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The world of finance and banking is in the midst of transformation. As the wants of consumers and the need for new regulations arise in the sector, the industry as we know it is evolving. Going back to 2020, the world saw a shift in trends that focused on accelerating a digital experience for customers. Now, experts are not only predicting a further embrace of online banking trends but anticipating more growth in the shadow banking arena, the rise of personal financial management tools, and more emphasis on ‘green’ financial transactions.
Their Roles As Financial Hubs Will Fade
Previously, the need for people to gather and exchange financial information fuelled the continued existence for traditional institutions. In the UK, a Future Of Banking study found that approximately 23% of Gen Z consumers hoped that bank branches would transition to become ‘community hubs’ for financial education. However, with more non-banking companies like Walmart and Amazon entering the financial services marketplace, the place of a traditional financial institution as the go to financial hub is quickly withering- and will continue to do so in coming years.
Newcomers like Amazon are not just focusing on traditional banking services either. For instance, Amazon’s reach in the financial services sector extends to digital payments, lending and even insurance. With this progression, wall street banking institutions are being forced to choose: will they defend their traditional business structure?
Attention Will Turn To Banks To Uphold Their Environmental Role
As consumers become more environmentally conscious, they are translating that belief to the power they hold with their money. This includes adding environmental and ethical red flags to their judgment of whether a financial institution is reliable or suitable for their needs. As a result, it is time for banks to go beyond empty promises and manifestos to support green banking initiatives. In the coming years, it is expected that regulations will come into effect mandating that financial institutions reveal their commitment and investments in sustainable companies. This will be quite a turnaround from the traditional portfolios held by banks that have historically included oil and gas companies.
The Focus Will Turn To Digital Engagement As Cashless Transactions Advance
Cash is dying. With contactless card payments set to hit $2.5 trillion and a 45 percent growth between 2020 and 2021, it comes as no surprise that society as we know it is moving away from the use of cash in their daily lives. There is an increased onus on banks now to amp up their digital strategy to connect with consumers. Digital engagement is no longer wishful thinking; it is now warranted.
In Chase’s Digital Banking Attitude Study, it was revealed that Americans are ready for a primarily digital environment. In fact, 80 percent prefer to manage their finances digitally. As in-person banking dwindles, financial institutions will have to overhaul their digital reach and engagement tactics to remain competitive with online competitors. For instance, by redesigning their banking apps to provide personalized financial overviews and offering round-the-clock engagement.
These changes are only the beginning of what is to come for the industry. The evolution of banking is set to continue for some time, led by a digital-first mindset from consumers. While the changes will vary across the scale and in impact, the fundamental shift towards a more digital-friendly mindset is predicted to set the tone going forward.
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