While 2020 and 2021 have been largely dominated by the challenges of digital transformation, 2022 looks set to be the stabilizing year in terms of new normal business activities.
The major hurdles of working remotely, swapping systems to digital platforms, and devising user experiences that retained customers during the pandemic are now calming down. Many shifts have occurred. Many more still need streamlining. But an equilibrium has been reached, which means innovation for its own sake, rather than crisis-led necessity, can now develop and grow. We take a look at the top three trends that will shape banking and finserv in 2022.
Digital banking and the rise of the challenger
Bricks and mortar have become very 2018. Branch closures have reached an all-time high over the past two years, driven not only by the pandemic but by great mobile penetration and innovative banking services that are now fingertip accessible.
As noted by Global Market Insight in 2019, the fintech evolution of digital banking has decreased physical visits to brick and mortar bank branches by 36% and, as the trend becomes more prevalent, it is expected to go down even more.
Incumbents in general, have accepted the fact that the good old days of monopoly are now crumbling. In order to maintain a leaderboard position, many of them are creating digital versions of themselves in an attempt to keep up with challenger competitors.
This in itself is a good thing, but many experts believe it is not a long-term solution. If digital subsidiaries only provide a temporary solution to incumbents, while they shift their core legacy systems to a more agile model, success is likely. After all, they have the customer base and marketplace presence to hold their position for years to come.
However, if antiquated legacy systems continue to be central to the bank’s functionality, even with the presence of a digital twin, they risk falling behind because they don't provide the flexibility or agility required to compete in the post-2020 marketplace.
Data and the customer experience
Now that digital banking is considered the go-to option, we will begin to see a number of new innovations emerging, not only to engage customers more effectively, but to provide them with far more tailored products and services. Data is at the heart of this transition. Better insights generated by AI and machine learning provide sharper analytics and therefore, a clearer understanding of how the customer operates - and what they want.
Real-time analytics also provides speed of service. In 2022, customers expect instant responses on their banking status and services like loan applications. Alongside this, better security can be established, with bio-authentication from voice recognition solutions to better cyber security offerings.
Gamification and incentives are also set to explode in 2022 as part of the customer experience drive.
According to figures gathered by Martech Alliance, customers are prioritising the following aspects when it comes to online services:
- 76% of customers expect consistent interactions across departments (Salesforce).
- 54% believe sales, service, and marketing teams don’t share information.
- 74% of customers have used multiple channels to start and complete a transaction.
- 66% of customers expect companies to understand their unique needs and expectations
- However, 66% also say they’re generally treated like numbers.
- Consumer data shows healthcare, travel, and retail are the most customer-centric industries - not fintech.
Payment technology and going cashless
Cash is swiftly diminishing - reports suggest that by 2026, the UK will be almost entirely cashless, while Sweden and other Nordic countries are aiming for total, digital transactions by 2023.
Stores will become increasingly automated, with customers using contactless payment methods that run via mobile phones. There will also be moves to reduce the number of credit cards and debit cards that are produced.
ESG directives will favour those companies that move away from traditional currency and plastic payment cards, due to the environmental impact of cash and card production.
BNPL giants like Klarna, are also making the credit card far less popular among Millennials and Gen Z customers. The zero interest, installment pay options that are now offered on the vast majority of online stores, means credit card usage has reduced dramatically over the past two years.