As virus-related disruptions reverberated around the globe, the plans of financial services firms were suddenly thrown into complete disarray.
Faced with dramatic changes in business and consumer behaviour patterns, the financial sector, including banks and insurance providers, had to rapidly adopt changes in their operations to ensure customer service levels were maintained. What made things even more challenging was that this had to be achieved while the majority of their staff were being forced to work from home.
In Singapore, the Monetary Authority of Singapore (MAS) called on financial organisations to ensure operational resilience during lockdown. According to MAS managing director Ravi Menon, 85% of workers in the financial industry have been able to work from home. With the investments made to strengthen retail electronic payment systems in digital banking and online trading in the last few years, customers were able to access the majority of financial services online during the circuit breaker period. Without this infrastructure in place, it would have been more challenging for the financial sector to achieve operational resilience.
Now, as we pause to consider how the sector has fared during the pandemic, with Singapore’s infection rates under control and the prospect of a vaccine increasing by the day, it is even possible to anticipate positive developments for the industry in 2021.
Delving into these trends, the coming year for the financial sector will be dominated by initiatives to leverage the power of data. Whether it is guiding planning decisions or opening up opportunities for new products and services, ubiquitous and secure access to data will shape business activity throughout the year.
2020 has been a challenging year for most businesses, not just financial institutions. Cost control and possibly a renewed focus on reducing IT spend are going to be top of mind for companies. Moving applications and processes to the cloud, and sunsetting expensive legacy systems and the associated overheads that accompany them will make a compelling impact on cost optimisation and IT spending.
The financial sector is well plugged in to digitalisation. Financial institutions that can adopt deeper end-to-end transformation projects are in a better position to succeed. Those that are able to continue their operations using digital platforms today are going to have a strong competitive advantage.
Time is of the essence and the sooner organisations embrace data technologies and invest in cloud-based platforms, the sooner they can unlock the potential of their data stores.
Geoff Soon is managing director of South Asia at Snowflake, a data cloud company
Key trends that are likely to shape the banking and financial sector in the next 12 months:
1 Continued growth of cloud platforms
The Covid-19 pandemic has led to many changes, but it has also encouraged firms to bring forward planned investments in digital products and services. To support this, many have made increasing use of cloud platforms to help deliver more personalised customer experiences and compete with the rapidly evolving fintech firms that are gaining traction in the market. The growth of the cloud platform is expected to continue throughout 2021.
2 Higher levels of data sharing
The adoption of cloud platforms by financial services firms will facilitate seamless sharing of data, both across organisations and with trusted third parties. The supply chain and business partners will be able to use this data to streamline their operations and further improve the levels of service provided to customers. With the help of cloud platforms, the data-sharing trend will accelerate rapidly in the next 12 months.
3 Increasing demand for digital-first experiences
The sudden decrease in face-to-face business activity during the pandemic has encouraged customers to seek a simple, user-friendly and reliable digital-first experience when dealing with banks and financial institutions. They want similar levels of service regardless of the communication channel or device they are using.
For this reason, challenger banks and fintechs are poised to gain an increasing share of the financial services market. This trend is going to pick up in 2021 and beyond.
4 Growing use of artificial intelligence (AI) and machine learning (ML) to personalise experiences
The increasing sophistication of AI and ML tools are opening up a range of possibilities for financial services firms. With AI and ML, banks and financial institutions are able to obtain valuable insights from data in ways not previously possible. As the sector increases the adoption of data-driven technologies, personalisation of services will also accelerate.
Armed with the knowledge of spending patterns, financial situations and other data, financial firms will be able to create products that match particular requirements of customers at different stages of their lives. For business customers, lending rates and other variables will help them make informed business decisions to better navigate the shifts in market conditions.
5 The rise of open banking
The shift to the open banking system will kick-start competition and drive innovation at an unprecedented rate. Customers will be able to compare products and services and shift between them with ease and confidence.
For financial services firms, this ongoing trend will lead to an ever-increasing focus on maintaining competitiveness and keeping their market share. They will also have to maintain effective oversight of their open banking requirements and ensure that their systems and processes adhere to regulatory requirements.