Important Finance Trends will be discussed in this article. The world of banking is moving more quickly than ever, from crypto to DeFi. Additionally, financial services (such as banking, insurance, and money management) are battling to keep up. Many of these contemporary phenomena are the result of evolving technology. Others are the outcome of a fresh emphasis on the client. Let’s examine a few present and emerging financial trends that are predicted to soar during the following 12 to 24 months.
Top 7 Important Finance Trends In 2023
In this article, you can know about Finance Trends here are the details below;
1. The Financial Services Industry Embraces Blockchain
Blockchain technology has been linked to cryptocurrencies for many years. Experts anticipate that the technology will now be more thoroughly incorporated into the current banking systems. Blockchain, for instance, would enable banks to carry out transactions more cheaply and effectively while retaining high security. Peer-to-peer lending, a market with potential development of up to $150 billion by 2025, can also be handled using it. In 2023, more banks will switch to cloud-based banking, and blockchain will undoubtedly play a part in this. Blockchain technology is already used to settle currency trades by HSBC and Wells Fargo. Users can use blockchain currencies to make payments on their networks using Paypal, Mastercard, and JP Morgan services. Of course, this has to do with cryptocurrencies, but it also demonstrates how open banks are to using blockchain. Blockchain isn’t simply being used by banks, either.
The French international insurance business AXA employs blockchain technology to provide flight delay insurance to its customers. Following that, the insurance contract and air traffic statistics are linked via an Ethereum blockchain. The system is alerted and initiates the insurance payout as soon as a flight is more than two hours late.
2. More People are Download Personal Finance apps
Personal finance app downloads increased by almost 90% during the pandemic. When financial applications like EveryDollar, Prism, and Mint offered exactly what customers were seeking for, their popularity skyrocketed. These apps provide options to invest in stocks and cryptocurrencies in addition to helping individuals manage their finances. People are drawn to cryptocurrency for more reasons than just being able to manage their money remotely. People particularly enjoy having the ability to virtually govern their entire financial world from the palm of their hand. This number will probably rise as the US implements open banking, which will make financial apps even safer. Additionally, users with security reservations might be encouraged to take another look. The most well-liked personal finance app now on the market is Square’s Cash App, which also offers a rewards program that connects to the topic of customer loyalty programs that we covered above.
3. More people Get Their Money Professionally managed
RIAs, a new breed of wealth manager, are rapidly taking over as the default money manager for many consumers. A company that is governed by the Securities and Exchange Commission that focuses on providing financial advice and managing investments is known as a Registered Investment Adviser (RIA). RIAs have an obligation to their clients known as a fiduciary duty, unlike regular broker-dealers. This implies that they must prioritize the interests of their clients over their own when making financial decisions.
In the US, this kind of client-centered, high-touch business strategy is becoming more popular. A total of $110 trillion was managed by RIAs by the end of 2020 from more than 60 million clients across the US. This is in contrast to the around $20 trillion at the start of this century.
Additionally, there are already close to a million individuals employed by slightly under 14,000 RIAs nationally. 47% of RIAs still think the industry has a lot of potential to grow even at current growth rate. According to a research by Schwab, more than half of investors prefer a fiduciary (an RIA) to any other approach for managing their money. Overall, it appears that more Americans are considering having their money managed by a professional as a result of the expansion of the RIA industry.
4. Loyalty Programs Drive Repeat Business
The concept of a loyalty program is not new; examples include half-full punch cards stashed in the back of your wallet and website-specific rewards schemes. However, the number of loyalty programs is increasing in the financial sector. In order to keep customers coming back, loyalty programs have long been a popular strategy; yet, they are typically only offered in the retail and food sectors. These days, loyalty programs are all but required, especially in the financial services sector. Many people think they will only continue to grow in size, quality, and level of competition.
According to a poll of banking clients conducted in August 2021 by American Banker/Monigle Agency, “rewards and loyalty remain paramount to the customer experience” regardless of the financial institution or product. The majority of consumers, including 80% of millennials and 68% of non-millennials, would be eager to join a deluxe loyalty program provided by their preferred companies. Spending of loyal consumers exceeds that of new customers by at least 33%. Additionally, whether or not they make a purchase, more than 80% of millennials and nearly 75% of baby boomers enjoy receiving rewards for engaging with their preferred companies.
CitiBank’s “thankyou” rewards program, which enables users to earn points by just utilizing their mobile apps or ATMs, is a nice illustration of this. Consumers who participate in paid loyalty programs are 62% more likely to spend more money with that company, according to a McKinsey & Company report. It’s interesting to note that just 30% of loyalty programs are free. The “tender wars” are going away from banks to businesses like PayPal and initiatives like Buy Now, Pay Later. One of their few remaining choices to entice customers back may be to offer a strong loyalty program.
5. Banks Further Embrace The Cloud
Banks Continue to Support Prior to the epidemic, the Cloud Banks were already moving toward the cloud, but the virus drastically accelerated things. The demand for digital services is increasing as individuals become more wary of human interaction, so banks need a mechanism to scale up quickly. By 2025, which is only three years away, the market research firm IDC predicts that global spending on cloud usefulness will reach $1.3 trillion. Heavy hitters like JPMorgan Chase and Arvest Bank have already converted a portion of their core systems to a cloud-native platform, so banks and credit unions will play a role in that.
According to Jim Marous of The Financial Brand, cloud banking is the way of the future. He bases this opinion on the fact that IBM has created cloud solutions exclusively for the financial sector. With Microsoft Cloud for Financial Services, Microsoft debuted its own product last year. According to Genpact, CIOs in the banking sector stated that making their applications cloud-ready helped their businesses adapt in 2021.
83% of the 1,300 financial services leaders surveyed in a separate survey by Harris Poll and Google Cloud said they were adopting the cloud as their primary infrastructure. One of the businesses with a focus on the cloud banking market is MANTL. The business primarily aids traditional banks in their digital market expansion. MANTL accomplishes this by creating tools that enable banks to automate back-office tasks, establish an online presence, and digitally onboard consumers.
With a digital offering powered by MANTL, the company claims that its clients may anticipate receiving four times as many account applications. The adoption of cloud services is significantly influenced by artificial intelligence. In addition to chatbots, AI can analyze transactions, keep an eye out for suspicious behaviour, and carry out other jobs just as well as or even better than their human counterparts. The cost of investing in AI is typically more than banks are ready to accept, but if AI is bundled with cloud services, it becomes a very alluring offer.
6. Banks Move Past Overdraft fees
Overdraft fees have long been a pain in the neck for anyone who uses a bank. They’re notorious for being excessive and for having a propensity to grow and become outrageous amounts. The Consumer Finance Protection Bureau estimates that revenue from overdrafts and insufficient funds totaled $15.47 billion in 2019. Of course, that doesn’t mean that banks will just stop charging fees (although Ally Financial did so last year, and Capital One did the same in January), but other organizations are introducing new services to assist clients in avoiding fees at all costs.
In order to avoid potential overdraft fees, Bank of America created a technology called Balance Connect that enables users to automatically move money to and from accounts. Although there is still a $12 fee each transfer, this is less than the standard overdraft fee. Additionally, there is less likelihood that it will compound rapidly. Customers can alter the sequence in which transactions are processed to prevent overdrafts with PNC’s new Low Cash Mode function. Customers of JPMorgan Chase now have extra opportunity to pay off overdraft accounts before being assessed fees. Customers can now access direct deposit paychecks two days earlier.
Banks suddenly looking to abolish or reduce overdraft fees have two main causes: One, it’s a widespread practice, and no bank wants to be the last to impose overdraft fees. Going the other way is an excellent way to go out of business in a time when customers desire loyalty programs. Second, the CFPB indicated its intention to start focusing on banks that had, in the words of Director Rohit Chopra, “become hooked on overdraft fees to feed their profit model” with the publication of the aforementioned study.
7. More Non-Tech People Get Into Crypto
The overall market value of cryptocurrencies peaked in November 2021 at $2.79 trillion. Seven out of ten traditional investors expressed interest in cryptocurrency last year, and they all intend to make the investment in the future. Not only them, but others are also displaying curiosity. Venture capital firms spent over $5 billion more on cryptocurrencies in 2021 than they did in 2020, totaling over $27 billion.
The recent signing of a law requiring all cryptocurrency exchanges to report their activities to the IRS by US President Joe Biden should serve as evidence that the cryptocurrency market is indeed growing. If cryptocurrencies weren’t anticipated to gain even more popularity, this kind of regulation wouldn’t be required. In October, the first Bitcoin ETF, or exchange-traded budget, debuted on the New York Stock Exchange, enabling investors to make investments in a more traditional manner. They can invest in businesses that have a financial stake in cryptocurrencies rather than purchasing cryptocurrency themselves. They’re just adding a middleman, so they’re still vulnerable to its unpredictable nature. Furthermore, the private sector isn’t the only one showing interest in cryptocurrencies.
The El Salvadorian government has mandated that all local businesses accept Bitcoin as legal money as of September 2021. Other Central American nations, like Honduras and Guatemala, were spurred by this to start investigating central bank digital currencies. This also had an effect in the US, where 27% of those surveyed said they would adopt Bitcoin. While the majority of nations are thinking about how they may include cryptocurrencies into their economies, certain nations, such China, have significant opposition to them.
Conclusion
There is no doubt that traditional financial methods are becoming obsolete. As expected, everything is becoming digital. Customers are looking at mobile banking, financial assistance are looking at the cloud & the blockchain, and everyone is looking at cryptocurrency. The financial services sector is experiencing fascinating times right now.
