6 Trends That Will Shape The Financial Services Industry In 2021
Financial services in 2020 was defined by a sudden acceleration in digitization and digital engagement—pushed by the impacts of the COVID-19 pandemic. Exchanges shut down their trading floors and moved to remote trading, mobile banking transactions spiked, personal trading apps saw record transaction volumes, and call center personnel kept customer support going by working from their living rooms.
While the financial services industry was able to weather the digital tsunami and continue its operations, it has become clear that the winds of change are not transient. Financial institutions are now thinking strategically about their technical setup and questioning whether the tools that they have previously relied on are the right ones to use going forward. Here are a few major themes we’ve identified as being likely to dominate financial industry conversations and technology roadmaps in 2021:
1. Modernizing dated core systems will be imperative
2020 was a year that put the financial infrastructure to the test and challenged existing architecture planning assumptions. Many of the core systems had not been architected to address the volume and pace of change that was suddenly required, and dated core systems struggled under the added weight.
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. As the credit needs of small and medium businesses surged, lenders faced challenges updating their legacy underwriting and risk management systems to meet the demands. Batch-based, fragmented, and slow-moving information and data pipelines hindered the ability to gain real-time insights and rapid response to customer needs.
As financial services rallied to overcome what economists were calling “The Great Shutdown” or “The Coronavirus Recession,” the need 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, with 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 is expected 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.
This trend toward contactless finances extends to banking. In 2020, 44% of retail banking customers relied on mobile apps to conduct business. Both traditional players and financial tech firms introduced new finance apps or upgraded existing ones to offer new services and programs to match consumer needs, such as benefit tracking for government-sponsored food allowances or access to early wages. As downloads of mobile apps soared, transaction volumes skyrocketed.
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.
4. Institutional and wholesale trading moves off trading floors
Suddenly, trading was no longer confined to corporate trading floors. While a small handful of firms positioned their traders as “essential workers” and required them to work on site, the majority of firms allowed traders work from the safety of their homes. As trading floors and exchanges worldwide emptied, the prior assumptions that all trading will happen from physical offices—over corporate networks and enterprise-operated data centers—were suddenly rendered obsolete. Operational resilience plans that counted on falling back to a secondary disaster recovery site became useless when all corporate sites shut down.
In the new world, financial architectures will decouple financial activities from physical facilities through the use of technologies like zero-trust networks that enable location-independent secure access. Operational resilience plans will be updated to include globally and regionally resilient infrastructures like cloud.
5. Work-from-home must work across financial services
Throughout 2020, widespread stay-at-home restrictions challenged businesses everywhere to keep employees engaged, productive, and connected. With the pandemic, as corporate offices became unavailable overnight, the entire financial services workforce—from traders to bankers to support personnel—relied on their at-home internet connections along with existing VPN and virtual desktop infrastructure solutions to do their work. While it got the job done, internet connectivity issues, bandwidth limitations, security concerns, interoperability problems, and limitations in collaboration capabilities plagued the day-to-day experience.
It will take a reimagined work environment—one that combines immersive digital and mobile experiences with flexible hardware—to support in-person and remote workers.
Work-from-anywhere solutions need to take a comprehensive look at seamlessly enabling a heterogeneous, globally distributed workforce, including traders who need high-speed connectivity, quantitative analysts who need vast amounts of compute capacity, retail branch workers who need responsive insights platforms to serve customers, and more.
It will take a reimagined work environment—one that combines immersive digital and mobile experiences with flexible hardware—to support in-person and remote workers. New ways of hybrid working and connecting with customers will also lean heavily on helpful, integrated tools centered on the cloud to level traditional boundaries in 2021.
6. Embedded innovation is the new status quo
While 2020 was bleak from many perspectives, one of the rare positives is that it helped prove that agility and innovation, done right, is a game changer. The speed at which the financial services industry transformed to help their customers through the pandemic is the speed at which they want to continue operating. And that requires a culture of innovation that is embedded into the corporate culture of an institution.
From financial services institutions to vendors, regulators, and supervisors, 2021 is likely to be a year of deliberate cultural transformation to find new ways of working together to create safer, cheaper, more inclusive, and more equitable financial markets.
This year at Google Cloud, we will continue working with our customers across financial services to help them prepare for the future, through our technology, tools and innovation partnerships.
Keep learning: Discover the steps any organization can take to quickly adapt and achieve positive results with tighter resources. Get Google’s Guide to Innovation.
Ulku Rowe Ulku Rowe, Technical Director, Office of the CTO, Google Cloud
At the forefront of Google’s cloud and machine learning capabilities, Ulku enables the financial services industry to take advantage of Google’s technology to fuel their digital transformation. Before joining Google, Ulku was a Managing Director of Technology at J.P. Morgan Chase and Bank of America. Ulku holds an MS degree in Computer Science from the University of Illinois at Urbana-Champaign and a BS degree in Computer Engineering. She also serves on the Federal Reserve Bank of New York Fintech Advisory Group.
[…] derivatives, mortgage securities, and the other speculative ventures that were behind the 2007 financial crisis […] After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead […]
[…] Additional documents, collections, and supporting resources regarding the Financial Crisis of 2007-2009 can be found in the Financial Crisis of 2007-2009 theme. THEMES: Financial Crisis of 2007-2009 START DATE END DATE Zoom: 5y 10y 25y ALL February 27, 2007 | Freddie Mac Press Release […] Subcommittee on Investigations releases its final report on its inquiry into key causes of the financial crisis. SAVE & SHARE less SAVE & SHARE less Federal Reserve Bank of St. Louis’ Financial Crisis Timeline. https://fraser.stlouisfed.org/timeline/financial-crisis, accessed on February 20, 2021 […]
[…] Why 2021 is The Perfect Storm By Uri Arad, VP Product and co-founder of Identiq If the 2008/9 financial crisis brought our industry the term “friendly fraud” then 2021 will be bringing “refund fraud” into ou […]
[…] By comparison, international business trips declined just 13 per cent during the financial crisis a decade ago, but took five years to return to their previous high point, according to McKinsey […]
[…] During the financial crisis of the late 2000s, for example, the drop was quite a lot less […] Growth resumed in 2010 after the financial crisis of late 2008/09 […] The only time the developed world has experienced a prolonged recession was during the truly major financial crisis of the 1930s and its aftermath […]
[…] group, carrying high levels of borrowings from its time under private equity, was forced during the financial crisis to abandon using the initial public offering (IPO) to further grow the business and used much o […]
[…] emerging economies of the late 1990s/early 2000s and, more recently, of the 2007–9 North Atlantic financial crisis […] and later the ‘new’ arrangements to borrow (activated in 1998 but tripled during the North Atlantic financial crisis), the former including only developed countries but the latter also some emerging countries […] 143) the North Atlantic financial crisis […]
[…] think of securitization at all, think of the mortgage-backed deals that were at the heart of the financial crisis of 2008 and 2009, having perhaps learned how they work through the movie adaptation of Michae […]
[…] While the rescue package signed by Barack Obama at the height of the financial crisis in 2009 was $800 billion, Biden is proposing a $1 […] need for such a massive package, arguing that the current economic situation is less acute than the financial crisis of 2009 […]
[…] 4) We can consider this further by looking back before Covid—as well as before the global financial crisis and 9/11—with the help of the 1999 cultural touchstone which deBoer himself invokes to describ […]
[…] 1% in 2020, at worse performance since the 1997 Asian Financial Crisis (15 February 2021) Thailand’s economy contracted by 6 […] 1% in 2021, its worse performance since the 1997 Asian Financial Crisis, during which its economy had contracted by 7 […]
[…] Rovinescu said coronavirus impacts were “hundreds of times worse than 9/11, SARS, or the global financial crisis—quite frankly combined […] Recoveries from the 2000 dot-com crisis and 2008 financial crisis were slow and difficult […]
Impacts will be felt on Low-wage retail, food, and hospitality workers. Via YOU MAY ALSO LIKE Employers will have the freedom to choose 8 to 12 hours of workdays. View Post It reveals that 42% of poor households had to tide over the financial crisis than the rich ones post road crash. View Post
[…] indebted to the Crown for $29 trillion by the orchestrated financial crisis The United States people may have won the War of Independence but they never won their freedom from […] people, the people… Sep 11 2013 / 6 Comments / Read More » The root of all evil The US and European Financial Crisis were orchestrated at the Vatican […]
[…] Previous exoduses from the labor force pale in comparison—the aftermath of the 2007–2009 financial crisis, for instance, resulted in the women’s labor force shrinking by less than a million over a perio […]
[…] On the eve of the financial crisis of 1997-98, Japan and South Korea had only $17 billion and $12 billion of FDI, respectively […] Although China witnessed eastern Asia’s 1997-98 financial crisis and the price that South Korea paid for overdeveloping its industrial capacity, misallocation o […] China resisted fierce pressure to devalue during the Asian financial crisis of 1997-98, on the grounds that it wanted to limit the risk that the crisis would spread […]