Preparing for financial services trends in 2023
Digital trends and innovative technologies have redefined the financial sector in many ways. The future of financial services rests on how well financial service organisations (FSIs) adopt new-age tools to gain insights, streamline operations, and improve customer experience (CX).
Here are the top six future financial services trends to prepare FSIs for 2023 and beyond.
Following the pandemic, many reputed banking and financial service institutions migrated from legacy systems to cloud-native software. 2023 will see a rise in this trend. Interoperability, cost-effectiveness, and enhanced CX are the key benefits of this trend.
Legacy systems that depend on third-party providers expose organisations to potential risks such as data breaches, regulatory compliance failures, frequent outages, and system failures. Support, maintenance, and updates for on-premise platforms are expensive, time-consuming, and labour-intensive.
Cloud-based architecture simplifies business process management in financial services by providing automatic upgrades, enhanced security, high scalability, and seamless integration of disparate datasets.
The future of financial services rests on personalised digital-first services through a remote workforce while cutting costs on development, support, and maintenance. With cloud-based applications, organisations can automate multiple processes and free up their staff for customer segmentation and strategy development.
Open banking will be a dominant trend in future financial services. The open banking market will grow at a compound annual growth rate (CAGR) of 26.6%, reaching $62.37 billion by 2027. The key drivers of this trend are the growth of online payment platforms, increasing e-commerce, and improved internet access.
Open banking allows banks, FSIs, and financial technology (FinTech) providers to exchange customer data easily and securely through application programming interfaces (APIs). It also enables big data analytics to build predictive models for enhancing CX through segmented targeting and product innovation.
Currently, the biggest players in the open banking market belong to the Global North. However, this trend is gaining momentum in less developed nations. In 2023 and beyond, Asia-Pacific is projected to be the fastest-growing market for open banking.
The features and benefits of open banking include
- Data sharing and account aggregation across multiple bank accounts
- Deeper insight into customer credit-worthiness
- Effective use of data analytics to identify consumer needs
- Customised product offerings such as educational loans and ‘Buy now, pay later’ (BNPL) services
- Gateways to open finance and wealth management solutions
The increasing cost of living, burgeoning inflation, pandemics, armed conflicts, and volatile markets made consumers rethink their finances and adopt accessible and sustainable wealth-management solutions. FSIs responded to this need using embedded finance technologies to offer tailored products for all customer needs.
Embedded finance is a forerunner in future financial services trends. It can be an important monetisation lever in diverse industries like healthcare, education, retail, and real estate. With the advent of banking APIs and fintech solutions, it will be easy to embed financial services in non-financial platforms such as digital marketplaces and point-of-sale (POS) systems.
Embedded payments are already a norm. Some other use cases of embedded finance in future financial services include embedded credit or BNPL solutions, embedded investments, and embedded insurance.
Artificial Intelligence (AI) and Machine Learning (ML)
AI and ML models will dominate business process management in financial services in 2023 and beyond. AI and ML are becoming increasingly relevant in managing risk, regulatory compliance, anomaly detection, and data security.
Digital technologies gather, describe, and analyse huge amounts of data accurately and almost instantly, allowing FSIs to focus on improving business processes and CX through data-driven insights.
According to IDC analysts, by 2026, 85% of organisations will deploy AI and ML to improve foresight, understand customer behaviour, and customise their offerings. This can increase their productivity by up to 25%. Algorithmic decision-making will be at the heart of the financial services industry in the future.
Chatbots, virtual assistants, and smart digital assistants
Chatbots and digital assistants trained through natural language processing (NPL) will become ubiquitous in future financial services. Financial services chatbots are expected to save businesses up to $7.3 billion in support, process automation, and more in the next two years.
FSIs are looking to future-proof themselves by investing in blockchain technology to improve security, data privacy, transparency, and scalability. Blockchains are also gaining importance as digital currency will be at the core of future financial services.
According to a study by Jupiter Research, blockchains can enable banks to save up to $27 billion by 2030 on cross-border settlement transactions. Blockchains will be increasingly deployed to streamline processes in banking and lending, trade finance, asset management, and capital markets.
For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like living organisms will be imperative for business excellence. A comprehensive yet modular suite of services is doing precisely that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.
How can Infosys BPM help?
Infosys BPM business process management in financial services assist organisations in transforming their business models, improving business performance, and standardising processes at a lower cost. Financial services firms may use our solutions to rethink their business models, operations, and technology in response to margin constraints and regulatory changes.