The Financial sector has faced tough challenges and competitions in the past five years. It had to deal with a lot due to the Covid-19 pandemic and resultant lockdowns.
These challenges have inevitably resulted in certain trends becoming popular.
Banks and other financial institutions had to move rigorously to digitalization.
Photo by Jason Briscoe on Unsplash
With growing technology, one of the most influential and important trends has been digitization in the financial sector. Digitalization has almost improved and made our lives easier in a variety of places. It is not just financed but things like shopping, dining out, and of course entertainment.
But the finance sector is heavily reliant on digitization nowadays. IT or Information technology is helping financial transactions quite a lot. As the finance sector still tries to recover from covid, globally, there have been certain developments that require quite a lot of praise.
This is due to the fact that these excellent trends and strategies will have a long-lasting impact on the financial sector. A lot of institutions, organizations, are struggling due to the pandemic. This has presented them with a unique opportunity to improve their business model and bring technology into their modus operandi.
From Digital banking to Cybersecurity, let us look at the top 5 trends in the financial sector for the year 2023.
These can be quite helpful in knowing how you and your organization can proceed in the current financial market.
1. Digital Banking
We talked about digitalization having an impact on various sectors, but let us review this trend and its impact. The digitalization of banking services is slowly becoming a norm nowadays. Customers and potential clients are now more attracted to digital and online services provided by a financial institution.
This could be because accessing a website is more convenient and comfortable in comparison to actually going to the bank.
Digital banking has been slowly improved and tested in recent years to provide customers with a safe experience. Digital banking ensures that customers can finish their work without having to interact with a human being, which is again something that a lot of customers appreciate.
Another benefit has obviously been the development of online payment systems. Through secured channels, customers can simply pay anywhere, anytime from their phones. This has taken the meaning of digital banking to a whole new level. People do not need to carry hard cash or cards anymore. Your phones are now just as capable of paying for your food, drinks, or dress.
One of the prime examples is the prevalence of online Wallets and Mobile payment applications. Not just banks but many digital service providers now offer online wallets and UPI transaction services.
There is bound to be an increase in digital activity as many economies are shifting towards a more cashless approach. And with people staying at home now more than ever, digital banking will surely have a great impact.
One of the best examples of this is the rise of third-party applications that use API/UPI to facilitate transaction and banking services.
Your bank details can sometimes be shared to allow such processes. This incorporates decentralized networking to allow seamless and safer banking. Decentralization is another trend we shall discuss.
2. Growth of Decentralised Network
Decentralized networks or more popularly known as Blockchain Technology, is becoming a norm nowadays.
What is Block-Chain Technology or Decentralised Network?
To explain it simply, when a transaction is being carried out by a seller and a buyer, there is no third party involved. Simply put, banking transactions will not have any additional middleman costs or security threats.
Why is it So Popular?
The rise and popularity of blockchain technology are due to P2P systems or Peer peer systems. The P2P system does not involve a middle man or a third party in transactions. This eliminates any additional tariffs and costs, as well as provides security to the parties involved.
Start-ups and large corporations alike have grown accustomed to this technology, creating a huge demand for implementation of this in a lot of areas.
One recent and most popular form of transaction is Cryptocurrency, which uses P2P services as well and has gained huge popularity.
For example, imagine you own a popular business. Let’s assume you own an escape room. In such a situation, you constantly need to buy materials and services to keep them more immersive.
As an owner, you will constantly engage with multiple service providers who will sell their services to you. A P2P system will ensure third-party free transactions that are safe and cheaper. This will allow you to run your business and provide competitively priced services.
3. Implementation of AI
Most of you reading must have come across a chatbot or automatic messaging service. These are examples of AI or Artificial Intelligence growing and changing the way we interact with digital services.
Insurance, Banking, and other financial websites are now supporting intelligent and tailor-made chatbots that provide direct customer support as well as guide people.
AI is set to become the most important and crucial technological trend globally. With various AI and machine learning developments, we would no longer need to put more effort into doing menial work. AI would also help in processing data much faster and provide a quick fix solution after the pandemic ends for a lot of financial institutions.
Understanding the Market
Chatbots, however, are not the only use of AI in the financial sector. AI is helping investors and companies in studying the shift and trends in a market.
There is only a human who can compute and analyze. On the other hand, AI provides analysis of large amounts of data in a seamless, fast, and understandable way.
While AI cannot mimic human knowledge and experience, crude or raw financial data is now available for everyone to see and understand without interacting with a human being.
There are plenty more ways in which AI is going to shape or affect the financial sector that is discussed further in the article.
4. Faster and More Transparent Transactions
Whether we talk about Business to business (B2B) or P2P transactions, transactions, in general, are bound to be more transparent and faster. This is due to a number of factors, most of which are by themselves a trend. Digital banking, AI integration, automation, blockchain technology, etc., are ancillary to each other in this respect.
Transactions on a financial and technological level are becoming increasingly resource-friendly. People and businesses are spending relatively less on the transaction since automation has allowed humans to have less interaction.
With increasing amounts, human intervention would make transactions slower, consume more resources and cost a significant amount of time.
With companies, governments, and individuals getting acquainted with automation, transactions consume less energy and resources. This is only bound to become even more efficient in the coming years.
This is due to the fact that modern technologies such as AI, Automation, and blockchain are simply efficient. This means that a lot of work and data is being processed faster than ever and that too without any human interaction. This allows us to focus on more important matters but increases transparency as well.
5. Cybersecurity and Regulation
As the world shifts towards the digital economy, data has significantly increased in its value. Protecting data is not just a personal concern but a necessity on multiple levels.
The presence of malware and hackers has been increasing with the use of AI and automation. Transactions between persons or large MNCs need to be secured.
Cybersecurity is becoming an increasingly important need. Technology is seemingly advancing at a blistering pace. If we fail to keep up with these changes, we will fall victim to them. This simply means that if we continue to make new technology without fixing existing loopholes, we will be prone to cyber attacks
Similarly, customers are increasingly becoming more aware of their rights and use of data. Financial records, account data, and transactions on a digital platform need to be safeguarded against potential threats.
Regulations in this respect are bound to be made or improved to suit the current market.
Let’s suppose, for example, that you have a mobile transaction application that is linked directly to your bank. In such a case, biometrics, encrypted authentication, and decentralization are good ways to ensure no third party can interfere with your data.
The financial sector is still combating the pandemic and its effects all over the world. Digitalization has thus made it easier to resume normal functions with much fewer human resources.
Most of these trends are influenced by each other and are interlinked via the internet. This means that the rise in popularity of these trends is not an isolated event rather a combined effect.
Much is to be seen and observed regarding these top trends in the finance sector. With digital technology making inroads in the financial world and the rise in tech-savvy customers.
These above-mentioned trends in the financial sector are sure to change and shape the way we view the finance sector. The interaction will become much more secure due to technologies such as blockchain.