All things considered, 2017 was a relatively good year for the financial industry, both in the U.S. and globally. However, despite the generally favorable conditions, such as improved growth prospects, better footing in the face of ever-changing regulations, and favorable shifts in interest rates, some companies reported a lack of positivity in the financial environment. Instead, many cited a growing concern regarding the future of the industry.
Many questions remained unanswered, questions that could have significant consequences if left disregarded. Though the year prior had been solid by most standards, the uncertainty of future regulatory changes, the acceleration of technology, and the growing distance between what institutions were offering and what their customers truly desired left many apprehensive as they looked to the upcoming year.
The World of Finance in 2018
Now midway through the third quarter of 2018, there appears to be a tonal shift taking place across the landscape. The anxiety that many felt upon entering the new year seems to have been replaced by an air of cautious optimism. There are still many obstacles for the financial industry to face, overcome, or adapt to, such as emerging technologies, the continued rise of fintech companies, societal shifts in expectations, artificial intelligence, cybersecurity, and much more. However, for savvy companies that are willing to make short-term sacrifices for the sake of long-term strategies and growth, the future seems bright.
The financial landscape is in constant flux, which can make it difficult to pinpoint the challenges that require the swiftest attention. There appear to be three primary obstacles that will continue to demand the most attention during the remainder of 2018 and beyond:
- The growth of customer expectations
- The need for rapid modernization
- The demand for advanced cybersecurity
Addressing just one of these challenges could be both difficult and costly for financial institutions, whether on a global or local scale. The truth is, however, that for companies to succeed in the current financial environment, they must address each of these obstacles simultaneously.
1. The Growth of Customer Expectations
As innovation continues to accelerate, the demands of customers grow in tandem. This is one of the most significant hurdles that financial companies have been faced with over the last few years. The majority of customers today are driven by both convenience and capability. This means that the companies that do not already have the capability of mobile access have already fallen behind the curve. On top of that, many customers understand the value of user experience, and they require the very best available — from customer service to app design.
Additionally, the types of marketing that these customers respond to has also changed, necessitating a shift from financial companies to more customer-focused strategies. All things considered, it is clear that this places many financial institutions in a position that requires rapid modernization and reimagined understandings of customer needs in order to both meet those demands and compete with the plethora of technologically advanced fintech companies.
“FIs must modernize and reimagine their customer’s expectations.”
2. The Need for Rapid Modernization
The necessity of this modernization is easier said than done, however, as most financial institutions operate on what one writer for Deloitte calls, “a hodgepodge of systems, platforms, software, and tools — much of its legacy infrastructure that demands significant resources and capital to ensure that operations run smoothly.”
The most prominent challenges here are the cost of modernization, the simultaneous and seamless integration of multiple solutions from a variety of internal and external sources, and ensuring that all regulatory compliances are being met.
3. The Demand for Advanced Cybersecurity
On top of that, financial institutions must ensure that cyber risk is being mitigated at every turn. As cyber threat continues to increase in both predominance and complexity, so too does funding for cybersecurity and cooperation between financial institutions, regulators, and counterparties.
This also means that the expectations of companies for cybersecurity have also risen dramatically, from both regulators and customers alike. The mitigation of cyber risk must be ingrained in every modernization that a financial institution undergoes.
Preparing for the Future
From this, it is clear that modernization, meeting the changing needs of customers, and increasing cybersecurity are all fundamentally linked. No one element can be addressed without considering its impacts on the others. It is for this reason that many businesses in the financial industry find themselves cautiously optimistic.
“Modernization, meeting the changing needs of customers, and increasing cybersecurity are all fundamentally linked.”
2018 has been, and will continue to be, a pivotal year for financial institutions. Despite the significant impact of many changes, financial institutions can overcome them by heavily investing in strategies.
These investment decisions may not be easy. FIs that are committed to their strategies and choose to take short-term losses for the prospect of long-term gains may be able to simultaneously meet or exceed regulations, increase profits, and move into the future with confidence.