As COVID-19 continued to be pervasive in 2021 and the world navigated numerous lockdowns, the financial services industry invested in technology and innovation at a higher rate than ever before.
We saw firms transform the way they interact and engage with their customers and employees, deploy new operating models to accommodate extreme end-to-end digitisation internally and with ecosystem partners, and embrace new ways of doing business (e.g., platform business models) and new types of products (e.g., digital assets).
However, with the introduction of vaccines and our world striving to get to the next normal, will these trends continue?
Here are three of the most important trends we will see in 2022:
Changing customer behaviors
The emergence of platform players has changed the way customers go about their daily activities and the way companies conduct their business. They leverage the power of platform-enabled ecosystems to reduce friction between customer value chains within and across industries like housing, commerce, mobility, communications, media, travel, health, and others.
By controlling the customer interface, these platform companies can influence financial services use. For example, a customer seeking to book a vacation on a company’s platform can have the payment, insurance, and a loan bundled into the value proposition through a partner financial institution.
These platform companies reduce the cost of financial services by regularly switching to lower cost financial institutions, further commoditising the industry products. Many of these players are now building their own financial services capabilities to embed into their platform offerings.
With proprietary access to more customer data points, they arguably are able to make better decisions on product offerings or credit decisions.
Rising cybersecurity risks prompting an increased focus by regulators
Accelerated digital adaptation, expanding partner ecosystems, and new business and operating models have fundamentally changed the way financial institutions are built and run. While this has helped financial institutions improve operational efficiency and customer engagement, it has also raised concerns on the resiliency of these new models and the opportunity for security breaches.
This has gained the attention of regulators around the world, with a heightened concern for highly regulated industries, like financial services, in their ability to respond to escalating shocks driven by security breaches and uncertain economic conditions. In 2022, this will lead to regulators enacting new laws that improve resiliency and security as well as modernise infrastructure.
Investment in artificial intelligence (AI), with an eye toward ethical practices
AI has transformed industries around the world. The financial services industry specifically is investing in technologies that transform their data environments and accelerate the integration of AI capabilities into their operations to enhance customer experience, improve operational efficiency, and reduce fraud.
In the year ahead, we will see financial institutions continue to accelerate the use of AI, while also considering ethical aspects that integrate trust and transparency into the technology. This can be done in a few ways, including:
- Promoting trustworthy behaviors within the organisation by implementing governing boards and guidelines that all employees must follow – from engineers to policy advisors.
- Investing in diversity in datasets, practitioners, and partner ecosystems. This is particularly important as we see partner ecosystems growing in importance in the year ahead, helping organisations to develop more open architectures and improve risk mitigation.
This past year has demonstrated that today’s customer wants more personalisation, digitisation, and choice in how financial services are accessed and consumed, which has, in turn, impacted financial firms in how they manage their operations.
In 2022, this trend will only continue to accelerate as firms balance their investment in technology with the associated ethical and security risks.
About the authors:
Anthony Lipp is global strategy leader, banking and financial markets at IBM. Before IBM, he served in leadership roles with McKinsey & Co. and PwC.
Paolo Sironi is global research leader, banking and financial markets at IBM Consulting, the Institute for Business Value. He is also an author and former quantitative risk manager and start-up entrepreneur.