What does 2022 hold for the financial services industry? Hear from the experts…

It’s no secret that the financial services industry experienced disruption over the past year. The COVID-19 pandemic exposed many significant cracks in the industry. Ongoing lockdowns, high-street closures and the digital acceleration meant that many traditional high-street banks struggled. But, at the same time, other digital banks thrived.

Now, as we move into a post-pandemic environment, what will 2022 bring for the financial services industry? From the rise of online banking and its impact on traditional banks to the increasing importance of technology and security, we spoke to a few financial services experts about what those in the industry can expect to see next year and beyond.

Hans Tesselaar, Executive Director, BIAN

Over the past few years, the financial services sector realised without the comprehensive digital infrastructure necessary for today’s environment, they were – and remain – unable to bring services to market as quickly and efficiently as they would like. This will not change in 2022. Banks will continue to have issues with core legacy infrastructure as customers continue to demand digital services that help them manage their financial well-being. Failing to provide these services may force customers to take their business elsewhere.

In 2022, banks will have to focus on overcoming the extensive use of legacy technology which prevents them from bringing new services to life. As part of this, banks will need to combat the lack of industry standards. The lack of industry standards currently plaguing the financial services industry means that banks continue to be restricted by choosing partners based on their communication protocol and the way they would work alongside their existing ecosystem, instead of functionality and the way they’re able to transform the bank.

A ‘Coreless Banking Platform’ can support banks in overcoming this, and this is something banks will need to emphasise in 2022. This will empower banks to select the software vendors required to obtain the best-of-breed for each application area without worrying too much about interoperability. Furthermore, by translating each proprietary message into one standard message model, communication between services is significantly enhanced, ensuring that each solution seamlessly connects and exchanges standardized data. A system that can be reused and utilised from day one, and the ability to be used by other institutions, will mean the opportunities to connect the financial services industry are endless.

Brett Beranek, VP and GM of our Security & Biometrics business, Nuance

Financial services organisations of all sizes have seen digital interactions and call volumes rise as customers looked for ways to deal with the financial uncertainty created by the pandemic.

Like all brands, banks must offer great customer experiences to remain competitive. But the nature of their business means security must always be a top priority. Traditionally, adding security meant adding friction to the customer and agent experience, so moving forward financial institutions will prioritise investments in technologies that strengthen security and the customer experience simultaneously.

Traditional, knowledge-based authentication creates a huge amount of friction for customers and very little friction for fraudsters. Most of us struggle to remember all our PINS, passwords, and security question answers, but fraudsters have all that information in front of them when they get in touch. We’re already seeing banks get immense value from biometrics solutions. Over the next 12 months, I expect to see many more financial services organisations following in their footsteps.

Steve Barrett, Senior Vice President, International Operations at Delphix  

The financial services (FS) sector is currently undergoing a massive transformation. With the adoption of new digital habits, consumers expect greater convenience, choice, and flexibility in their banking relationships. At the same time, concerted regulatory pressure to encourage innovation and drive competition in banking has accelerated FS organisations’ investment in Open Banking initiatives worldwide. The race to leverage customer data and deliver superior next-gen services and experiences will only heat up as we enter 2022.

Connecting banks, third parties and technical providers – enabling them to share authorised data through Open Banking – will bring more competition and innovation to the sector, which, in turn, will lead to better products and services. But using data for innovation can be challenging because it often exists across many disparate systems, siloed throughout a business in different departments. This makes it extremely difficult to safely, efficiently and effectively deliver it to those who need it to glean any valuable insights or drive new projects. Broad reliance on legacy infrastructure and core banking systems in need of modernisation compound this issue.

Next year, FS organisations will increasingly turn towards DevOps as a means of delivering compliant data at speed via an API-driven data platform. By combining data delivery and compliance across multi-generational systems, these platforms automate, scale and optimise testing while mitigating compliance risks. Ultimately, they enable those working in the sector to unlock the power of their data and step into the Open Banking revolution.

Monica Hovsepian, Global Industry Strategist, Financial Services, OpenText

The pandemic has had a major impact and it’s still not over.  We are seeing various countries still suffer, such as Germany, Austria, and more. Things are still very fluid and there is a lot of uncertainty. Reading the tealeaves, here are my predictions, in no particular order.

Firstly, continued investment on employee engagements and the talent pool. Ensuring that the employees have the right tools to engage, service and conduct their day-to-day jobs is critical.  Simplifying processes, providing insights, digitizing are all part of the overall concept that has to be undertaken.  By doing so, FSIs can ensure that employees have the means to service customers and deliver optimal engagements each and every time.

Secondly, we need to be customer first and prioritize delivering optimal customer experiences. Today’s customers demand and expect exceptional service from everyone they engage with and that includes their FSIs.  Exceptional service means engaging whenever and through whatever channel the customer prefers, with a consistent, personalised service, empathetic manner, and in a frictionless and seamless way.

Next, hyper automation and digital transformation will be a key trend. It is key to keep in mind, though, that this needs to occur inside the organization as well as externally for it to be successful. Putting integration capabilities into the forefront will also be a trend. This will ensure that there is a true customer 360-degree view across the enterprise, which will enable optimal employee engagements, exceptional customer experiences, and improved operational efficiencies.
Last but not least, reducing cyber risk, ensuring regulatory compliance and managing risk. Cyber-attacks grew by more than 240% during the pandemic and FSIs must be prepared. In compliance, nearly $1bn was issued in AML, KYC and data privacy fines during H1 2021, so remaining compliant must be part of the fabric of every FSI.

Michael Mansard, Principal Director – Subscription Strategy, Zuora

In 2022, the most successful FSI organisations will turn away from loss making services and the ingrained ‘freemium’ model, towards a new model; high-value customer subscriptions.

Subscription models – which charge customers a recurring fee at regular intervals to access a product or service – could enable FSI firms to grow beyond their core and maximise revenue from new digitally-powered offerings. At their heart, subscriptions are all about giving the customer what they want and increasing personalisation and customer loyalty. By analysing a substantial amount of usage data, businesses now have the opportunity to engage with their customer base with new, targeted and personalised services that adjust to match demand, whether it reflects in pricing, packaging or marketing strategies to drive long-term customer retention.

Doug Gorman, Trends Analyst, GWI

The number of new cryptocurrency investors has grown exponentially in the past few years. From its beginnings as a fringe digital phenomena, it has become a huge investment category in its own right. Many first-time investors have flocked to the market but this has brought challenges—in particular investor protection and education.

Until relatively recently, crypto investors were young internet users who are often easily influenced by social media and internet forums. However, this is shifting and we’re seeing older, more established investors buying and bringing with them a more traditional mindset. This is leading to a desire for regulation and, in fact, GWI insights show that around 46% of crypto investors are supportive of regulation, rising to more than 50% when we asked people already using cryptocurrencies more regularly for transactions.

However, this may take away some of the factors that made the asset class popular in the first place. Well over a third of current investors surveyed predicted regulation will result in more government surveillance and reduce privacy & anonymity in the market.

Governments and regulators are paying attention to this burgeoning market and a top trend to watch in 2022 will be how increased regulatory scrutiny affects cryptocurrencies and impacts the desirability and attractiveness of the market.

Petru Metzger, Head of Payments Delivery, Endava 

“The drive towards mobile has already seen developments like Apple Pay and Google Pay make payments from mobile devices routine. Now when it comes to payments, we’re seeing a transition from mobile to the Internet of Things (IoT).

As wearables become more prevalent, we can expect a surge in this segment as well as a host of other devices that will become enabled to make payments.

 IoT has seen us connect everything from cars to fridges to the internet and there’s an opportunity to help customers make purchases using them. Further enhancing the experience by adding voice-activation and even gestures will make payments even more natural and convenient.

There is no doubt that we will continue to see developments in the payments and fintech sector to meet evolving customer and consumer demands. We have seen incredibly fast development over the last five years, and this is set to continue at a rapid pace.

Generations that have grown up with contactless and swift online payment wherever they happen to be unlikely to be willing to go back to cash transactions. As we increasingly move into a cashless society, companies will have to keep up with consumer needs through further technological investment and innovation.

Payments is increasingly connecting consumers and businesses – a foundational capability that supports the future of enterprise.”

It’s no secret that the financial services industry experienced disruption over the past year. The COVID-19 pandemic exposed many significant cracks in the industry. Ongoing lockdowns, high-street closures and the digital acceleration meant that many traditional high-street banks struggled. But, at the same time, other digital banks thrived.

Now, as we move into a post-pandemic environment, what will 2022 bring for the financial services industry? From the rise of online banking and its impact on traditional banks to the increasing importance of technology and security, we spoke to a few financial services experts about what those in the industry can expect to see next year and beyond.

Hans Tesselaar, Executive Director, BIAN

Over the past few years, the financial services sector realised without the comprehensive digital infrastructure necessary for today’s environment, they were – and remain – unable to bring services to market as quickly and efficiently as they would like. This will not change in 2022. Banks will continue to have issues with core legacy infrastructure as customers continue to demand digital services that help them manage their financial well-being. Failing to provide these services may force customers to take their business elsewhere.

In 2022, banks will have to focus on overcoming the extensive use of legacy technology which prevents them from bringing new services to life. As part of this, banks will need to combat the lack of industry standards. The lack of industry standards currently plaguing the financial services industry means that banks continue to be restricted by choosing partners based on their communication protocol and the way they would work alongside their existing ecosystem, instead of functionality and the way they’re able to transform the bank.

A ‘Coreless Banking Platform’ can support banks in overcoming this, and this is something banks will need to emphasise in 2022. This will empower banks to select the software vendors required to obtain the best-of-breed for each application area without worrying too much about interoperability. Furthermore, by translating each proprietary message into one standard message model, communication between services is significantly enhanced, ensuring that each solution seamlessly connects and exchanges standardized data. A system that can be reused and utilised from day one, and the ability to be used by other institutions, will mean the opportunities to connect the financial services industry are endless.

Brett Beranek, VP and GM of our Security & Biometrics business, Nuance

Financial services organisations of all sizes have seen digital interactions and call volumes rise as customers looked for ways to deal with the financial uncertainty created by the pandemic.

Like all brands, banks must offer great customer experiences to remain competitive. But the nature of their business means security must always be a top priority. Traditionally, adding security meant adding friction to the customer and agent experience, so moving forward financial institutions will prioritise investments in technologies that strengthen security and the customer experience simultaneously.

Traditional, knowledge-based authentication creates a huge amount of friction for customers and very little friction for fraudsters. Most of us struggle to remember all our PINS, passwords, and security question answers, but fraudsters have all that information in front of them when they get in touch. We’re already seeing banks get immense value from biometrics solutions. Over the next 12 months, I expect to see many more financial services organisations following in their footsteps.

Steve Barrett, Senior Vice President, International Operations at Delphix  

The financial services (FS) sector is currently undergoing a massive transformation. With the adoption of new digital habits, consumers expect greater convenience, choice, and flexibility in their banking relationships. At the same time, concerted regulatory pressure to encourage innovation and drive competition in banking has accelerated FS organisations’ investment in Open Banking initiatives worldwide. The race to leverage customer data and deliver superior next-gen services and experiences will only heat up as we enter 2022.

Connecting banks, third parties and technical providers – enabling them to share authorised data through Open Banking – will bring more competition and innovation to the sector, which, in turn, will lead to better products and services. But using data for innovation can be challenging because it often exists across many disparate systems, siloed throughout a business in different departments. This makes it extremely difficult to safely, efficiently and effectively deliver it to those who need it to glean any valuable insights or drive new projects. Broad reliance on legacy infrastructure and core banking systems in need of modernisation compound this issue.

Next year, FS organisations will increasingly turn towards DevOps as a means of delivering compliant data at speed via an API-driven data platform. By combining data delivery and compliance across multi-generational systems, these platforms automate, scale and optimise testing while mitigating compliance risks. Ultimately, they enable those working in the sector to unlock the power of their data and step into the Open Banking revolution.

Monica Hovsepian, Global Industry Strategist, Financial Services, OpenText

The pandemic has had a major impact and it’s still not over.  We are seeing various countries still suffer, such as Germany, Austria, and more. Things are still very fluid and there is a lot of uncertainty. Reading the tealeaves, here are my predictions, in no particular order.

Firstly, continued investment on employee engagements and the talent pool. Ensuring that the employees have the right tools to engage, service and conduct their day-to-day jobs is critical.  Simplifying processes, providing insights, digitizing are all part of the overall concept that has to be undertaken.  By doing so, FSIs can ensure that employees have the means to service customers and deliver optimal engagements each and every time.

Secondly, we need to be customer first and prioritize delivering optimal customer experiences. Today’s customers demand and expect exceptional service from everyone they engage with and that includes their FSIs.  Exceptional service means engaging whenever and through whatever channel the customer prefers, with a consistent, personalised service, empathetic manner, and in a frictionless and seamless way.

Next, hyper automation and digital transformation will be a key trend. It is key to keep in mind, though, that this needs to occur inside the organization as well as externally for it to be successful. Putting integration capabilities into the forefront will also be a trend. This will ensure that there is a true customer 360-degree view across the enterprise, which will enable optimal employee engagements, exceptional customer experiences, and improved operational efficiencies.
Last but not least, reducing cyber risk, ensuring regulatory compliance and managing risk. Cyber-attacks grew by more than 240% during the pandemic and FSIs must be prepared. In compliance, nearly $1bn was issued in AML, KYC and data privacy fines during H1 2021, so remaining compliant must be part of the fabric of every FSI.

Michael Mansard, Principal Director – Subscription Strategy, Zuora

In 2022, the most successful FSI organisations will turn away from loss making services and the ingrained ‘freemium’ model, towards a new model; high-value customer subscriptions.

Subscription models – which charge customers a recurring fee at regular intervals to access a product or service – could enable FSI firms to grow beyond their core and maximise revenue from new digitally-powered offerings. At their heart, subscriptions are all about giving the customer what they want and increasing personalisation and customer loyalty. By analysing a substantial amount of usage data, businesses now have the opportunity to engage with their customer base with new, targeted and personalised services that adjust to match demand, whether it reflects in pricing, packaging or marketing strategies to drive long-term customer retention.

Doug Gorman, Trends Analyst, GWI

The number of new cryptocurrency investors has grown exponentially in the past few years. From its beginnings as a fringe digital phenomena, it has become a huge investment category in its own right. Many first-time investors have flocked to the market but this has brought challenges—in particular investor protection and education.

Until relatively recently, crypto investors were young internet users who are often easily influenced by social media and internet forums. However, this is shifting and we’re seeing older, more established investors buying and bringing with them a more traditional mindset. This is leading to a desire for regulation and, in fact, GWI insights show that around 46% of crypto investors are supportive of regulation, rising to more than 50% when we asked people already using cryptocurrencies more regularly for transactions.

However, this may take away some of the factors that made the asset class popular in the first place. Well over a third of current investors surveyed predicted regulation will result in more government surveillance and reduce privacy & anonymity in the market.

Governments and regulators are paying attention to this burgeoning market and a top trend to watch in 2022 will be how increased regulatory scrutiny affects cryptocurrencies and impacts the desirability and attractiveness of the market.

Petru Metzger, Head of Payments Delivery, Endava 

“The drive towards mobile has already seen developments like Apple Pay and Google Pay make payments from mobile devices routine. Now when it comes to payments, we’re seeing a transition from mobile to the Internet of Things (IoT).

As wearables become more prevalent, we can expect a surge in this segment as well as a host of other devices that will become enabled to make payments.

 IoT has seen us connect everything from cars to fridges to the internet and there’s an opportunity to help customers make purchases using them. Further enhancing the experience by adding voice-activation and even gestures will make payments even more natural and convenient.

There is no doubt that we will continue to see developments in the payments and fintech sector to meet evolving customer and consumer demands. We have seen incredibly fast development over the last five years, and this is set to continue at a rapid pace.

Generations that have grown up with contactless and swift online payment wherever they happen to be unlikely to be willing to go back to cash transactions. As we increasingly move into a cashless society, companies will have to keep up with consumer needs through further technological investment and innovation.

Payments is increasingly connecting consumers and businesses – a foundational capability that supports the future of enterprise.”