplace and often aim to provide a great experience simply by fulfilling their primary function of giving customers access to banking services from anywhere. In fact, during the pandemic, they have become the most popular channel for customers to interact with their banks. Now, the race is on between service providers looking to differentiate themselves based on how effectively they can leverage the hottest trends to further enhance everyone’s experience. Many apps now come with built-in AI assistants that can perform tasks like helping customers manage their money more efficiently by categorizing spending habits and automatically suggesting where efficiencies could be made. Other strong underpinnings include personalization, where data is used to match customers precisely to the products and services they actually need, rather than the ones a financial services company wants to sell them. An example of this is when a lender is able to pre-approve a customer for a loan without doing research that impacts their credit report. This means they can approach that customer with a loan offer, rather than just an invitation to apply. Voice, as in voice interfaces and chatbots, is also high on the list of must-haves. It reaches levels of sophistication where it becomes truly useful.
Learn more about these and other future trends in my new book, Business trends in practice: 25+ trends that are redefining organizations.