The last year came with several uncertainties, exposing vulnerabilities in society and transforming how we do business. With the disruption to face-to-face services, the finance industry was forced to explore alternative, innovative ways to reach out and connect with customers.
Shifting from face-to-face services to alternative plans isn’t easy. Apart from the potential risk of losing existing customers, there are the added worries of complying with certain procedures and ensuring the service offered works for your users. With this in mind, several key challenges are facing the financial technology industry:
The shift in finance – the traditional finance industry has shifted dramatically as a consequence of the pandemic. In 2020, over 3,300 physical banks closed their doors in the United States. At the same time, we have witnessed a surge in challenger banks. At the beginning of 2020, only 4% of millennials and Gen Zs were prepared to use a challenger bank account as a primary one. By the end of 2020, this figure increased to 15%.
For financial providers, this means they will need to adapt and be prepared for a more diverse audience. Gone are the days of providing a one-size-fits-all solution. Instead, industry demand suggests that customers require bespoke services. One area to focus on is utilising technology solutions like big data and automation to ensure the services meet customer demands.
As the conventional banking industry changes, emerging industries like cryptocurrency are transforming too. Earlier this year witnessed a significant rise in bitcoin prices and other altcoins. The crypto industry is closely affiliated with blockchain technology and it is in this area where we may witness more changes. From smart contracts to trades, blockchain can offer security to traditional financial services and alternative markets. Reports suggest that by 2030, blockchain will impact global GDP in big ways.
At the same time regulators worldwide are focusing on new legislative solutions to make the financial industry more secure and create legislation for anti-money laundering in regards to blockchain assets. For financial solutions providers, this is the time to explore how services and technologies like this impact their industry and how to work with them in the future.
The Lending industry
At the beginning of the pandemic, many people experienced a financially unstable situation due to loss of employment, furlough or health-related issues. With a continued rise in online services and restrictions easing across the world, there has been an impact on the lending market. For customers, this could involve a shift from desire-focused lending to more needs-focused lending. This shift is associated with a decline in credit card searches and an increase in purchase finance and commercial lending, indicating borrowers are becoming more cautious and selective in their choosing loans and providers.
For traditional and alternative providers, a similar lesson resonates. It is important to consider the changing needs within the consumer market. Whether this translates into creating a smarter, more customer option or transferring to a digital platform, each service will vary. Whichever service you choose, it is essential to find one that works for your clients.
Today, the finance industry is in a transformation stage. Many traditional processes have been proven not to be as efficient or as reliable as previously thought, and the concept of how finance and lending have been changed significantly. The industry is still reshaping for the future and while it still isn’t completely clear what shape the industry will take, it is likely to be focused largely on data, new technology and prioritising the needs of customers.