2022 will be both a challenging and an exciting year for financial institutions. Innovative new technologies are redefining the sector, shaping the services that financial organisations offer, the ways in which they interact with consumers, and the ways in which they apply new sources of data across departments.
The evolution of financial services is set to continue. Let’s examine the 5 top trends for financial organisations in 2022:
- Buy now, pay later (BNPL) will continue to grow
- Open banking will dominate the future
- Cloud-native systems will replace legacy alternatives
- Artificial intelligence (AI) and machine learning (ML) will increase in importance
- Cybersecurity continues as a top priority
Trend 1. BNPL will continue to grow
Buy now, pay later (aka BNPL) has radically altered consumers’ behaviour by allowing them to buy goods online and pay the cost back in a series of instalments. In other words, they can buy goods and services that they can’t afford—at least, not at that time. That’s why it has become so popular, growing at an annual rate of 39%. Indeed, the market as a whole is expected to be worth over $260 billion by 2025.
A recent Bain & Company report on BNPL points out that “for businesses in financial services, over the past few years it has been essential to have a fintech strategy. Now it’s also essential for businesses that intersect payments, lending and e-commerce to formulate a BNPL strategy.”
Take Klarna, for example, the leading BNPL player. The company recorded sales of $57.3 billion in Q3 2021—a $22.1 billion increase compared to 2020—demonstrating the growing popularity of BNPL. Interestingly, a massive 45% of UK-based 18 - 34 year-olds used BNPL over the past year. Given that Millenials and Gen Z will soon be the largest demographics (both numerically as well as in terms of purchasing power), we can expect BNPL to continue to rise in importance.
Additionally, BNPL companies such as German fintech startup Bilie are also entering the space to address the B2B side of BNPL. Billie has in fact added Klarna as a strategic partner, who in turn has subsequently become the world's first payment provider to offer a comprehensive range of BNPL payment methods for both B2C and B2B.
But there are some downsides to using BNPL—particularly on the B2C side. More than 2 in 5 people have struggled to repay what they owe when using BNPL, while 1 in 4 people used it to pay for something they couldn’t actually afford. When consumers can’t pay back what they owe, this will pose a huge challenge to financial organisations. Financial institutions that leverage BNPL need to collect what they’re owed. Otherwise, it doesn’t benefit the business.
So how can they do this? By using three future-proofed collections tactics: using multichannel communication strategies, letting customers self-cure their debts, and leveraging account management capabilities. This makes it easier for agents to contact past-due customers and to help both customers and the business to stay on top of the end-to-end repayment process.
Trend 2. Open Banking will dominate the future
According to Statista, the number of global open banking users “is expected to grow at an average annual rate of nearly 50 percent between 2020 and 2024, with the European market being the largest”. Considering how open data benefits consumers as well as financial players, it’s easy to understand why this trend will become increasingly popular moving forward.
By granting third parties access to consumers’ financial data, organisations can better understand how consumers behave, what they want, and most importantly, what they need. In turn, financial institutions can therefore improve their customer experience, which results in higher retention and engagement.
According to PWC, the “retail customer propositions that are enabled or enhanced by Open Banking will include:
- Account aggregation to provide single view of accounts across different banks
- Financial management tools using data analytics to identify spending patterns to budget and save more effectively
- Tailored product offerings based on transaction history, such as customised holiday loans based on flight and hotel bookings and anticipated spend
- Increased access to credit for ‘thin-file’ customers due to improved access to financial data”
PwC goes on to state that Open Banking has created a £7.2 billion revenue opportunity—and 71% of SMEs expect to adopt it by 2022. Financial institutions are beginning to act as they look to embrace this opportunity. 47% of banks developed Open Banking APIs in 2021, with another 25% looking to do so in 2022. In addition, this momentum has been furthered by political action, such as President Biden’s Executive Order on Promoting Competition in the American Economy.
Expect Open Banking to dominate the financial services sector in 2022 and beyond.
Trend 3. Cloud-native systems will replace legacy alternatives
Leading financial organisations continue to embrace cloud-native systems. For example, in 2020, HSBC signed a long-term deal with Amazon Web Services to move their existing legacy functions over to new cloud-based alternatives. And then there’s Deutsche Bank, which partnered with Google to deliver a cloud-native “fully-managed environment for applications”.
But why is the cloud so important? According to IBM, cloud-based systems support increased agility, decrease IT costs and operational expenses, and play a key role in ensuring that employees can be effective when working remotely.
This last point is especially important. Hybrid working is the future—in fact, 90% of employees surveyed by Loom are happier with the increased freedom that working from home gives them. By leveraging cloud-native systems, employees can access crucial financial data at any time and any place. With cloud-native capabilities, financial institutions can maintain high performance at all times and dramatically improve both customers’ and employees’ satisfaction.
Cloud-native architecture and systems also enable faster new feature development and automatic upgrades (instead of disruptive updates that require downtime).
Trend 4. Artificial intelligence and machine learning will increase in importance
Artificial intelligence (AI) and machine learning (ML) make organisations more efficient and more effective. These technologies gather, sort, and analyse enormous datasets in seconds—and are almost error-free. Financial institutions can spend their time acting on these data-driven insights, instead of wasting unnecessary time and effort manually digging through the data itself.
IDC predicts that by 2026, 85% of organisations will use AI and ML in some capacity to augment their foresight, resulting in a 25% increase in productivity. Low-code/no-code AI is a great example, allowing people without coding knowledge to build applications themselves. While Gartner reported that “low-code tools will make up 65 percent of all app development by 2024”, Forrester also pointed out that low-code/no-code industry spending is expected to increase to approximately $21 billion by 2022.
Whether these technologies are used to personalise service offerings, better understand consumers’ behaviour, or reduce errors, one thing is for certain: AI and ML will only grow in importance moving forward.
Trend 5. Cybersecurity will become a top priority
Cybersecurity has always been crucial for financial institutions. However, with the number of data breaches up until the 30th of September 2021 exceeding the total number of events throughout 2020 by 17%, it’s clearly more of a concern than ever before. These cyber attacks have a wide-ranging impact on organisations. In fact, 42% of businesses say that digital fraud prevents innovation and halts their expansion into new channels.
Cybersecurity breaches are particularly damaging for financial institutions. Their customers’ financial and personally identifiable information (PII) are incredibly valuable for hackers—and security breaches may well result in the bank losing a huge quantity of customers as well as revenue.
Hence, financial institutions must prioritise cybersecurity in 2022 and beyond. They must not only optimise their own internal processes, but they must also be selective about only working with third parties that put data security at the heart of everything they do.
An exciting year in store
The financial services sector is rapidly evolving. The 5 trends outlined above will only accelerate this evolution, dramatically redefining the industry over the next 12 months. The pace of change is so quick that financial organisations cannot afford to fall behind, even for a moment.
Working with innovative partners, ones that understand and implement new technologies and trends, is the best way for financial players to future-proof their business going forward.
FAQs
What are the latest trends in finance? ›
- #1: From Personalization to Hyper-personalization.
- #2: Banking Customers Will Share More Personal Data.
- #3: Data Security Has to Continue to Improve.
- #4: Banks Will Empower Customer Service Reps Everywhere.
- #5: Finserv-Fintech Partnerships Will Continue to Drive Advances.
- Cyber incidents.
- Business interruption.
- Changes in legislation and regulation.
- Pandemic outbreak.
- Market developments. The top five risks for the financial services sector as voted for by 872 respondents in the Allianz Risk Barometer 2022. Find out more in the allianz risk barometer.
- 1) State Bank of India (SBI) Savings Account.
- 2) HDFC Bank Savings Account.
- 3) Kotak Mahindra Bank Savings Account.
- 4) DCB Bank Savings Account.
- 5) RBL Bank Savings Account.
- 6) IndusInd Bank Savings Account.
- 7) ICICI Savings Bank Account.
- 8) Axis Bank Savings Account.
The top challenges facing the financial services industry are data breaches, keeping up with regulations, exceeding consumer expectations, and surpassing the competition. Financial service firms must stay ahead of the curve to remain competitive and meet the needs of their customers.
What are the key emerging trends of 2022? ›- Artificial Intelligence (AI) and Machine Learning (ML) ...
- Internet of Things (IoT) ...
- Cybersecurity. ...
- Quantum Computing (QC) ...
- Robotic Process Automation (RPA) ...
- Virtual Reality (VR) and Augmented Reality (AR) ...
- Edge Computing. ...
- 5G.
The top 3 financial resolutions for 2022, as given by those surveyed, are to save more money (43%); pay down debt (41%); and spend less money (31%).
What are the 5 most common long term trends that is impacting the banking industry? ›- Analytics.
- Anti-money Laundering and Know Your Customer.
- Capital Markets.
- Commercial Banking.
- Credit Risk Management and Underwriting Services.
- Customer Experience Service.
- FinTech Companies.
- Governance, Risk and Compliance.
Digital disruption, rising competition, regulatory change and post-pandemic economic fluctuations are all important issues in the banking industry today. Tomorrow's winners will take steps to not only mitigate or manage these issues—they will find creative, disruptive ways to address them proactively.
What are the top 3 challenges facing the financial industry right now? ›- Delivering unified customer experiences.
- Staying competitive in the era of fintech.
- Keeping up with technology.
- Data breaches and cybersecurity.
- Staying regulatory compliant.
Fintech startups, businesses specializing in financial technology, are disrupting the financial industry in big ways. They have several advantages that allow them to be more innovative and deliver services to customers more quickly and cost-effective than traditional banking institutions.
What is the No 1 bank in the world? ›
| Sr. No. | Company Name | CRAR |
|---|---|---|
| 1 | HDFC Bank Ltd. | 19.50% |
| 2 | Kotak Mahindra Bank Ltd. | 24.50% |
| 3 | ICICI Bank Ltd. | 17.91% |
| 4 | Axis Bank Ltd. | 18.72% |
- Lack of income/job loss.
- Unexpected expenses.
- Too much debt.
- Need for financial independence.
- Overspending or lack of budget.
- Bad credit.
- Lack of savings.
The 5 most important banking services are checking and savings accounts, loan and mortgage services, wealth management, providing Credit and Debit Cards, Overdraft services.
What trends are affecting the financial services industry? ›Financial sector trends
Ultra-low interest rates and debt defaults made 2021 difficult for the industry, but as the pandemic recedes, recovery is expected in most markets.
We called those with the most potential the Essential Eight. They include: artificial intelligence (AI), augmented reality (AR), blockchain, drones, Internet of Things (IoT), robotics, 3D printing and virtual reality (VR).
What are the next 22 emerging technologies to watch in 2022? ›- Internet of Behaviors. ...
- Virtual Reality. ...
- Artificial Intelligence. ...
- Blockchain Technology. ...
- Autonomous Vehicles. ...
- Augmented Reality. ...
- Biotechnology. ...
- Fintech Technology/Finance Technology.
Looking at the most common resolutions, health is a clear thread running through most of them. Almost half said they wanted to exercise more in 2022, while eating healthier and losing weight were also the choice of 4 in ten respondents.
What is the number one New Year's resolution for 2022? ›New Year's resolution of Americans for 2022
About 23 percent of Americans wanted to start 2022 by living healthier, which was the most popular New Year's resolution. In addition, personal improvement or happiness was the year's resolution for 21 percent of Americans. Resolution makers, resolution keepers?
Buy now, pay later (BNPL) will continue to grow. Open banking will dominate the future. Cloud-native systems will replace legacy alternatives. Artificial intelligence (AI) and machine learning (ML) will increase in importance.
What are the 4 major trends that are affecting the financial environment? ›
These factors are government, international transactions, speculation and expectation, and supply and demand.
The next big thing in finance is fintech, which is to say, how finance and the world of finance grapples with and integrates all of these advances in technology that will impact how individuals save, how they invest, and how they interact with all aspects of their finances.
What are current trends in corporate finance? ›With the development of Robotic Process Automation (RPA), artificial intelligence (AI), and machine learning, digitisation in corporate finance is taking on a whole new meaning. These tools can process transactions, audit processes, monitor compliance, etc.
- Artificial Intelligence. Artificial intelligence (AI) is the next big breakthrough in the digital era. ...
- Unstructured Data Collection. ...
- Virtual Data Rooms. ...
- Blockchain. ...
- Relationship Management / Relationship Intelligence.
Subscribe Now Get The Financial Brand's FREE Email Newsletter Advanced, predictive artificial intelligence, robotic branch assistants and helping consumers secure digital goods in the metaverse are among the top bank technology trends financial institutions must consider as they begin to set their priorities for 2023.
The covid-19 crisis will come on top of the pre-crisis challenges of the traditional banking business model: revenue pressure and low profitability (low levels of interest rates and higher levels of capital), tighter regulation (after previous financial crisis), and increasing competition from shadow banks and new ...
What are the biggest financial concerns? ›- 1: Monthly spending exceeds income. ...
- 2: You can't get out from under car payments. ...
- 3: You carry a credit card balance every month. ...
- 4: You don't have an emergency fund. ...
- Your rent keeps going up. ...
- A new baby brings unexpected costs. ...
- You owe the hospital for medical care.
The five trends that they discussed are: data analytics, digitization, security, mobility, and regulatory challenges. We wanted to discuss not only what each of these challenges were, but how the crowd is uniquely suited to help banks and other financial institutions solve some of these problems.
What are the latest banking innovations? ›Robotic Process Automation. One of the trends in banking for 2021 is RPA which can be used by financial institutions to reduce costs, minimize human errors, save time and offer customers a more efficient service.
Mobile banking has become the go-to method for users to make deposits, account transfers, and monitor their spendings and earnings—and a key differentiator for banking leaders.
What will replace ATMs in the future? ›
There is now a broad swath of terms that financial institutions and fintechs coined to describe new self-service banking technologies: ITMs, video tellers, IBKs, PTMs, VTMs, self-service kiosks, self-service technologies. And of course ATMs.
| Rank | Bank | Country |
|---|---|---|
| 1 | KfW | Germany |
| 2 | Zürcher Kantonalbank | Switzerland |
| 3 | Landwirtschaftliche Rentenbank | Germany |
| 4 | L-Bank | Germany |
Chase, part of JPMorgan Chase & Co., is the largest bank by asset size in the U.S., including deposits from checking and savings and other accounts, plus loans, mortgages and more.
The Lifestory Research 2022 America's Most Trusted® Bank Study found Chase the most trusted bank. The America's Most Trusted® Study is a large-scale survey of consumers in the United States that seeks to identify the brands that people trust the most within their respective industries.
What is future scope in banking? ›The banking sector mainly recruits for three posts- Clerical cadre, Management and Trainee (MT), and Probationary Officer (PO). Other opportunities in this career path are Financial Service Representatives, Bank tellers, Bill and Account Collectors, Loan Officers, Financial Managers, Bookkeeping, and Audit Clerks.
High-yield savings account
A high-yield savings account is an attractive option for those who want to grow their savings while having easy access to the money, just in case. To put the earnings into perspective, the yields on traditional savings accounts are typically very low, as little as 0.01 percent APY.
Analysts see big upside for these undervalued bank stocks.
After a big year in 2021 and a hot start to 2022, bank stocks have lagged in recent months. Aggressive Federal Reserve interest rate hikes could set up bank stocks for outsize earnings growth in the next couple of years.
- Paying your bills after the payment due date. ...
- Missing your credit card or loan payments altogether. ...
- Relying on overtime to cover your debt related expenses. ...
- Borrowing from family members to make your monthly debt payments. ...
- Skipping one credit card bill to pay another.
- 1 - Access to Funding. ...
- 2 - Debt Repayment. ...
- 3 - Inconsistent Cash Flow. ...
- 4 - Emergency Expenditures. ...
- 5 - Reporting. ...
- 6 - Taxes.
- Social Welfare.
- Financial Inclusion.
- Financial Literacy.
- Mastering Personal Finance.
- Factors that Influence Financial Planning.
What are the 7 P's in banking services? ›
The seven 'Ps' are: product, price, promotion, place, people, processes and physical evidence.
- Checks. can be used to pay bills, give money in person without cash, or send money through the mail or electronically.
- Online Bill Pay. ...
- Debit Cards. ...
- Account Transfers. ...
- Automatic Teller Machine. ...
- Mobile Banking.
- Banking.
- Professional Advisory.
- Wealth Management.
- Mutual Funds.
- Insurance.
- Stock Market.
- Treasury/Debt Instruments.
- Tax/Audit Consulting.
- Accounting.
- Business banking.
- Funds and investments.
- Insurance.
- Investment banking.
- Life assurance and pensions.
- Regulated advice.
- Retail banking.
The income earned in the present Financial Year (FY) 2022-23 is the income earned from April 1, 2022, to March 31, 2023.
Digital Banking
These entities are known as neobanks, who take innovation in financial services to a level where customers are provided with the power to control their finances, pay bills instantly, manage outgo, and access merchandise in just a few clicks.
Today, paying for purchases with tailored, flexible buy now, pay later plans–for even small ticket items–is poised to become one of the fastest-growing payment trends in 2022. 65% of merchants plan to add buy now, pay later as a payment method in 2022.
- The Savings Function: As already stated, public savings find their way into the hands of those in production through the financial system. ...
- Liquidity Function: ...
- Payment Function: ...
- Risk Function: ...
- Policy Function:
Frictionless payments provide a competitive edge to the financial institutions. Banks can provide efficient payment transaction experience by streamlining their services and utilising full potential of the emerging technologies such as blockchain, smart contracts, tokenisation, Internet of things (IoT), among others.
If your financial year is from April 1, 2022 to March 31, 2023, it is known as FY 2022-23.
What will be the assessment year for financial year 2022 23? ›
Assessment year is the year just succeeding the Financial Year. For e.g. Income earned in the current Financial Year 2020-21 (i.e. from 1st April 2020 to 31st March 2021) will become taxable in Assessment Year 2021-22 (i.e. from 1st April 2021 to 31st March 2022).
The 2023 financial year in Australia starts on 1 July 2022 and ends on 30 June 2023. The financial year for tax purposes for individuals starts on 1st July and ends on 30 June of the following year.
What is the best innovation in 2022? ›- 6 Distributed Companies.
- 7 Low-Code Services.
- 8 Decision Intelligence.
- 9 Total Experience (TX)
- 10 Computer Vision and Pattern Recognition.
- 11 Data Fabric.
- 12 Sustainable Technology Trends.
- 13 NFT (Non-Fungible Tokens) with AI.
Blockchain
Blockchain is one of the most innovative Emerging Technologies in the Financial Services Industry. This term is mostly used in the context of cryptocurrency. Companies can use blockchain technology to protect data, verify and identity, record transactions, sign contracts, and improve traceability.
The payments industry is poised for significant growth over the coming five years; we expect an average annual revenue growth rate of 9 percent, exceeding the already-healthy prepandemic long-term trajectory of 6 to 7 percent.
Innovative technology is fueling new business opportunities for payment enablers. Electronic payments have come a long way since the days of magnetic strips and swiping your card at checkout. Increasingly, you don't even need to carry a physical card.
How do you pay in the metaverse? ›The metaverse is still in its early stages, so there isn't a single payment system that's been widely adopted. However, most payment systems work either with cryptocurrencies or with normal fiat currencies.