9 Banking Trends for 2022, According to GDS MODELLICA
COVID has strengthened the banking sector, with the sector having undergone a structural transformation and seen significant regulatory changes
GDS MODELLICA lists trends for the banking sector in 2022, as it looks towards a mixed future. Innovation and the digital transformation will be key as financial institutions look to satisfy new demands and address future challenges
In the wake of COVID-19, the banking sector has actually come out stronger. Not only has the sector undergone a serious structural transformation, but it has also seen significant regulatory changes made regarding risk management, governance and control. For these new standards, digital is no longer an option but a necessity. Two key areas are digitalisation and artificial intelligence. Both form part of the current ecosystem and are contributing significantly towards the implementation of new analysis, planning and monitoring tools by financial institutions. In turn, these tools are helping to facilitate tasks and identify new business opportunities. Artificial intelligence, in particular, will help to make commercial transactions more secure and analyse investments. It can also be employed to address challenges in managing risk, detecting credit card fraud and a whole range of other cybersecurity matters as banks seek to improve the user experience and attract new customers.
Clearly, the pandemic has left a significant mark on trends and investments in the past two years, and financial institutions have focused heavily on digitalising their basic products and services to make up for the lost footfall in their branches. Banks have had to adopt a new comprehensive strategy that looks towards a sustainable future, and this has led to an acceleration in the digital transformation as institutions seek to remain competitive, profitable and solvent. Taking all this into consideration, GDS Modellica believes that these are the nine key trends to keep an eye on in 2022:
1.- Investments in technology and talent in order to offer innovative products and services, reach less digitally savvy customers and face up to current and future challenges. Innovation focused on added value and profitability.
2.- Incentives focused on digital banking and a more digital experience. Traditional banks have had to significantly enhance their digital options to compete with neo-banks and other new players on the market. Examples of such initiatives include mergers between national institutions, cost reductions and collaborations with fintech companies.
3.- Partnerships with new players on the market. If they were seen as competitors in the beginning, they have now become a key way of consolidating services and providing customers with what they want. But such integration requires a great deal of time, effort and work.
4.- More personal interaction with customers and more personalised services. In the aftermath of the pandemic, customers want a more personal approach when managing their finances, whether it be a phone call or another form of real-time interaction.
5.- Greater use of customer data. Customer Data Platforms (CDPs) make it possible for data to be accessed and used in real time and thereby personalise recommendations. Correctly managing, storing, processing and sharing this data can also support banks in their own open banking initiatives.
6.- More self-service options as demand continues to grow. It is vital that financial institutions can attend to customers on all platforms and that their products are available on all channels. Digital platforms will probably become the default business model for banks and financial institutions in the future.
7.- Connect with younger generations, particularly Generation Z. The youngest market segment is crucial, and their future financial power and spending cannot be overlooked. Furthermore, this generation trusts heritage institutions and actively looks to manage their finances for a more secure future.
8.- Incentives for new secure payment methods using mobile wallets, mobile payments, contactless or card payments. As this trend continues, it will become ever more important to ensure that transactions are secure and verify the customer’s identity.
9.- Continued expansion of open banking and data exchange. Regulators have pushed open banking forward and, with it, an increasing exchange of data. In order to comply with current regulations, institutions have to verify the customer’s identity through Know Your Customer (KYC).
One thing that all these trends have in common is that they aim to improve the customer experience through the application of new technology. According to GDS Modellica managing director, Antonio García Rouco, financial institutions need to prepare themselves for new challenges in a future full of uncertainty. While the hints of an economic “recovery” may have appeared sooner than expected, there are still doubts about finance, solvency and credit recovery in the wake of the pandemic. The true impact of COVID-19 will only really be seen once employment-support measures and loan moratoriums expire, and in all likelihood, defaults will start to increase.