The Ten Biggest Trends in the Financial industry
Numerous trends in the financial industry are changing the way we bank. These include the growing use of Blockchain technology, payment fraud, and AI and data-driven technologies. Also, new generations are making their way into the banking industry. This article looks at the key trends in these areas.
Payment fraud is on the rise
As the financial industry continues to digitize and increase its internet use, fraud incidents have also increased. This trend is especially problematic when card payment transactions are involved. Fraudsters can take advantage of the lack of security in these transactions to trick victims into paying into the wrong accounts.
Fraudsters are constantly finding new ways to commit fraud. This makes it difficult for companies to protect themselves against fraud. Although fraud has been a problem for centuries, the financial industry is experiencing an unprecedented increase in this type of fraud. For example, a TransUnion report found that digital payment fraud attempts will be worth $206 billion by 2025.
In the U.S., the cost of fraud has grown from $3.25 per attack in 2000 to $4.00 per attack in 2021, according to the LexisNexis Fraud Multiplier. This figure includes the face value of the transaction for which a firm is held responsible, legal fees and fines, labor and investigation costs, and external recovery expenses.
AI and data-driven technologies are becoming increasingly accessible to banks
AI and data-driven technologies enable banks to personalize their customer experiences, improve operational efficiency, and lower operating costs. In addition, these technologies help banks gain detailed insights into customer behavior, which can help them make better decisions. This approach also removes the need for intuition and biases that may be present in decision-making processes.
AI can help banks develop personalized loan and retirement plans for customers. It can also identify suspicious data patterns and help manage fraud. It can also make intelligent investment decisions, which can help banks increase their profitability.
Blockchain technology
As a disruptive technology, blockchain is attracting the attention of financial institutions. These institutions are exploring ways to use this technology to process payments and issue their digital currencies. This technology also can potentially reduce costs by reducing the need for banks to settle transactions manually.
Currently, consumers rely on third parties for the processing of their transactions. Blockchain could help bypass those third parties and eliminate their costs and fees. Institutions could use this technology to offer lower-cost financial services to attract a larger market share. It could also reduce expenses for everyday investors. Traditional financial institutions make money through transaction fees, which can increase investors’ costs.
Blockchain technology has the potential to disrupt a wide variety of industries. It can improve process efficiency, lower costs, and ensure secrecy. By 2020, it is predicted that 77 percent of financial institutions will adopt blockchain technology. It can also be used to launch standalone cryptocurrencies regulated by monetary policy. This could lead to increased competition in the financial sector and more financial transparency.
Generation Z is becoming a mainstream customer of banks
A new survey reveals that traditional banks are missing an opportunity to reach Gen Z, the next generation of consumers. The group is focused on the future and has specific financial goals. According to a Center for Generational Kinetics study, 69% of Zoomers prioritize saving for retirement, and 66% are concerned with debt. However, there is still room for banks to reach out to Gen Z and provide a service that meets their needs.
The report found that Gen Z customers are increasingly likely to use physical bank locations than other generations. Those who visit a bank location at least once a week are more likely to get treats than people who only see a bank a few times a year. This trend suggests that free snacks, coffee, and other amenities may be enough to attract younger customers.
The COVID-19 pandemic has irrevocably changed the financial industry
The COVID-19 pandemic has impacted many aspects of the financial industry, including how the finance function is performed and how people are onboarded into a financial institution. The global financial sector has faced many challenges in the wake of the pandemic, but some positive changes are expected to occur.
The COVID-19 pandemic has disrupted the global economy and supply chains. It has forced countries to implement tight restrictions on movement to prevent the virus from spreading. This has resulted in massive economic damage, representing one of the most significant economic shocks in decades.