Snowflake Managing Director Geoff Soon says the Banking and Financial Services Sector faced major changes in business and consumer behaviour patterns in 2020. He discusses some key trends that may shape the sector as markets eye a wary recovery in 2021.
By Geoff Soon
As virus-related disruptions reverberated around the globe, the plans of financial services firms were suddenly thrown into complete disarray.
Faced with dramatic changes in business and consumer behaviour patterns, the financial sector, including banks and insurance, had to rapidly adopt changes in their operations to ensure customer service levels are maintained. To make things even more challenging, this had to be achieved while the majority of staff were forced into a work-from-home mode.
In Singapore, the Monetary Authority of Singapore called for financial organisations to ensure operational resilience during the lockdown. According to MAS Managing Director Ravi Menon, 85 percent of workers in the financial industry have been able to work from home.
With investments toward strengthening the retail electronic payment system in digital banking and online trading in the last few years, the customers within the financial services sector were able to access the majority of the services online during the circuit breaker period. Without these infrastructures in place, it would have been more challenging for the financial services sector to achieve operational resilience.
Now, as we pause to consider how the financial services sector fared during the pandemic, with Singapore’s infection rates being controlled and the prospect of a vaccine growing stronger by the day, it is even possible to anticipate positive developments for the industry for the year 2021.
Some of the key trends that are likely to shape the banking and financial services sector in the next 12 months include:
Continued growth of cloud platforms
The COVID-19 pandemic caused many changes, but it also encouraged many firms to bring forward planned investments in digital products and services. To support this, many have made increasing use of cloud platforms to help deliver more personalised customer experiences and compete with the rapidly evolving fintech firms gaining traction in the market. The growth of the cloud platform is expected to continue throughout 2021.
Higher levels of data sharing
The adoption of cloud platforms by financial services firms will facilitate seamless sharing of data, both across organisations and with trusted third parties. Supply chain and business partners will be able to use this data to streamline their operations and further improve the levels of service provided to customers. With the help of cloud platforms, the data sharing trend will accelerate rapidly in the next 12 months.
Increasing demand for digital-first experiences
The sudden drop in face-to-face business activity during the pandemic has encouraged customers to seek a simple, user-friendly and reliable digital-first experience when dealing with banks and financial institutions. They want similar levels of service regardless of the communication channel or device they are using.
For this reason, challenger banks and fintechs are poised to gain an increasing share of the financial services market. This trend is going to pick up in 2021 and beyond.
Growing use of AI and ML to personalise experiences
The increasing sophistication of artificial intelligence and machine learning tools are opening up a range of possibilities for financial services firms.
With AI and ML, banks and financial services are able to obtain valuable insights from data in ways not previously possible. As the sector increases the adoption of data-driven technologies, personalisation of services will also accelerate.
Armed with the knowledge of spending patterns, financial situations and other data, financial firms will be able to create products that match the particular requirements of customers at different stages of their lives.
For business customers, lending rates and other variables will help them make informed business decisions to navigate the shifts in market conditions better.
The Take-up of open banking
The shift to open banking system will kickstart competition and drive innovation at an unprecedented rate. Customers will be able to compare products and services and shift between them with ease and confidence.
For financial services firms, this ongoing trend will lead to an ever-increasing focus on maintaining competitiveness and keeping the market share. They will also have to maintain the oversight of their open banking requirements and ensure their systems and processes are adhering to regulatory requirements.
Delving into these trends, the coming year for the financial services sector will be dominated by initiatives to leverage the power of data. Whether it’s guiding planning decisions or opening up opportunities for new products and services, ubiquitous and secure access to data will shape business activity throughout the year.
The year 2020 has been a challenging year for most businesses not just financial institutions. Cost control and possibly a renewed focus on reduced IT spend are going to be top of mind for companies. Moving applications and processes to the cloud, sun-setting expensive legacy systems and the associated overheads that accompany them will make a compelling impact towards cost optimisation and IT spending.
The financial sector is well-plugged in to digitalisation. Financial institutions that can adopt deeper end-to-end transformation projects are in a better position to succeed. Those who are able to continue operations using digital platforms today are going to have a strong competitive advantage.
(Ed. Featured image by Photographer Charles Parker.)