Top Trends that will Shape BFSI in 2022

The banking and finance firms are interlinked with every other business and industry in the market. Not only does the BFSI sector covers the major part of the daily news headlines, but it also captures the attention of many customers, retail investors, stakeholders, and corporate and business leaders.

The BFSI industry comprises mainly bluechip banking firms and the new-age fintech startups. Banks, being authentic financial institutions, are a common choice for most people around the globe to conduct their transactional activities. Moreover, today's ever-busy customers expect convenient, contactless, and quick assistance for their regular banking needs, including payments, investments, loans, currency exchange, and credit cards. However, due to the legacy system and the practices of abiding by the regulatory pressures, banks are inefficient in delivering the expected support to their consumers.

Meanwhile, the leading and rapidly growing fintech startups follow an agile and flexible approach. Their business model helps them gain the advantage of quickly adopting any new trends and changes that drive the industry. Consequently, customers have started accepting many fintech companies as preferred partners in their day-to-day finance. As per a report, in 2022, the global Fintech market value is anticipated to reach $309.98 billion.

Incumbents vs New Players

The main challenges faced by the incumbents of the BFSI industry are their traditional legacy system and their obligation to comply with regulatory pressures. Meanwhile, the minimal control and relaxation enjoyed by the fintech startups give them an opportunity to be agile and offer customized services to their consumers.

In general, banks offer a wide range of products and services to their customers through the vast network of their physical branches. Contrary to this, fintech companies deliver intuitive and on-demand solutions powered by the latest technology, right through their comprehensive and user-friendly applications. However, banks are still responsible for fintech's core banking activities.

Latest Trends that will Impact the Future of the BFSI Industry

Technology, consumer expectation, and market scenario keep changing. This leads to the evolution of various temporary and permanent trends that significantly drive the marketplace. Let’s discuss the latest technological trends in 2022 that will influence banking and fintech firms.

1. Banks will start modernizing their legacy system

After a long hold due to the Covid, the BFSI industry is actively looking to reshape its business. Therefore, the major trend that will be igniting the banking sector is the amendment and modernization of its legacy system. Today’s market demands an immediate paradigm shift where stakeholders can quickly implement powerful strategies for enhancing their banking architecture, including platforms, services, and apps. While the financial institutions have been struggling a lot to optimize their core legacy system, digital innovations are emerging as a boon, especially for the bluechip banking firms.

Banking enterprises looking to become competitive in the marketplace must shift from legacy mainframe applications to more technologically inclined and cloud-based tools and software. Consequently, financial companies, especially the incumbents, will start reaping maximum growth in this digital era.

2. Customers will crave more digital humanization

Banks are investing heavily in the latest technologies to enhance their customers' digital interaction and provide them with more ease and flexibility. Digital services such as online account opening, virtual banking, and seamless digital payments are among financial institutions' top-level offerings to their customers. However, consumers still prefer humans or human-like interactions over digital support because the former delivers better personalization. Moreover, personalized services help banks target consumers accurately, thus increasing customer retention and customer loyalty. Forrester reports that 74% of US opulent customers prefer interactions with human advisors for their banking activities. Therefore, banks and fintech are looking to create a perfect balance between digital interaction and the human touch.

With an omnichannel approach, BFSI companies can amplify their platforms and serve their customers better. The Bank of America has been doing extremely well after it recognized the power of omnichannel banking. With its ‘Robo-branch’ initiative, it aimed at delivering digital yet human support to its customers. This eliminated the need for an actual teller and allowed customers to voice their grievances to a machine. This even helped in reducing the footfall of their customers in the physical branches.

3. A shift in focus toward Cloud Platform

Multi-cloud technology is expected to dominate the IT budgets of BFSI companies in 2022. Migrating the services, tools, and digital assets to the cloud will open the door to a wide range of possibilities for financial companies. Moreover, the strategic utilization of cloud platforms, especially by banking enterprises, can ensure better security, faster transactions, and holistic customer support.

4. Exploiting AI & ML for better business growth

Machine Learning (ML) and Artificial Intelligence (AI) are no longer innovations for the future but a necessity for the present. Today, financial companies possess massive amounts of data, which must be used to their advantage. By analyzing the data in real-time using AI and ML, companies can gain valuable insights and make better and quicker decisions. Moreover, it will benefit the banks to conduct time-efficient and cost-effective activities for various processes.

5. Financial institutions will emphasize more on Customer Experience

This year banks will be shifting their focus towards using advanced technology and tools for strengthening and improving the customer experience. Features and functionalities such as Interactive Voice Response (IVR), AI-powered chatbots, live video chats for KYC, and augmented reality for virtual assistance will continue to gain popularity within the BFSI industry to serve the consumers better.

6. Banks will abide by and regulate cryptocurrency-based services

Until now, digital currencies have been viewed as an unauthorized and precarious form of asset. However, presently many banking firms and financial institutions are actively working to offer services related to cryptocurrencies. While it's comparatively easy for fintech startups, the enterprises such as banks need to strategize on regulations that will govern cryptocurrency-based transactions and services.

7. Restructuring the hidden and overdraft fees for winning the customers

Previously, banks used to charge a nominal service fee for their services. Customers were happy and satisfied by paying such charges as these fees were absolutely transparent to them. However, as the industry grew, banks and financial institutions started imposing hidden fees for multiple things such as late payments, overdrafts, and transfer processing charges. This leads to a loss of consumer trust, and consequently, banks are left vulnerable to competition from their rivals. This year will witness the banks reorganize their fee structure and present them to customers in a way that is simpler, more transparent, and easier to be paid off.

8. Customers will choose Self-service for better convenience

In order to cater to the needs of busy and restless customers, banking and financial firms have to deliver seamless digital services across various platforms. The ability of customers to self-manage their financial and banking activities is a need today. ATMs, comprehensive mobile apps, chatbots, video banking, Interactive Teller Machines, and providing automation in various processes will be a priority for banks and fintech so that consumers can handle and control their banking activities all by themselves.

9. Banks will invest heavily into super apps

You know how a mobile phone has consolidated the requirements of various accessories, such as maps, day-planner, cameras, iPods, and more, into a single device. In a similar vein, a super app is a comprehensive platform that combines multiple apps into a single package. Many non-banking companies such as WeChat, Alipay, and Paytm are becoming a very favorable option for users, giving them a lot of services under one umbrella. However, for banking firms incorporating a super-app into their system can be challenging. In the time to come, banks will need to take a critical decision - either they themselves become a super app, partner with a one, or stay away from this trend. Each of them has its pros and cons, and opting for one will significantly influence the financial institutions, especially the incumbents.

10. Buy-Now-Pay-Later offerings will attract more consumers

In response to the popularity of the Buy-Now-Pay-Later (BNPL) feature among e-commerce companies, financial institutions began to recognize its benefits. Apart from liking complete transparency in their payment journeys, users appreciate no added fees, hidden charges, and the availability of installment plans. The BNPL feature has united these benefits under a single service, thus enabling customers to enjoy a traditional crediting system even without credit cards. It is estimated that the BNPL lending in the US will exceed $100 billion by 2024. With the increasing demand for BNPL, this year will witness many banks and fintech adopting the same.

11. An increase in mobile banking services for driving better convenience

When the Covid pandemic struck the world, all the business sectors started looking for contactless but seamless ways to enhance their services. Even banks and financial firms focused more on delivering convenience to their customers through virtual mediums. Consequently, mobile banking gained popularity, which helped eliminate the need for bank branches. People can now do their banking-related tasks right from their mobile phones. Moreover, by switching to a 100% digital onboarding process, banks significantly eliminated the in-person visits of the customers. Even customers appreciate this as it moved them away from the tiresome and time-consuming activity of visiting the banks. Besides reducing the number of physical branches, virtual banking proves to be a more cost-effective alternative to traditional banking. This is merely a start; the upcoming time will witness the customers' rapid and mass adoption of mobile banking services.

12. Increase in security and fraud prevention measures

Certain BFSI-based companies such as BNPL providers and Fintech startups currently have fewer regulations and compliances to be followed. This opens the door for many hackers and fraudsters to commit cybercrime and bypass online security gateways. Although the government has been actively working to mitigate such issues, various regulatory bodies will implement a whole array of safety precautions and measures this year. Moreover, legacy banks will look to incorporate more secure biometric features such as face recognition to ensure logins of legitimate persons only.

Final Words

In this highly competitive market, banks should implement the trends discussed above to ensure a successful journey. However, it needs a strategically planned roadmap and courage to execute it. Considering the highly volatile nature of the BFSI sector, the banks and fintech companies should have a strong sense of motivation and vision to abide by these trends. Consequently, they will be ready for whatever the future holds for them.

To thrive in the business, BFSI companies should also look ahead to invest in digital transformations. At QED42, we deliver excellent services to our clients to help them fulfill their vision. Moreover, we offer digital products that allow companies to boost their business and engage with customers better.

Connect with us to learn more about digital transformation services.