Today, nearly every financial activity is being reimagined in some way, from banking, to lending, to wealth management. Tasks and transactions that once involved human interaction and paper money have overwhelmingly moved into the digital world, and new players are emerging to disrupt the traditionally staid industry. The coming year promises only more of the same. In order to compete in this changing landscape, financial services firms are under increased pressure to adapt to these shifts in the industry.
Here are the five most important trends facing the financial services industry(opens in new tab) in 2017.
The Rise of Fintech Innovators
While the financial services industry used to be difficult to penetrate, recent fin tech innovators have had no trouble moving in and turning the market on its head. These companies are often reinventing a single process, such as lending, while offering a highly customized user experiences at an affordable price. In order to stay relevant, it is essential that traditional financial institutions incorporate some level of fin tech principles into their strategy in order to avoid being pushed out completely.
Meeting the Needs of the Modern Consumer
The widespread success of fin tech companies can be linked to the wiring of the modern consumer. The pervasiveness of the Internet has led to the inherent desire to receive goods and services instantly. Not only do consumers today demand a seamless experience, but they want it at the lowest cost and the highest value. Because of this, the concept of customer loyalty is largely a thing of the past. Online comparison tools and hyper-connectivity among millennials means that traditional institutions that relied on building relationships will have to reinvent themselves to keep up. Knowing customers’ demands will be essential for financial services industries, allowing them to be ready with the right product at the right time for younger consumers.
Identifying New Revenue Streams and Business Models
Being ready with the right offerings may require identifying new revenue streams or adopting new business models. For traditional financial institutions this could mean moving away from putting their own capital at risk and toward a more intermediary role instead; or for example, offering career services in addition to loans and mortgages. Likewise, adding new revenue streams could mean incorporating fin tech offerings such as robo-investing platforms to target millennials who don’t have time for traditional wealth management advice as opposed to the learned advice from a real life advisor.
Whether you are a start-up or longtime incumbent in the industry, shifts in the global economy—and the potential for economic downturn at any point—makes international expansion a wise investment strategy. A rising middle class in many emerging economies offers immense opportunity for fin tech companies, as well as traditional banks. In particular, Asia-Pacific countries have the world’s largest middle class growth, and with it, a huge population of millennials who have grown up in the digital world. PWC expects that by 2020, “many US financial institutions will have a fully functional Asian hub...”
Continue to Invest in Cyber Security, Analytics
Overarching the entire financial services industry is the need for enhanced security without sacrificing the customer experience that consumers today demand. Institutions must maintain visibility, but also protect against cyber criminals. Luckily, innovations in the cloud have made it easier to manage sophisticated data analytics that can search for external threats. Meanwhile, this same cloud technology facilitates the flexible and customized interfaces that provide superior user experiences. Inevitably, financial institutions will continue to turn to the cloud when thinking about the future of their business.
Whether an emerging competitor or long established institution, financial services companies have a lot to consider in the years to come. In order to keep pace with the trends outlined above, financial services companies must learn to be agile(opens in new tab), forward thinking and open to collaboration as they navigate a constantly changing global economy.
For more on how NetSuite can help financial services address these trends, visit the financial services(opens in new tab) web page.