The market has changed drastically this year, with many viewing 2020 as an outlier of events. However, it is actually the perfect model for financial institutions (FIs) to keep in mind going into 2021. The COVID crisis is representative of how market changes and customer demands can rapidly occur so FIs need to be agile to meet any changing demands, quickly. Moving forward, the emphasis must be on customer service and as customer needs change, FIs need to adjust along with them.
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Instead of considering 2020 an anomaly, FIs should use the year as an opportunity to help guide their strategic growth for the next and upcoming years. Here are five trends that will continue to affect the industry in the following year:
Increase in Fintech Collaborations – In 2021, the focus on the customer experience will continue to be heightened. That means FIs looking to become more digital will no longer consider fintech a threat, but instead welcome them as new partners. Digital-only FIs came into play in 2020 to serve the online banking needs for customers that can no longer walk into a branch due to social distancing guidelines. As digital adoption becomes the norm and customers continue to require seamless, online experiences, digital-only FIs will gain even more traction.
FIs will also embrace new technology to support their customer needs. In order to do so in the most efficient and cost-effective manner, they will start to partner with fintechs to help them evolve to keep their customers. The significance of these partnerships is not just all about the technology though, it is about how they are formed to build greater collaboration and to empower FIs to serve customers in the way they want.
A Neobank Evolution – Neobanks will grow and better serve customers next year. Almost all customers now expect modern digital experiences and tailored user experiences. As a result, the evolution of neobanks will continue through next year as FIs recognize the growing importance of building a bank around a customer’s needs without being inhibited by old technology. Cloud technology has become a better solution, because FIs are able to stay agile and up to date with market and consumer demands. Neobanks will also leverage APIs to drive these advancements forward.
Blockchain and AI/ML – As the customer experience continues to evolve, FIs will feel the pressure from the increasing customer demand to be faster, more innovative and more accommodating than in the past. The need for artificial intelligence (AI), machine learning (ML) and blockchain to automate a lot of backend and front-end operations will grow increasingly. Additionally, AI and ML are crucial to helping meet individual customer requirements through their personalization abilities. While this trend might seem a little old and over mentioned, AI/ML and blockchain are really the present and future of how customers expect their banking services to be delivered.
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Fintech will take a global approach – Financial institutions are looking to expand, not just regionally, but also globally. FIs are interested in reaching different markets and so fintech will expand to become more globalized as well. Next year, FIs will need global diversification in their technology stacks, which means fintech will enable more global APIs, open banking standards and more. As many of the top tier FIs look to gain market share through open banking, fintech has to serve global diversification. This trend will best be facilitated through use of cloud technology and SaaS.
Regtech – Regtech will accelerate in 2021 to address some of the new challenges in the financial market. The impact of cybersecurity threats will continue to affect banking, cryptocurrency, open banking and more, so any information surrounding regulatory requirements will be in higher demand. Regulatory requirements are evolving across the world, so as the market shifts, the financial industry will identify new areas of interest for reg tech. FIs should also be ready to handle another situation like the paycheck protection program (PPP) crisis. As regulations change, FIs must be able to pivot as needed to provide customers what they require. As businesses continue to expand regionally and globally, FIs need to make sure all of their technological and regulatory controls are in place, secure and up to date for their different target markets.
There is no better time for financial institutions to modernize and transform their business. This next year will bring digital services and adoption to the forefront as FIs advance their digital transformation to stay competitive. Additionally, APIs will be a large focus as they provide the extensibility that enables financial institutions to increase their technological offerings. Digital modernization has become key for financial institutions to broaden their markets and build customer loyalty. To ensure that they are putting forth the best products and services for their customers, FIs need to look at how they can serve their customers through any change in market trends to avoid repeating the effects from the COVID crisis. FIs must be agile, provide seamless processes and take a global approach to solve any customer pain points quickly and grow in market share, or risk falling behind.
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