The explosive growth of digital technology in the last two decades has permeated virtually every aspect of our daily lives. Every industry now has tech-driven solutions that make the utilization of its products more convenient for consumers. The financial services industry is no exception. If you hadn’t heard, adoption of digital banking products is soaring. Consider the following statistics:
- 73% of Americans access their bank accounts online or through their mobile device.
- The penetration of digital payments reached 78% in 2020.
- The COVID-19 pandemic accelerated the adoption of digital products and services by six years.
Staying ahead of the technology curve is vitally important for financial institutions that want to keep up with borrower expectations. In this article, we’ll highlight the top FinTech trends that you’ll want to tune in to in 2021.
Trend #1: Using Data-Based Insights to Improve Borrower Relationships
Investing the time to learn more about your account holders through the use of data is a value-added exercise. Analyzing datasets allows your institution to develop deeper insights about your account holders’ financial activities. Digital usage gleaned through online activity, website, and mobile apps provides valuable insight on consumer behavior. Financial institutions that adopt data-driven decision-making models can realize measurable improvement with their customer engagement while helping to drive more informed business decisions.
Thanks to advances in data acquisition and analytics, your financial institution now has new opportunities to leverage data-based insights to help build and deepen borrower relationships. Using AI technology with sophisticated data analytics, financial institutions can discover trends within their existing datasets that ultimately lead to better service options for their account holders.
- Upon learning of a major life event, such as a marriage or new child, send a timely message offering an appropriate service. For example, send educational information about college savings plans to a customer with a new child or a child starting school.
- If a customer has borrowed money for a car recently, and they’ve opted-in to receive email communications from you, send helpful information about vehicle protection products.
- Ask for permission to send customers text messages. For those customers who agree, send useful reminders by text, like bank and credit card account alerts, payment reminders, or notices of services your institution offers, such as life insurance.
Trend #2: Biometric Authentication Adds Layer of Security for Borrowers
With the rampant growth in cybercrime, borrowers want to feel secure when it comes to making financial transactions online. Biometric authentication is a method of verifying a user’s identity using their unique biological features, such as fingerprints, facial structure, iris composition, or voice. With the rise of digital banking, it has become increasingly popular among consumers who want an added layer of security. In fact, the global biometrics market is expected to reach $45.96 billion by 2024 as the network formed by partnerships between tech and biometric companies continues expanding.
Trend #3: RegTech Enables Digital Compliance Solutions
Ensuring and maintaining regulatory compliance in the financial services industry is critical, and the laws are constantly changing. Consider the following statistics:
- The financial industry spends over $181 billion maintaining compliance every year.
- Large firms report that the average cost of maintaining compliance runs approximately $10,000 per employee.
- The cost of industry regulation amounts to an 8% tax on financial firms.
RegTech allows financial institutions and other financial services companies to leverage advanced software—powered by big data, artificial intelligence (AI), and machine learning (ML)—to simplify and expedite the compliance process within the framework of existing laws and regulations. This enables them to reduce administrative overhead costs, protect their consumers, and gives their organizations another level of compliance protection.
This compliance-based technology has been praised in the industry for its speed, flexibility, integrative capability, and analytical power.
Trend #4: Omnichannel Payments Options
Modern consumers make purchasing decisions using all available channels, and they’re extending their omnichannel preferences to financial institutions. As a result of experiences in other industries, consumers expect simple transactions and “omni-commerce,” the integration and consistency of payments across channels and devices, to create a seamless, superior customer experience.
This demand for broader choice in payments by consumers in an integrated and consistent manner is in large part due to the very high growth in electronic payments of all types, across all markets. From the growth of payment cards for low-value, day-to-day use, the development of online and now mobile commerce channels, to the growing rates of financial inclusion in all markets, consumers now have more choice in their payment tools than ever before, and increasingly expect a variety of integrated options. As a result, financial institutions must adapt and offer a growing range of cost-efficient payment tools to their customers to further their growth.
In the world of financial technology, failing to keep up means sacrificing account holders. Capitalize on these trends now to grow your existing relationships and make sure your financial institution is top of mind for prospective borrowers.
In our upcoming webinar, Wading in the Digital Payments Deep End? Lessons in Risk Management and UX Design, we’ll take an even deeper dive into why UX design should be a vital part of your payments program. Our experts will also discuss what the shift to digital payments over the last year means for the future of credit unions. Click here to register now!