In the world’s largest economy, the U.S., the financial industry accounts for a whopping 7.4% of the country’s total GDP. It’s safe to say that the financial services industry is hugely influential.
For consumers, it’s important to understand the industry and how it works. This will give you a better picture of your finances and banking options.
For those looking for a new career, it’s important to know what the latest financial industry trends are, to better prepare yourself for a new career.
Either way, it’s important that you understand the latest financial industry trends. Are you unsure of what’s new in the financial industry?
Here are what trends you need to know for 2022.
Increasingly Mobile-First
Regardless of your financial institution, more and more are prioritizing mobile experiences. This is more than consumers switching over from website use to mobile use. It’s also the fact that in-person banking has been declining.
The COVID pandemic has only sped up the process. Many have chosen to bank at home rather than risk a public outing. Institutions must focus on mobile banking, and allow customers to do more online via apps.
This is especially important as banking and financial customers have more and more options for which institution to use. Major online retailer Amazon has partnered with Affirm for “buy now, pay later” options. Personal finance company SoFi recently acquired Golden Pacific Bank.
The competition for which bank to use, brokerage to trade with, or budgeting app to download has never been greater.
More Investment Options
Not only are there more financial and banking options, but there are also more investment options than ever before. Traditional investments such as stocks and bonds are still popular, but new securities have emerged.
Cryptocurrencies, NFT art, traditional art, and collectibles have gained increased attention. Some of the more popular cryptocurrencies can be used for online purchases. Some websites will even allow you to purchase real-world real estate with cryptocurrency.
These new investment options are interlinked. For example, you can purchase a digital cryptocurrency. Then you can use this currency to purchase collectible NFT art.
Or you could buy digital land in the metaverse.
More investment options have led to more mobile apps and trading platforms. Investing has become easier than ever.
Improved Sustainability
ESG (environmental, social, and governance) factors are more important to consumers than ever. For younger generations, sustainability is more important than ever. Financial institutions are no different.
Ideally, sustainability should come from a broad range of methods. Energy reduction, reduced paper consumption, and other sustainable incentives are important. Institutions must also realize prioritize funding green projects.
Sustainability isn’t just an issue for customers. More employees are also seeking careers that value social and environmental causes.
Quantitive Easing and Tightening
A newer recent financial trend is quantitive easing (QE) and quantitive tightening (QT). Quantitive easing and tightening have only been used a few times recently in U.S. history, including during the COVID pandemic.
QE is when a central bank (such as the Federal Reserve in the U.S.) buys long-term securities from member banks. Buying these securities adds money to the economy, and causes interest rates to fall. In times of financial crisis, this can stimulate the economy.
QT is the opposite, where a central bank sells its assets. They can also let these assets reach maturity.
Check out this article on quantitative easing and tightening explained. It provides a more thorough explanation of how it works.
Hyper-Personalized Services
More consumers want digital financial offerings that are catered to their specific needs. This could be a range of services, such as spending or saving insights, or real-time analysis.
The financial industry can no longer solely market traditional products to its customers. Customers desire proactive insights and alerts that they can customize.
In exchange for these more personalized services, they are willing to share more personal data. This will require even greater cybersecurity, and a banking institution will have even greater expectations for data security.
New Revenue Opportunities
Financial institutions need to do more than offer new, tailored services. They need to find new ways to create revenue.
Banks have been heavily criticized for predatory practices such as overdraft fees. Some banks have reduced their penalty for an overdraft. However, many still penalize consumers for insufficient funds.
Yet without overdraft fees banks may lose $15 billion annually.
So what revenue opportunities are still available? Some online retailers have seen success partnering with banks to create branded cards. Frequent shoppers can buy from their favorite store and receive card-specific rewards.
Other banks have merged or acquired nonbank companies. Then they integrate their financial solutions into their own products.
Many clients lack knowledge when it comes to personal finance. Robo-advisors, as well as access to human financial advisors, can provide additional value to a credit union or bank.
Further revenue streams can occur due to selling new products to existing consumers, or via expanding their customer base.
This Year’s Financial Industry Trends
The financial industry has been forced to evolve, partially due to evolving technology, and partially due to consumer and commercial demand. Consumers desire greater investment options for all levels of wealth – but they also want to support sustainable investments and companies.
To stay in business, financial institutions should offer smart banking and wealth management options for everyone.
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