COVID-19 has brought on many unexpected trends this past 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 into overdrive. Previously, family offices, wealth and asset management and other financial services firms didn’t necessarily have the 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 a lasting impact on financial services into 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 now make up the largest segment of the workforce, while Gen Z is the largest age group. Combined, more than 20 million Canadians are millennials or younger.
Younger users are demanding more tech from financial services providers, including personalized services and expect numerous digital touchpoints to access data anytime from anywhere – from 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 digitalization, which in turn puts more pressure on wealth managers and other financial services firms to follow suit. That’ll 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.
The COVID-19 pandemic 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, areas of cost savings and come up with a plan. 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.
“Before Sage Intacct, we couldn’t truly spend as much time as we wanted drilling down and analyzing what was in front of us because we spent too much time trying to compile everything (across 30 multi-entities),” Strulowitz said. “Sage Intacct is allowing us to look at information more clearly, more strategically, and more efficiently than we could previously.” – Isaac Strulowitz, CFO of CoVenture, an asset management firm
3. Implement robust data ownership and cybersecurity protocols
Collecting and analyzing the data is just half the challenge; securing that data is another vital task. The COVID-19 pandemic has shone a spotlight on cybersecurity as numerous financial services firms, businesses and organizations have dealt with a huge uptick in cybercrime. On average, cybercrime costs Canadian businesses and organizations a staggering $12 million per business, each year.
To keep valuable data secure, financial services firms need to implement robust protocols around data ownerships and cybersecurity. That also includes checking on the security measures at vendors.
4. Look for where you can automate processes and reporting
Automating repetitive manual work 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.
Minimizing the manual efforts enables firms to be more strategic and deliver higher-value with better insights, better client knowledge, and to proactively provide more strategic advice/services.
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, AmazonPay, AmazonCash and AmazonLending. 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 in the cloud that work together. By adopting technology, financial services firms are able to 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, connect clients with experts for specific financial and non-financial needs, deepening the relationship.
Hopefully, 2021 will come with fewer surprises, but getting to the cloud, integrating technology, gathering, analyzing and protecting data channelled to and from your General Ledger and finding opportunities to automate core reporting processes will surely put financial services firms on a stronger footing for whatever lies ahead.