<\/p>\n
The last two years have been a rollercoaster for the entire world, putting pressure on the society, economic models and industrial models for many sectors and players. The financial world hasn\u2019t been spared.<\/p>\n
Banks globally have played a crucial role in maintaining the economy by supporting several government and state initiatives. The banking industry also had to adapt to changes in consumer behaviours and provide responses to emerging needs in how we consume and use financial services.<\/p>\n
Like any “exit from the crisis,” 2022 promises to continue the transformation of financial institutions around the world. The last 24 months have \u00a0driven significant investments in new financial services capabilities and operating models. Let\u2019s take a look at eight major trends financial services companies will face in 2022.<\/p>\n
1. Economic Shifts<\/strong><\/p>\n After 2020, which was marked by a global economic crisis of unprecedented magnitude, 2021 was characterised by economic recovery. The return to economic growth was gradual and happened heterogeneously throughout the world.<\/p>\n In 2022, it\u2019s clear that central banks are focusing on fighting inflation and raising interest rates. This will result in a significant increase in financial movement (wealth management, brokerage, home equity, etc.), as well as opportunities for banks to grow profits after dealing with very low margins in years past. Banks that can be nimble and offer products and services that their clients want, while continuing to transform the back office will gain a competitive advantage.<\/p>\n There\u2019s also downside risk: Some federal and local aid will come to an end in the coming months in many countries, potentially driving up delinquency rates and credit losses. This can create tension between banks and borrowers. And, it has a knock-on impact in many industries (construction, automobile, etc.). How banks respond to this is critical. Proactively proposing hyper-personalised solutions will help them build customer confidence and trust \u2014 and it could even keep employee churn low.<\/p>\n 2. Demographic Shifts<\/strong><\/p>\n In 2022, banks and financial institutions also must shift to meet changing demographic needs. For the last decade, the industry focused its time and energy attracting and retaining Baby Boomers with traditional banking models. Now, we\u2019re probably facing the beginning of the next \u201cGreat\u00a0Wealth Transfer.\u201d<\/p>\n Where will this wealth go? The most likely recipients are Gen Xers – who have largely been the forgotten generation \u2014 stuck between inherited wealth decisions from aging boomers and banks that are focusing their energy to attract Millennials and Generation Z consumers with digital-native models. Even though Gen X trust their primary financial services provider, they\u2019re also technologically savvy and conformable using digital services. This could lead to a shift in digital banking.<\/p>\n This demographic shift not only affects customers but also employees. Aging populations in developed economies as well as the COVID-19 pandemic have created the \u201cGreat Resignation.\u201d Talent scarcity and the need to meet the values of Generation Z employees become front and centre in bank hiring practices, talent retention and work environment accommodations.<\/p>\n 3. The Year of the Human \u00a0<\/strong><\/p>\n Data and people are usually key elements to getting better outcomes in financial services. Humans are social; they want real-time, human-to-human contact and interactions. To be successful, banks should establish both digital and human interaction channels. According to experts, banking with empathy and banking with purpose were the most cited predictions for the sector in 2021 \u2014 and these will remain strong in 2022.<\/p>\n Bringing humanity back into the banking sector and putting empathy into action requires board and executive committees to think of new modalities and ways to do banking \u2014 often through technologies like cloud, artificial intelligence (AI) and machine learning. Connecting physical and digital will create a \u201cphygital\u201d banking model.<\/p>\n This will require banks to repurpose and continue to redesign branch networks. There is no one universal correct answer however to what these new connected channels look like. To illustrate this think about French consumer banks. Here, the model is: we\u2019re keeping the branches, but changing the role of the folks in them. We\u2019ll equip branch personnel with new training, connectivity technology, and put local humanity into digital channels.<\/p>\n In Germany, we see a completely different model emerging, e.g., Commerzbank in Germany. This includes close one-third of the branches and will consolidate, bankers, advisors and the traditional call centre into banking or \u201cberatungscenter.\u201d<\/p>\n 4. The Year of the Empowered Employee<\/strong><\/p>\n The Great Resignation that began in 2021 is expected to continue in 2022 and beyond. The pandemic has led to a shift in employee behaviours, expectations and how workers want to manage the work-life balance. And, while there are strong signs of a \u201creturn to work,\u201d banks still face tight market conditions this year.<\/p>\n Think \u201cfewer suits, more hoodies.\u201d This doesn\u2019t mean a focus on dress codes; it\u2019s a mindset. And it\u2019s the importance of work environments also reflecting how we live. Banks see the key competitors for top new talent \u2014 not as other banks \u2014 but Google or Microsoft or the tech start-up.<\/p>\n Traditional banks face competition from fintechs. They\u2019re under pressure to attract and retain talent. This year, banks will need to make different efforts for employee experience. They\u2019ll need to hire more people comfortable in the fintech environment \u2014 fewer suits and more hoodies. That also means skill development. There\u2019s an acceleration in digitizing the modern workplace, more collaborative and multichannel. What seemed unthinkable for advisors in branches only months ago is now a reality: video-advising or remote working.<\/p>\n 5. Environmental, Social and Governance Factors<\/strong><\/p>\n Environmental, social and governance (ESG) requirements are fundamental challenges for banks in an environment of low margins and increasing external operating and capital costs caused by regulations and headwinds from the COVID-19 crisis. Making this a priority in 2022 and beyond will have several benefits for the banking industry.<\/p>\n First, banks can acquire new customers, especially millennials, who are known to be socially and environmentally conscious. They\u2019ll typically endorse banks, investments and funds that have a demonstrable social and environmental focus. Banks need to support advisors to better know their customers and match with green finance investments.<\/p>\n Second, banks need to retain and attract employees. New generations, especially Generation Z employees, are more likely to choose workplaces that demonstrate a commitment to people and that focus on inclusion, diversity and sustainability. Placing employees at the heart of the bank\u2019s transformation toward more ESG-driven decisions will attract a younger workforce.<\/p>\n In addition, many banks have made it clear they intend to focus on green and sustainable finance. And a few have moved in that direction already. Expect initiatives in green finance to accelerate \u2014 and this means banks must be able to make better data-driven decisions to attract investors in all age demographics.<\/p>\n Finally, the banking industry\u2019s carbon footprint is at the centre of the equation. Banks are known for using extensive\u00a0 data centres to host servers for processing massive amounts of data. Moving to carbon neutrality means banks must adopt \u201cgreen\u201d technologies and instate appropriate policies on data retention.<\/p>\n 6. The Rise of Immediacy<\/strong><\/p>\n Financial services have transitioned from delivering products and services through physical distribution and traditional sales and marketing channels to a new customer experience that\u2019s driven by digital capabilities, convenience, and alignment to customers\u2019 lifestyles, needs and interests. As digital becomes mainstream, banks face a new paradigm where consumers expect immediate, contextualised and personalised solutions.<\/p>\n The notion of immediacy guides innovations for the consumer experience. Account onboarding, which typically was a complex process that takes days, moved to online during the pandemic. Peer-to-peer payments have also been at the forefront of many innovations that give consumers the feeling they have everything they need at their fingertips. The \u201cbuy now, pay later\u201d model grew exponentially in 2021 to drive economic recovery.<\/p>\n Consumers also want the ability to interact with their advisors on their preferred channels. They want financial advisors to know them and be there at the moment of truth with the most personalised solutions. This trend will continue, spurred by technology innovations like automation, AI, machine learning, and the reinvention of internal processes and operational models.<\/p>\n 7. Finance Models Get Real<\/strong><\/p>\n Open Finance, which is an extension of Open Banking, is the next step to accelerate the creation of a broader financial ecosystem that goes beyond the traditional boundaries of banking services. Based on data-sharing principles, Open Finance empowers banks to offer a broader range of possibilities that are specifically suited to clients\u2019 needs. And data sharing brings rise to questions of regulations and security.<\/p>\n Additionally, banks are exploring Banking as a Service and embedded finance; both models offer opportunities to embrace change and capture new customers. With these models, banks can take advantage of their digital investments and develop new partnerships outside of financial services. None of this is easy. Business executives are going to get these very clear goals to deliver digestible API layers and banking as a service. They want it to be as easy to open an account as it is to get an Uber. These executives know these are difficult, multi-year journeys \u2014 and you need to keep showing progress and<\/em> continue to deliver financial targets and customer experience rankings.<\/p>\n 8. The New Financial Ecosystem<\/strong><\/p>\n Here, the initial hype cycle on all-things crypto gives way to tangible value creation via network effects and scale. Layer 1 protocols, which are the foundational blockchain network \u201crails\u201d one layer above compute nodes, become paramount Examples include Bitcoin, Ethereum, Avalanche and Solana. Half-baked projects either consolidate or fall by the wayside.<\/p>\n The case for decentralised finance pressures banks to respond competitively to defi-value propositions. And regulators recognise that 1930s-era regulatory structures must adapt without compromising financial integrity. Inflation and related expectations fuel cryptocurrency \u00a0and alt-asset maturity.<\/p>\n Industrial Revolutions have always been the result of technological advances that allow transformations in our societal and economic models. In the past two years, we\u2019ve witnessed a technological boom that has enabled banks to respond to the modernisation of their business models and new customer expectations. The alignment of new technologies foretell the start of a new industrial revolution. In 2022, major banks will continue to accelerate a future-proof technology strategy and an end-to-end digital transformation to preserve their competitiveness \u2014 and to prepare for the next wave of disruptors.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" The last two years have been a rollercoaster for the entire world, putting pressure on the society, economic models and industrial models for many sectors and players. The financial world hasn\u2019t been spared. Banks globally have played a crucial role in maintaining the economy by supporting several government and state initiatives. 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