Published On: December 28th, 2022
Change is inevitable but keeping up with these changes is not an option in this fast-evolving world. The financial services industry is at the forefront of managing and dealing with these changes.
But are you aware of how the financial services industry is changing and innovating? If not, it’s about time you give this some thought, as it is expected to have a CAGR of 6% from 2020 to 2025. Also, the industry accounts for about a quarter of the world’s economy, so any change in this sector will directly or indirectly impact you.
Noteworthy Trends Reshaping The Future of Financial Services in 2023 And Beyond
With instability in the global economy, the financial services sector is evolving at a breakneck pace. How do we know the financial services industry is changing? Here are some financial industry trends highlighting the ongoing transformation.
Cloud Technology is Replacing Legacy Systems
Technological advancements are key drivers of change in the financial services industry.
Cloud technology is among the most notable technologies driving transformation in this sector.
The recent Covid pandemic has increased the prevalence of remote or hybrid work environments. According to a survey, 90% of employees were happier with the freedom they enjoy working in remote environments. Cloud technology will again play an essential role in making that a feasible possibility for institutions in the financial services industry.
The advanced capabilities of this technology make it a preferable choice for the most dominant players in the sector. For instance, Deutsche Bank partnered with Google to shift to a cloud-native application environment.
Then there’s HSBC which signed a deal with Amazon Web Services to replace its legacy systems with cloud-native systems. This is just the start, as more institutions will need to make this shift and ensure healthy competition in the banking and financial services industry.
One of the primary reasons these institutions choose cloud technology is its vast potential. IBM reportedly increased agility, reduced operational costs, and created a better remote working environment by leveraging the potential of cloud technology.
Cybersecurity Is Becoming a Pressing Matter Of Concern
Financial services institutions do not have the privilege of undermining the significance of cybersecurity.
- Data breaches are increasing yearly, with numbers indicating a 17% increase in data breach events from 2020 to 2021.
- These events not just pose security threats but also cripples innovation and business expansion, hindering the future of financial services. 42% of businesses say they are halting expansions due to increased digital fraud.
Any financial services institution will lose its customer’s trust, and its revenue generation will nose dive if things remain the same. Businesses in the financial services industry are taking proactive measures to counter these events. This is imperative as they are responsible for securing customers’ data.
Cybersecurity is now at the heart of banking and financial services institutions. Most financial services institutions are now shifting their priorities towards strengthening existing infrastructure for better security. Besides that, optimisation of internal processes is also becoming an important priority now.
Open Banking Is No Longer a Thing Of The Future
The financial services industry conventionally spends a lot of time and resources in delivering better customer experience. But this is now changing for good, with open banking making things much more accessible. These institutions can now better understand customers and use these insights to boost customer engagement and retention.
Global open banking systems are set to grow by 50% from 2020 to 2024. This is a welcoming development since it positively impacts all stakeholders, making it one of the most noteworthy financial services industry trends.
Open Banking is set to dominate the future of financial services in 2023. In 2021, 47% of banks developed Open Banking APIs, while 25% more hopped on the same boat in 2022. The open banking phenomenon has also garnered further political momentum with President Biden’s Executive Order.
Machine Learning And Artificial Intelligence Are Taking Centre Stage
The application of Machine Learning (ML) and Artificial Intelligence (AI) is spreading like wildfire throughout the financial services industry. This does not come as a surprise since these technologies can help enhance the efficacy and efficiency of all operations. These institutions now leverage better data-driven insights to drive better decision-making and results.
- By 2026, 85% of organisations will leverage the potential of ML and AI to augment foresight and boost productivity by 25%.
- One great example of this phenomenon is eliminating the need for coding with the potential of AI technology. As per reports, low-code tools will make up 65% of app development by 2024.
These figures make it clear that the significance of machine learning and artificial intelligence will only increase in the coming years and more so for the financial services industry. Whether enhancing their offerings to customers or mitigating human errors, these technologies have varied applications and unmatched potential.
An Augmented Future For Financial Services Awaits!
The financial services industry is at the heart of the global economy, and even the slightest changes in this sector will have widespread implications. But there is no reason one should fight these changes because change is inevitable.
Financial services institutions are embracing these changes and finding better ways to deal with them. This is the only sure-shot way of securing financial services’ future and mitigating adverse phenomena’ impact.
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