Financial services industry trends and predictions for 2022.

Covid-19 accelerated digital transformation in the financial services industry. 2021 saw record-breaking downloads in mobile apps for retail banks, insurance companies, and other areas. As retail banks, insurance companies, and other financial service organizations continue to compete with neobanks and fintech startups, they will need to deliver personalized experiences across every channel, but especially mobile. Here’s a look at financial services industry trends and predictions for 2022. 

When dealing with retail banks and insurance companies, people still want that personal touch.

The percentage of consumers using technology such as mobile phones to manage their finances jumped from 58% in 2020 to 88% in 2021. In fact, 80% of people now say they prefer online banking to visiting a physical branch. 

According to JD Power’s 2021 Retail Banking Satisfaction Study, 41% of all banking customers are now digital only. 88% of Gen Zers and Millennials, moreover, access their bank accounts via their mobile devices.  

For digital teams in financial services, this means replicating the in-person experience of seeing a bank teller or an agent on digital channels. 

But how? 

They will continue to build personalized services in their products, such as the ability to track spending and create a budget, pre-approval limits for buying a house or financing a car based on an applicant’s unique financial history, and more. 

When an in-person or a digital 1-on-1 experience is required, agents should be able to pull up an individual’s account information right away. This is especially important if the client bumped into digital friction on the mobile app or website. 

Banks and insurers will continue to rely on agents and tellers – both in-person and online.

Topics in banking and insurance can be confusing, especially for people looking to secure loans, invest in the stock market, or put a down payment on a house.

Despite the push to digital, retail banks and financial service providers will continue to increase their live channel employee base, as well as see growth in contact centers and branches. Fidelity, for instance, has added thousands more client-facing jobs in 2021 alone.

People will continue to start researching their specific questions online, but will want to speak to someone when they need additional support and expertise.

For financial institutions, investing in improving the employee experience will be a must. 

As wealth management firms and insurance companies look to onboard more client-facing employees, they will need to invest in tools for lead generation and developing client profiles. 

These new tools will make it easier for agents to understand their clients, and more importantly help clients address any challenges they might be facing. When building your tech stack, make sure to prioritize intuitive, easy-to-use applications for your employees as well. 

To keep up with neobanks and insurtech companies, incumbents  must embrace a mobile-first strategy. 

Neobanks, insurtech, and fintech startups have put additional pressure on incumbents in financial services to build and deliver standout mobile experiences. 

For insurance companies, mobile-first design means coming up with new and innovative ways to file claims and get insured online. For retail banks, it means offering a seamless experience for completing everyday tasks such as depositing checks online and transferring money, as well as more complex ones, like applying for a car loan. 

More importantly, financial service institutions must continue to build more flexibility into their products and services. Insurance companies, for instance, are finding innovative ways to personalize the customer experience by tracking a client’s driving skills and gathering personal information from public sources with AI and ML to deliver quotes in 1 minute, as opposed to 24 hours or longer. 

Generally speaking, insurance companies and retail banks will continue to advance in digital transformation, but at different rates. 

In terms of financial services industry trends, insurance companies have been slower to adapt to cloud infrastructure, especially compared to retail banks and wealth management firms in terms of digital transformation. Many incumbents are still trying to build capabilities on mobile, such as filing claims, inputting beneficiaries, and researching companies.

However, insurance companies have recognized that their legacy technology can’t keep up with client expectations. 

Financial service institutions will continue to acquire and incubate fintech startups.

Retail banks, insurance companies, and wealth management firms have developed one solution to their legacy technology problems. 

They are now investing and incubating insurtech startups focused on a few specific pain points, acquiring them, and keeping them in a separate arm. 

I predict that financial service institutions will continue to invest in–and incubate–fintech startups. This approach has its advantages. Startups can focus on very specific pain points. Once the startups are mature, financial institutions can acquire the new companies and keep them in a separate arm. MassMutual, for instance, owns Haven Life, but Haven life is not a MassMutual platform. 

In 2022 and beyond, I expect insurance companies to continue funding insurtech side projects and acquiring startups that solve unmet digital business needs.

Still, financial service institutions companies will avoid combining their primary business with these startups entirely for a few reasons. 

First, integrating their legacy systems with new technology can be cumbersome. Second, fintech startups are also a great way for incumbents to gather intelligence, which doesn’t require integration.

Finally, and perhaps most importantly, fintech companies tend to be direct to consumer (DTC). This poses a conflict of interest for incumbents whose business models significantly depend on agents. If an incumbent puts their name on a DTC, they risk backlash from their agents who claim the incumbent is cannibalizing the agents’ business.

Like retail banks, insurers will continue working to overcome silos.

Even as insurers invest in hot fintech startups, they will run into one problem: their data is scattered across multiple systems, databases, backend systems, and other internal apps. With so many platforms, digital teams run into silos and duplicate information. 

Between migrating clients off of legacy systems to new ones and investing in the latest cloud infrastructure, insurance companies are in a pickle. They will need to invest in building one centralized platform for all policies, as well as all customer data. 

Most importantly, they will need to find a way to create “one source of truth” that each team can refer to, as well as create a system that enables everyone to see the business impact of each technical and design decision. 

Omnichannel excellence will be a must. 

As financial insurance companies adapt to digital first, ensuring consistency across each digital channel is a must. The experience on desktop and mobile devices should work in tandem. What you can do on mobile, you should be able to do on desktop.

For tasks that require in-person experiences, the digital channels should provide the necessary instruction to help clients accomplish tasks that must be completed in a branch.

In 2022 and beyond, financial service institutions will need to come up with innovative ways to customize and personalize the banking experience. They will need to ask themselves, how do we translate the in-person experience into digital? How can we see the in-person experience as an extension of the digital one?

Financial firms will keep NFTs at arm’s length.

In 2021, one of the most interesting financial services industry trends to follow was NFT’s.

While NFT’s have gained a lot of traction in the media, I predict that financial service institutions will approach this specific area of crypto technology with caution. Even experts in the financial service fields are still learning what value NFTs will bring. 

But they will continue digging into cryptocurrency. 

Cryptocurrencies like Bitcoin and Ethereum, on the other hand, will continue to be important for incumbent financial institutions. 

Fidelity, for instance, has a mutual fund focused on cryptocurrency. Chase is investing in blockchain technology to enable instantaneous payments.

Even social media giants like Meta (formerly Facebook) are digging into financial services by getting into blockchain and leveraging their burgeoning expertise in crypto. 

Cryptocurrencies have largely gone unregulated by the federal government, though investors will continue watching to see what new laws are passed in 2022 and beyond.  

Clients will care even more about social consciousness.

Simply put, people don’t trust financial service institutions. However, banks, insurers, and other financial institutions are working to change that. That’s why we’re considering it one of the top financial services industry trends for 2022.

Like companies across industries such as travel and retail, companies across the financial institutions sectors will need to focus more on social consciousness. This means investing in local neighborhoods, donating to charities, and taking a stand against racial injustices. People will choose the brands that represent their views. 

Financial service institutions will continue to invest in education and transparency as well. In 2022, it will be imperative that digital teams at these organizations deliver digital products that help clients develop financial literacy and learn more about financial wellness. 

Robo-advisors will continue to democratize access to wealth management platforms.

While consumers are getting more comfortable with the idea of investing in the market, many people recognize that they don’t have the expertise to do it effectively, making them more open to wealth management support.  

However, most consumers don’t want to pay large advisory fees to get help with their investment strategy. As an answer to this need, robo-advisors have grown in popularity.  

Robo-advisors offer asset allocation support with very low fees and intuitive online interfaces.  These products have opened up wealth management support to customers who historically did not have enough assets to warrant working with an advisor, but who could still benefit from financial advice. 

While these products are intended to be managed primarily online, most investors still want to speak with a financial services representative to validate their investment decisions. This means that a human touch is still a necessary component of these products.

If you’re interested in learning more about financial services industry trends and predictions for 2022, please join us for our virtual conference, Quantum LEAP, on Feb. 8-9.