After 2020 threw the entire world into a frenzy, the economy felt the brunt of the blow. Understandably, this course of events shined a scrutinizing light upon the world of finance.
Given the importance of social distancing, it was no surprise that digitization requirements got kicked up several notches industry-wide.
In fact, more industry-based institutions than ever seem immersed in the technological revolution. No matter the financial company, it seems they’ve rooted the bulk of their services and products in apps, software, data, and analytics.
During the rest of 2021, will industry behaviors continue moving in this tech-based direction?
As shown by the trends discussed below, it does appear the financial services space will continue to leap head-first into the digital revolution:
Enhanced Data Core Systems
2020 taught the financial services industry a hard lesson about its infrastructure and existing architecture planning assumptions. Namely, the systems weren’t built to handle the rapidly increased volumes, initially crumbling beneath the weight.
Bottlenecks occurred due to additional relief programs (e.g., Payment Protection Program (PPP)). These placed tremendous demand upon systems. Unfortunately, document processing, manual reviews, and approvals couldn’t keep up.
Lenders struggled because of lagging legacy underwriting and risk management that failed to meet small/medium businesses’ rising demands. This led to data and information moving slowly, hindering companies’ abilities to garner insights and respond to market needs.
The pandemic-related challenges have highlighted the importance of modern, agile, scalable, secure, and resilient technology infrastructures. Come 2021, after all the lessons learned, these advancements will become more the norm than ever.
Digitally Focused Banking
Long before people were afraid of the associated germs with hand-to-hand cash transactions, contactless payments were the norm across Europe and Asia.
And due to the pandemic, there was nearly a 30% increase in US businesses seeing more contactless payments from customers. Expect this trend to grow during 2021–considering that around 3-quarters of global consumers say they’ll keep using contactless payment after COVID.
Strengthening this hypothesis is the expected 11.7% worldwide CAGR in the contactless payment market size from 2020 to 2025.
Most relevantly, this shift will be reflected in banks.
Last year, mobile apps were relied on by 44% of retail banking customers. During this time, financial tech firms and traditional institutions either improved current financial apps or launched new ones. These advancements were meant to meet consumer demands.
For instance, the apps mentioned above helped with monitoring government-sponsored food allowances. Plus, the new tech aided in accessing early wages. This all led to a skyrocketing in transaction volumes as app downloads increased.
The landscape will only continue to move in this direction come 2021. Expect continued improvements in data and analytics tools, artificial intelligence, and digital platforms to be more prevalent across financial services.
Personalized Insurance
Faced with an enormous health crisis and a murky economic future in 2020, insurance companies transformed the way they do business. Furthermore, they did it in seemingly the blink of an eye, offering a sense of stability to consumers.
Many providers offered reduced rates for the decreased driving that was required last year. Also, health insurance organizations better-aligned premiums to match the drop in non-essential medical procedures.
Products appealing most to the market are ones catered to unique customer needs. Thus, hyper-personalization will continue to be prevalent throughout the industry in 2021.
As shown by the example above, customers will be most interested in auto insurance based on miles driven. Beyond that, home insurance should be integrated with connected homes to minimize potential damage from leaks or fires.
At the heart of this growing trend will be a technology infrastructure, allowing for insights derived from multitudes of streaming data. Moreover, this analysis should be offered in real-time.
Throughout this year, expect AI-powered data and analytics to enable hyper-personalized insurance life cycles. This includes all facets of the process, whether sales, underwriting, claims, management, or support.
At Preston & Company, we have access to an exceptional financial services talent pool on top of the latest trends. Contact us today if you’re interested in recruiting candidates with state-of-the-art skill sets crafted and honed for the new normal.
