No one would disagree that 2020 was a transformative year in terms of how we live and work. This transformation required individuals, businesses, and institutions to fully embrace technology. COVID invited new virtual requirements: remote working, challenges of pandemic living and operating business. And financial sector was no exception. Digital transformation in finances is not a new story, financial technology has empowered financial businesses for decades now, pre-COVID there was massive investment in the cloud, mobile banking, e-payments, and many more. What 2020 showed the industry was that these investments were no longer an option, but crucial to survival.
2021 is shaping up to be an exciting year, the financial sector will need more than just digital endurance to pivot through the temporary hurdles of the pandemic and changing socioeconomic environment. Financial players will need to invest in their long-term “financial equipment and overall fitness,” what we call financial agility. With this context, let’s dig deeper into the key trends experts believe will shape the 2021 financial technology market.
Trends to Watch in 2021
Digital transformation opens up a financial business with agility to meet financial operations in an exponential manner, this includes revamping the customer journey, as well as partner and third-party engagement. Given the reality of the digital financial world, the new financial customer now sees their financial life as one entity. Therefore, it is crucial for financial institutions to catch up, and seamlessly create a unified customer journey that includes an ecosystem of all the customer wants and needs.
Openness is a crucial trend in finances. That is why open payment ecosystems, or end-to-end ecosystems and solutions, is a must this year. Open banking means leaving behind the need to have digital payment met by multiple companies in parallel. The new focus is on the customer: with a single chain around each key customer need, eliminating barriers between competitors and industries. It enables a single provider, such as a bank, to serve and solve any customer demand through the orchestration of different products in an open banking ecosystem. This allows a financial customer to easily log into any device and have access to their finances anytime, anywhere.
What does this mean for the financial business? These payment ecosystems require open technologies such as APIs, which can be easily integrated with other systems. For this reason, it is also predicted that any technology that is only designed to be compatible with itself, unable to integrate with APIs, limited by its storage capabilities, or not open to integration with other platforms, will become obsolete.
Digital Finances and Virtual Banks
The new need for improved digital access imposed by COVID has created great opportunities, from enabling mature players to pivot their business models to inviting new players, such as "neo-banks," shaking up the market and requiring financial institutions refocus their strategies.
The pandemic pushed many financial barriers, especially in terms of regulation, it allowed non-financial players to enter the banking space and completely virtual banks (neo-banks) to operate without any physical location. This new market for virtual banking is a new demand, for if had you asked the financial customer a year ago, many would have been wary of security implications or preferred the ability to go to a branch, but now experts believe many users actually prefer institutions that can operate entirely through virtual means..
All of these trends point to an obvious investment most financial institutions had already embraced: the need for cloud transformation. Infrastructure is the base that enables entities to really serve their customer, and without the right cloud solution, financial institutions are handicapped. The cloud also saves businesses money, with many SaaS service models there is great efficiency and flexibility to choose an offering solely based on your needs. It is no longer a question of whether or not to invest, now it comes down to what cloud solution to choose and whether to switch based on new needs.
- Analytics and AI
Data Analytics and Artificial Intelligence are crucial for all business operations- from management, planning, operations, implementation, and much more. They enable the automation of both internal and external digital systems, these are reactive, predictive or even proactive behaviors. Artificial Intelligence exponential benefits in that it maximizes what humans can do by creating virtual realities, such as chatbots, digital payment advisors, and biometrics. Data Analytics empowers the customer through smart data analysis: it enables a business to collect and process data in real-time, and uses it as a guide to identify problems, opportunities, and market solutions. The more data that is gathered and analyzed, the smarter the predictive capabilities become, both for the business, as well as for the whole industry.
The global pandemic has accelerated the need for financial technology. A McKinsey study illustrates that the digital progress of just two months in 2020 are equivalent to the predicted technological changes of the next 5 years. Therefore, financial entities need to be ready to sprint into 2021, for there is no space to catch up once you fall behind.
To survive in 2021, financial players will need to be more open, digital, cloud-enabled, automated, and smarter. At Cobiscorp, we are proud to be one of the leaders in financial technology. COBIS solutions are available in the cloud, integrate easily with APIs, and have incredible functionalities for the automation of processes and data collection. Start 2021 right, partner with us, the best banking technology provider in the Americas. Visit our website for more information.
Interested in reading more about the evolution of the financial technology industry? Here is an article, we think you'd like: The Future of Financial Technology.