2021 was a transformative year for financial services, with an extended effect of Covid-19, a low-interest and heavy inflation business environment, and a challenging new regulatory environment in the expansion of cryptocurrencies and online payments.
Financial institutions should focus on the lessons learned from the past year, largely in terms of the importance of innovation in a constantly shifting landscape, to guide their decisions in 2022.
Here are some of the major trends from 2021:
A Strong Step Toward Open Banking
2021 felt like the year when the rubber hit the road in terms of true, widespread FinTech partnerships in the form of open banking, where financial institutions standardized their open APIs in order to attract various FinTech suitors and “cook in” innovation into their offerings with minimal overhead investment.
In this way, financial institutions should thinking of an open API as the one key investment in innovation to make, if they haven’t already. In doing so, they create an environment to largely expand their offerings through collaboration.
Banks and credit unions who focused on their digital offerings were rewarded in 2020 and 2021 during a major shift in adoption of digital and mobile banking. Those who focused on easy-to-use interfaces, pertinent features for their customers and a robust support center gained new fans in the form of older, late adopters of digital banking technology, as well as a streamlined experience for more seasoned online banking users.
An Explosion of Crypto
Cryptocurrencies saw a huge amount of adoption in 2021. The sources of this explosion are varied, but include:
- Prospective value. Crypto, particularly in the form of BitCoin, has been around for a while, and has seen a roller coaster of valuations over time. However, there seems to be enduring interest, and 2021 saw a pool of new investors invest in crypto for the first time, interested in getting in early on what they see as a growing wave of adoption.
- Lack of regulation partnered with increased pool of interest. One of the biggest benefits of crypto is the lack of regulation and fees around it. Additionally, more currencies have entered the market, and while some will likely fail to gain traction or clear regulatory hurdles, the breadth of the pool signals a trend that isn’t going away any time soon.
An Expansion of Online Payments
Contactless payments saw a major boost this year in adoption, and Apple Pay paved the way for the next generation of digital wallets to streamline payments, particularly in a digital venue where login information and other personal details are needed to complete a transaction.
In 2022 and beyond, tap-to-pay solutions as well as real-time payments will grow in popularity and efficacy.
Customer-Centric Business Approaches
Above all else, financial institutions became more customer-centric in 2021, moving away from the traditional model of a secure utility and finding ways to innovate, offer new technology and become more invested in customers’ financial wellbeing.
Specifically, financial institutions shifted away from a technology-first model to a people-first model, mapping out customer journeys, understanding pain points, and then seeking out technology and other solutions to solve those problems.