Financial institutions are now thinking strategically about their technical setup and questioning for better ones to use going forward. There are trends that will shape the financial services industry in 2021.
1. Modernizing dated core systems
2020 was a year that put the financial infrastructure to the test and challenged existing architecture planning assumptions. Relief programs such as the Payment Protection Program (PPP) in the U.S. saw tremendous demand, but loan document processing, manual reviews, and approvals became bottlenecks. The credit needs of small and medium businesses surged. Lenders faced challenges updating their legacy underwriting and risk management systems to meet the demands.
Financial services rallied to overcome what economists were calling “The Coronavirus Recession,”. The needs for modern, agile, scalable, secure, resilient technology infrastructures became abundantly clear—and the new imperative in 2021.
2. Banking goes beyond cash with digital engagement
The role of cash in society was in flux before 2020. Contactless payments already a way of life across Europe and Asia. Even in America, which has been resistant to move away from cash. 27% of U.S. businesses reported an increase in contactless payments by customers as a result of the pandemic, according to an April 2020 survey. That trend will continue in 2021, with 74% of global consumers saying they will use contactless payment methods even after the pandemic. Globally, the contactless payment market size expects to grow from $10.3 billion in 2020 to $18 billion by 2025, at a compound annual growth rate (CAGR) of 11.7% during the forecast period.
3. Insurance becomes personal
In 2020, faced with a major health crisis, economic distress, and an uncertain future, insurance companies redefined how they did business almost overnight to provide stability, comfort, and peace of mind for their customers. For example, auto insurance providers offered discounts or refunds given decreased levels of driving. Health insurance companies adjusted their premiums to reflect reductions in non-essential surgeries.
It has become clearer than ever that the most useful products are tailored to the specific needs of the customer, and that hyper-personalization will continue to define the customer journey in 2021. Auto insurance products are more valuable when they are based on miles driven. Home insurance products are more effective when they are integrated with connected homes so that they can prevent or minimize damage from water leaks or fires.
Building this personalization for customers requires technology. With infrastructure real-time insights in it from vast amounts of streaming data from data sources. Data and analytics, powered by AI, will enable personalization and contextualize interactions across the entire insurance life cycle.
Those are major themes categorize as being likely to dominate financial industry conversations and technology roadmaps as Forbes states.
