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Financial services trends to watch in 2021

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COVID-19 has introduced many unexpected trends in the last year. But while some—like mask wearing and compulsive hand washing—will surely peter out, others such as accelerated technology adoption will have long-lasting impact.

The shift to increasing digital touchpoints, cloud computing, and big data isn’t anything new in financial services, but the pandemic has put adoption on overdrive. Previously, family offices, wealth and asset management, and other financial services firms didn’t necessarily have impetus to invest in technology. But now that so many financial services professionals—from CFOs to advisors—are working remotely for months on end, there’s much more pressure to deliver value, digitally.

Here are five trends we expect will have lasting impact in financial services in 2021 and beyond.

  1. Make sure technology has a seat at the table

Technology matters more than ever. Part of this is due to a generational shift. Millennials are fast becoming the most dominant segment of the workforce. By 2025, they are expected to comprise 75% of the Australian workforce.[1]

Younger users are demanding more tech from financial services providers, including personalised services. And they expect numerous digital touchpoints to access data anytime, from anywhere – either from their phone, laptop or face-to-face. The pandemic has made the importance of digital access even more important and accelerated demand from older users as well.

For financial services, technology is no longer a nice-to-have. It is a catalyst that is transforming the industry. To provide the services consumers demand and expect today, technology needs to play a significant role. Banks have accelerated their investment in digitalisation, which in turn puts more pressure on wealth managers and other financial services firms to follow suit. That will continue to play out next year and beyond.

2. Embrace data

Big data is more accessible than ever. The widespread adoption of cloud computing makes it relatively easy for financial services firms to use powerful analytical tools, without having to add new infrastructure or staff. More and more firms are jumping in—gathering and aggregating data, using data analysis, AI and predictive analytics to gather insights and make strategic decisions based on data.

COVID-19 has highlighted the importance of accurate and updated data as financial firms both large and small scrambled to plan for an uncertain outlook using cash flow simulations and financial modelling. Firms also examined financial data to find potential areas of concern, as well as cost savings, and to thereby come up with a plan to adapt. To do this, financial services firms are providing key stakeholders secure, easy access to financial performance data in real time.

While this crisis will eventually pass, it is clear that data and data analytics are playing an increasingly vital role in financial services.

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3. Implement robust data ownership and cybersecurity protocols

Collecting and analysing the data is just half the challenge; securing that data is another vital task. COVID-19 has shone a light on cybersecurity as numerous financial services firms, businesses and organisations have dealt with a huge uptick in cybercrime. Cybercrime costs businesses and organisations a staggering $11.4 million each minute.[1]

To keep valuable data secure, financial services firms need to implement robust protocols around data ownership and cybersecurity. That also includes checking on the security measures at software vendors.

4. Look for where you can automate processes and reporting

Automating repetitive manual tasks frees up staff to do more strategic work. Surprisingly, much work in financial services is still manual. Up to 40% of work in a family office or wealth management firm revolves around aggregating and collecting historical data. It’s estimated that 95% of that work can be automated.

Minimising manual tasks enables firms to be more strategic and deliver higher value with better insights. It also helps them gain better knowledge of their clients, and to proactively provide more strategic advice/services to them.

5. Integrate a delivery of services through an ecosystem of partners

Expect fintech firms along with technology providers to make further inroads into financial services. Amazon, for instance, now offers a range of financial services including, but not limited to, Amazon Pay, Amazon Cash and Amazon Lending. In China, Ant Group, an affiliate of Chinese tech giant Alibaba, has a full ecosystem of financial services.

This doesn’t mean financial services firms need to go it alone. Partnerships between financial firms, financial management vendors, and fintech are increasing – enabling a seamless array of services that offer value.

There are benefits to fintech and financial services working together in the cloud. By adopting technology, financial services firms can provide more holistic services. Wealth advisors, for instance, can offer more than just financial advice and a focus on ROI. Advisors can better support client personal goals and lifestyles, as well as connect clients with experts for specific financial and non-financial needs.

Hopefully 2021 will come with fewer surprises. But migrating to the cloud, integrating technology, gathering, analysing and protecting data channelled to and from your General Ledger, as well as finding opportunities to automate core reporting processes will surely put financial services firms on a stronger footing.

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[1] World Economic Forum, Cybercrime is maturing. Here are 6 ways organizations can keep up, Nov 17, 2020

[2] https://www.pwc.com.au/ceo-agenda/ceo-survey/2019/turning-inward-to-reduce-the-talent-gap.html