The banking and finance industry has faced massive challenges in recent years due to the rise of FinTech companies, which have offered real-time, 24/7 solutions that appeal to many consumers, particularly digitally savvy younger generations. Despite this pressure, banks have deployed technology and displayed impressive agility to continue to serve customers, maintain productivity and reassure regulators.
PWC has reported that 88% of incumbent financial institutions believe that part of their business will be lost to standalone FinTech companies in the next five years(1). The following are ten key industry trends that will shape the future of banking and finance.
The impact of rising rates on product innovation
As interest rates increase, banks will be motivated to introduce new and innovative financial products to attract and retain customers. Banks can differentiate themselves from the competition by providing a suite of services and benefits, similar to those in other industries such as Amazon Prime. The rise in interest rates will act as a catalyst for banks to take advantage of new technology and think creatively about the services they offer, leading to the development of new and innovative financial products that meet the changing needs of consumers.
The renewed importance of branches
In recent years, many banks have shifted their focus towards digital channels and online services, but without in-person interaction, many banks have struggled to maintain close relationships with their customers. However, 2023 is set to see a renewed focus on branches and the role they play in delivering personal, face-to-face banking services. Branches will be transformed into community hubs that provide a range of financial services, enabling banks to build stronger customer relationships, provide more personalised experiences and increase customer loyalty. The branch will once again become an integral part of the banking and finance landscape, providing customers with convenient and accessible services they need to manage their finances.
Discovering the metaverse potential
The rise of the metaverse has the potential to completely change the game for the banking and finance industry. Banks will have to navigate new and unfamiliar territory, but the metaverse presents an exciting opportunity for banks to offer immersive and innovative financial services and experiences to their customers. As the metaverse continues to evolve, banks that embrace this new technology will have the opportunity to stay ahead of the curve and deliver the financial services of the future.
Strategies for attracting and retaining top talent
The importance of the right culture and talent cannot be overstated as the banking and finance industry continues to evolve and change. Banks that prioritise the development of a positive and supportive work culture, as well as offering competitive benefits and opportunities for growth and development, will be better positioned to attract and retain the best talent. This will lead to improved customer experiences, increased innovation and overall success in the highly competitive world of banking and finance.
Managing risk in an evolving landscape
Banks that focus on helping their customers solve their problems, rather than solely on collections, will be better positioned to outperform their peers. By taking a customer-centric approach, banks can build stronger relationships and increase customer loyalty, even in the face of new risks. This can involve offering financial education and resources, developing tailored financial solutions and providing support during difficult financial times.
Treating data as a product
The banking and finance industry is recognising the increasing value of data as an asset. Traditionally viewed as a means to an end, a shift towards treating data as a product has the potential to revolutionise the industry. Banks that invest in the technology and infrastructure to manage, analyse and utilise data will have a significant advantage over their competitors. By leveraging data to provide personalised financial services, optimise operational efficiency and make informed business decisions, banks can enhance the customer experience and maintain a competitive edge. Those organisations that view data as a valuable resource to fuel growth and success will shape the future of banking and finance.
The evolving role of FinTechs: from disruptors to enablers
Although FinTechs initially disrupted the traditional banking and finance industry, their role is now evolving towards becoming enablers. Incumbent banks have the opportunity to reestablish themselves as the primary owners of banking, but to do so, they need to offer FinTech-like services at reasonable prices. Through partnerships with FinTechs, banks can quickly and efficiently introduce innovative financial services and technologies to the market, improving the customer experience and keeping pace with a rapidly changing industry. The relationship between banks and FinTechs has shifted from one of competition to one of collaboration and mutual benefit.
Tackling the climate crisis
The climate crisis is an urgent challenge that requires a collective effort from all industries, including banking and finance. Although banks alone cannot achieve net-zero emissions, the pressure to address the issue is mounting. In 2023, the focus will be on finding a consensus on how banks can contribute to mitigating the impact of the climate crisis. This can involve offering green financing and investment products, reducing emissions in their operations and collaborating with organisations to drive sustainable solutions. By embracing their environmental responsibility, banks can not only mitigate the risks associated with the climate crisis but also position themselves as responsible and forward-thinking institutions.
In today's age of big tech and super-apps, banks recognise the importance of addressing their customers' overall well-being, rather than solely focusing on their financial journeys. The shift to life-centricity involves developing financial products and services that cater to the broader needs and goals of customers, beyond their immediate financial needs. By prioritising the total well-being of their customers, banks can foster deeper and more meaningful relationships, improve customer satisfaction and loyalty and gain a better understanding of their customer's needs and behaviours.
Updating core systems for modernisation
The banking and finance industry requires continuous modernisation of technology, but 2023 is expected to mark the beginning of a crucial period for core modernisation. Technological advancements, increased competition and evolving customer expectations have created a convergence of forces driving banks to transform their outdated systems and processes. This modernisation effort involves updating and transforming legacy systems, increasing operational efficiency and enhancing the overall customer experience. By embracing this change, banks can gain a competitive edge, improve risk management and better serve their customers.
Leveraging outsourcing to adapt to emerging trends
Outsourcing is a resourcing strategy that can help banks adapt to the rapid changes and emerging trends in the industry. By outsourcing certain processes such as operations and technology, banks can access specialised expertise, advanced technology and systems and improve operational efficiency. It also allows them to respond quickly and cost-effectively to changing customer needs and market conditions.
For instance, core modernisation is a major trend in banking, and outsourcing can provide banks with the resources and expertise to modernise their core systems and processes without significant investments in internal resources. By outsourcing, banks can focus on their core competencies such as risk management, customer engagement and product innovation. In 2023, outsourcing will continue to be a crucial strategy for banks to achieve their goals and navigate the changing banking and finance landscape.
As financial institutions face pressure to cut costs and improve efficiency, many are partnering with outsourcing providers that have the experience, technology and talent to deliver results. The global BFSI outsourcing market was valued at $85 billion in 2020 and is projected to reach nearly $175 billion by 2028(2). About 80% of retail banks already outsource at least one aspect of their business operations(3).
Outsourcing in the banking industry offers numerous benefits, including cost savings by reducing staff employment costs, and accessing a global talent pool of skilled and committed workers. Many outsourcing hotspots, such as the Philippines, have a large pool of tech-savvy workers that operate in a fiscal and financial system almost identical to conditions in Western countries and are supported by dynamic financial tracking and reporting tools. Outsourcing also increases productivity by enabling in-house staff to focus on higher-value tasks, such as delivering better customer experiences, creating new products or managing compliance risk.
What banking and finance roles can you outsource?