What Is the Future of Financial Services? 6 Trends to Follow
Major global upheavals have occurred in the last few years, significantly affecting the financial services landscape. After experiencing everything from a worldwide pandemic to supply chain disruptions, from increasing inflation and interest rates to geopolitical crises, institutions needed to adapt to change and resolve problems as they came quickly.
Financial services companies such as banks, insurers, wealth management firms and corporate finance service providers must continue to evolve and respond to similar challenges and other potential issues. They can accomplish this by learning to anticipate future uncertainties, continually keeping tabs on the concerns of increasingly tech-savvy consumers, and turning to technology to deliver better service and create more effective solutions that can help them maintain resilience in 2023 and beyond.
Here, we explore six prevailing financial industry trends that give us an exciting glimpse into the future of financial services.
1. Adopting cloud-based solutions
Technology can transform the future of banking in several ways. Banks can use cloud-based systems for storing, processing and analyzing data that provides greater insight into market trends and customer behavior and preferences.
Across the financial services field, cloud-based technology also brings the digitalization of products and services to the forefront. This can come in the form of online investment platforms, digital wallets, and mobile banking and money transfer apps, which can revolutionize customer experiences.
2. Tightening security
When financial services fall victim to cybercriminal tactics like money laundering, ATM skimming, and phishing or malware attacks, they lose more than money. They also get crucial data stolen through security breaches.
According to Flashpoint’s Risk Based Security division reports, finance and insurance firms across the globe experienced 566 data breaches as of December 9, 2022. This translates to over 254 million leaked records. No details could be gathered on exactly how the data was exposed, but 57% of the time, it was determined that the breaches were done through general hacking techniques.
With the rise in digital transactions and remote work, the financial services sector is becoming increasingly vigilant about investing in information security best practices and reporting criminal incidents.
3. Enforcing better fraud detection and prevention measures
The future of artificial intelligence in banking is looking bright because it offers excellent solutions for detecting and preventing instances of fraud.
- AI analyzes real-time transaction data to determine if a person is currently attempting any suspicious activity. This is a big step towards preventing fraud from actually being committed.
- Data analytics is being used to collectively go through customer data, transaction histories, and other external data sources to create a clear picture of a specific customer’s behavior. Suppose questionable activities cannot be identified from a single data source. In that case, using AI to scan multiple sources may be more effective at identifying a culprit that has committed fraud.
- AI is also helpful in harnessing behavioral biometric data analysis (such as facial or fingerprint recognition) combined with transaction data analysis to detect fraudulent activities.
4. Consumers demanding greater convenience and improved experiences
Younger, more tech-savvy consumers want everything quick and easy. Whenever they shop online, transfer funds, receive their salary, or subscribe to services, they are sure to remember which providers deliver the most mobile-friendly options. They will quickly switch to those if they find their current providers’ offerings too slow, ineffective and inconvenient overall.
Financial institutions are adapting to keep up with these consumers’ fast-paced lifestyles. The goal is to provide mobile wallets, online banking and money remittance services, and payroll solutions that help create flawless digital experiences anytime and anywhere.
5. Adopting greener initiatives
The financial services industry increasingly prioritizes implementing environmental, social and governance (ESG) initiatives to highlight their commitment to greater sustainability. Firms can employ measures such as reorganizing their operations and supply chain management practices to achieve net-zero carbon emissions. They can also offer green funds or loans so consumers can have eco-friendly options and contribute to a significantly reduced carbon footprint.
6. Leveraging predictive analytics
For investment firms, predictive analytics delivers valuable benefits when used for the following purposes:
- Quickly identifying potential risks
- Making better investment or lending decisions
- Marketing services to the right customers
- Enabling intelligent credit scoring
- Initiating proactive customer support before major problems arise
- Developing models for algorithmic trading (they analyze massive amounts of historical and real-time market data to predict future stock market movements)
Moving With the Times
What does the future of financial services look like? Being open to change always pays off when it comes to addressing global events, pinpointing consumer preferences, and reinforcing the integrity of the most utilized systems and processes. The above trends demonstrate how financial service providers remain keen to develop solutions that resolve the most pressing concerns. Such a transformation helps financial firms stay competitive, relevant, and essential.
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