If you've been peering into the future, you've probably noticed four significant financial sector trends emerge. One is globalization, which will lead to a rise in the number of nations with a single currency. The rise of digital banking and the popularity of cryptocurrencies is another factor. Although these trends are not new, they are expected to continue influencing the financial services business for some years.
Moreover, financial organizations are increasingly utilizing data to improve their client service. In addition to delivering superior customer service, banks may increase their profitability by gaining a deeper understanding of consumer requirements and behavior. According to PwC, the Open Banking revenue opportunity may reach £7.2 billion by 2022, and 71% of SMBs anticipate adopting the technology. Financial institutions are beginning to capitalize on this potential; by the beginning of 2019, over half of banks have created an Open Banking API. Several others want to do so by 2022. Additionally, political action has added to the momentum.
Increasing interest rates are a significant issue impacting the financial industry. Increasing interest rates will improve bank earnings but also raise corporate expenses. Rising interest rates will increase household debt, which will have a negative impact on the economy. Businesses and people may struggle to absorb these extra expenses. In addition, increased interest rates will raise the probability of delinquency and default. Banks will attempt to reduce operational inefficiencies, but they will cut too fast or fail to move swiftly and comprehensively. This will impact their business models.
The expansion of digital applications is compelling banks to adopt new customer service strategies. Customers will rely on digital tools for the majority of their transactions in the future. Technology makes this achievable. Banks must decide whether they wish to collaborate or compete with these digital technologies. As a result, customers are requesting greater openness and improved services, which come with associated costs and benefits. Also, the digitalization of money is generating vast data streams that will be evaluated to give insights on spending habits and cross-sell other financial goods.
Although many additional variables are expected to influence the future of the financial industry over the next 12 months, five developments are anticipated to have the most impact. Although you should be aware of all of these developments, you should take precautions now to safeguard your future. By using the most recent technical advancements and cooperating with new technology partners, you will be able to adapt to the changes and remain competitive.
Automation is altering the characteristics of financial services. Human labor is being replaced by automation, and several sectors are responding to digital change. Financial services will be revolutionized by blockchain technology, and artificial intelligence will transform digital experience platforms. Hybrid cloud solutions give accessibility, privacy, and real-time integration of intelligent data. Furthermore, intelligent data analysis will revolutionize bank websites, which will have a direct influence on client experiences and loyalty.
Experience with customers is the new competitive difference for financial services firms. Consumers today want businesses to give an amazing experience that helps them feel confident in their decisions. By providing a satisfying experience, they will increase customer loyalty and market share. Customers will continue to pick your firm as their financial services supplier of choice if you give a unique and customized experience. Therefore, take use of the chances and benefits it provides without delay.
Focus of the financial services business is on digitization and adoption of new technology. These advances aid businesses in attaining operational efficiency, speed-to-market, and greater customer service. While the majority of banks continue to rely on branch-based services, the expansion of digital public goods and digital currencies will make this business more competitive. Customers anticipate that roughly 60 percent of their banking needs will be met online by 2024.
The blockchain is another new technology that is transforming the financial industry. Although the technology is still in its infancy, large institutions such as JP Morgan Chase are investing in it as a mainstream option. Blockchain is one of the most promising technologies for financial institutions despite its low implementation rate. In addition, the technology is still in its infancy, allowing $10 billion to be saved throughout the process of clearing transactions and settling accounts.