A rapid change is being seen in the world of finance. Find out the top 5 future trends in financial industry.
Whether you like it or not, money is a fundamental component of society. And our relationship with money – how we use it, who we trust to look after it, and how we expect to be treated as financial customers – is changing. Four significant trends, in particular, will have an impact on the financial sector in the next years. Let’s take a look at those game-changing trends.
Here are the top 5 future trends in financial industry:
The Account Aggregator (AA) framework is the most recent digital revolution in India. Banks will act as data suppliers in the proposed system, followed by lenders as data seekers, with AAs serving as a conduit for communication between lenders, third parties, and banks operating inside the AA framework.
This framework, which facilitates data sharing with user consent, is a collaborative project of four major financial regulators: the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), the Pension Fund Regulatory and Development Authority (PFRDA), and the Insurance Regulatory and Development Authority (IRDA).
With the recently introduced Personal Data Protection Bill, the AA framework would be more than simply another feather in India’s digital transformation cap, but a requirement for regulatory compliances for consented data.
Money in digital form
Money has fully transitioned to the digital realm. You may now pay for goods and services with a tap of a screen or by scanning your phone in a store. People in China can now pay by smiling, according to a facial recognition payment service called “Smile to Pay.”
Physical money isn’t always a factor these days. In essence, digital money refers to any type of money or payment that exists exclusively electronically – and this can be as basic as an online payment or money transfer (usually managed by a standard bank or credit card provider) or as sophisticated as an entire cryptocurrency like Bitcoin (which generally sits outside of traditional money institutions).
Credit cards, smartphones, applications, online banking, money transfer platforms, and cryptocurrency platforms are all examples of digital money, but the crucial point is that no physical money is exchanged.
The COVID-19 pandemic accelerated this tendency, as people and businesses grew hesitant to touch actual money, resulting in an increase in contactless payments. In summary, people’s trust in banks and traditional forms of payment is increasingly being placed in digital money.
As a result, a slew of new services are emerging to challenge existing financial service providers.
Finance apps increasing
Mobile payment apps and so-called “digital wallets” – often app-based services that allow users to pay for products (for example, via contactless payments) and transfer money to others – are facilitating this new wave of digital money.
What’s particularly significant about this trend is that many of these apps and services are provided by IT behemoths and digital-native businesses rather than traditional banks, such as Apple, Google, Samsung, and PayPal.
This new generation of fintech firms, powered by data and AI skills, is threatening the long-established monopoly that traditional banks and financial service providers hold over money and payments.
Apps are also making inroads into the area of unsecured financing, with firms such as Klarna, a popular buy-now-pay-later digital payment system among millennials.
Consumers expect more tailored and sophisticated services.
The digitalization of money is generating massive amounts of data on what consumers really do with their money – and this data can be used in the future to provide customers with useful insights about their spending or even to cross-sell other relevant financial products and services.
For example, Metro Bank, an independent UK bank, provides an intelligent tool called Insights that analyses customer spending habits and predicts whether a customer is going to surpass their credit limit before their next paycheck or whether an unforeseen purchase could tip them into the red.
This is the type of individualised, tailored service that 21st-century banking customers will increasingly expect.
This tendency is so strong that customer intelligence was named the most important predictor of revenue growth and profitability in a PwC poll on technology in finance.
Money’s Future — Will Physical Money Disappear?
Money digitization is forever changing our relationship with money, to the point where real money may disappear totally.
If that sounds far-fetched, remember that over 600 currencies have vanished in the last 30 years, and it’s not impossible that more may vanish or be replaced by digital currencies.
“Another effect of money digitalization is that our personal data is becoming increasingly interwoven with our money.”
Even more of your personal information, such as whether you’re a student or a homeowner, could be encoded in your money and transactions in the future.