Dmitry Dolgorukov is the Co-Founder and CRO of HES Fintech, a leader in providing financial institutions with intelligent lending platforms.
In the past couple of years, the finance industry has experienced changes like never before. In 2020, companies and businesses scrambled to adjust to what was known as the “new normal” as the world reacted to the global pandemic. Last year marked the acceleration of digital transformation. Now, in Q1 2022, these changes will solidify into new best practices. So, what should you take away to ensure your company continues to meet market demand and thrive?
Remote working, decentralization and digitization are just some of the trends that are set to shape how finance professionals do business in 2022. But how will they look in practice? Here I’ll review some of the top finance industry shifts that companies need to know for this year.
Brand and reputation are everything.
One of the most exciting changes to come out of the past few challenging years is the drive toward more human-centered businesses. Research shows that younger generations are more focused on sustainability than ever. So much so that 73% of Gen Zers and 68% of millennials are willing to spend more on sustainable services.
Reputation matters, and consumers are demanding the companies they use take more responsibility for the services they offer.
Statistics suggest financial providers aren’t doing as well in this aspect as they’d like to think. When surveyed, just 24% of respondents stated they would share their data with their bank, while 28% said their trust levels were decreasing. Thirty-nine percent wanted more transparency, and a significant 76% told of a crisis in consumer trust.
What this indicates is that greater innovation and the emergence of new fintechs with competitive offers have shaken the status quo of the finance industry. Consumers are demanding more not just in terms of product offerings but in business practices and transparency, too.
AI and ML are continuing to gain traction.
Bringing these demands to fruition will take time and innovation. So how can brands engage artificial intelligence (AI) and machine learning (ML) effectively to get tangible results? With the potential to deliver an annual value of $1 trillion to the banking industry, AI and ML adoption is showing no signs of slowing down.
These aren’t just on-paper developments, either. In a 2020 McKinsey survey of almost 2,400 professionals, 50% of respondents said their companies had already adopted AI in one or more business areas. Conversely, 34% of respondents from not high-performing companies said their senior management was committed to the strategy, suggesting that not all executives are convinced of its viability.
If you’re in that 34%, it’s likely you already know the benefits and challenges of onboarding AI solutions. However, if you fall into the other 66%, let’s look at some common AI practices today and what they can mean for your business tomorrow.
• Risk management: AI can empower smart risk management. Automating the data analytics process, you can unlock a wealth of insights into your business’s health and viability. Backed by real data, you can lower risks and build a more effective business structure.
• Point-of-sale (POS): POS lending is an emerging trend linked to embedded finance, more on that later. It uses AI technology to complete financial transactions at the point of service. For example, this may mean quick lending approvals for buy now, pay later clients, on-the-spot insurance quotes, or something similar aimed at streamlining the purchase process and boosting consumer satisfaction.
• Personalized services: Businesses can use AI to analyze data faster than ever before and at much higher volumes. In turn, this means companies can utilize this data to personalize their offerings, either to individuals or specific groups. For example, a company could reduce insurance premiums for careful drivers, or lending providers could provide lower rates for responsible clients.
Services will become more connected.
That said, it’s not just about the technologies’ capabilities. AI and ML are tools for realizing ongoing trends. One of the biggest ones in recent years is the concept of embedded finance, which is working to turn almost every business into a fintech company by integrating lending and other financial technology into their web and mobile apps. Perhaps one of the best examples of this is Klarna, which has been successfully integrated into companies worldwide to deliver buy now, pay later financing. Such technologies simplify processes and work to build customer loyalty, which helps businesses thrive.
Similar changes are occurring in the banking world. As the competition between neobanks and traditional lenders intensifies, open banking is expanding to increase fairness to clients and ensure equality in service provision. In 2020, over 24 million people used open banking services, and this is set to grow in the next couple of years, indicating that the future is becoming more connected than ever before.
It’s a brand-new world (so get used to that).
What I’m seeing is closer cooperation between financial providers, businesses and their clients. Embedded technologies are paving the way to a more connected reality. They will be a crucial focal point for investments this year and in the future for traditional financial providers, fintechs and businesses.
For companies looking to the future, it’s essential they concentrate not only on the technology they onboard, also known as digital transformation, but how these tools can create impactful solutions for their clients. By taking a human-centered strategic approach, they can improve consumer loyalty and ROI on tech investments in years to come.
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