7 Predictions for the Future of Financial Services in 2021

Amid unprecedented consumer discomfort and an unstable social atmosphere, financial services must be ready to pivot.
Headshot of author Michelle Palomera
Michelle Palomera
Expert Contributor
March 16, 2021
Updated: March 31, 2021
Headshot of author Michelle Palomera
Michelle Palomera
Expert Contributor
March 16, 2021
Updated: March 31, 2021

The triple forces of the pandemic, a change of presidential administration in a very heated election year and the incredibly low-interest-rate environment has yielded some important secondary effects in the form of volatile market conditions and major behavioral shifts on the part of both consumers and the workforce.

This has created a blazing crescendo of not only consumer discomfort and an unstable social atmosphere, but also a massive imperative for businesses to pivot and adapt to meet this opportunity.

The banking and capital markets team here at Rightpoint is working closely with clients to plan for 2021 and beyond. Here are my seven predictions for 2021 affecting financial institutions.

 

1. The No-Code and Citizen Developer Movement Will Take Off

A citizen developer is a non-programmer who builds business applications using development tools that require very low levels of coding expertise — or sometimes none at all. The citizen developer movement has been growing in the background for a few years now, and as it accelerates, it reminds us of when traders coded their own algorithms in tools like Excel and now Python.

However, the citizen developer trend will prevail beyond the simple automation of operational workflows. With the emergence of true no-code platforms, it will start to drive and power customer experiences. The newly empowered knowledge workers that are being born out of the workforce shift and the need for speed will be key drivers of this movement, aided by enterprise cost and efficiency directives for automation and integration. Gartner forecasts that three out of four enterprises will lean on multiple low-code development tools by 2024 and that more than 65 percent of app development will hinge on low-code or no-code features.

Also, as Forbes details, there are pros and cons for the citizen developer movement, but we will continue to see no-code platforms quickly rise and become verticalized — which will both add value as cloud and SaaS models take off and drive the need for microservices to enable open banking models and ecosystems.

As a firm that has historically made a living off of custom development, we see this as a next stage of software development maturity and we have invested in understanding this space so we can advise clients on the appropriate solutions and have also scaled up our teams to work on these platforms for clients.

 

2. Values-Driven Initiatives Will Weave Themselves Into the Fabric of Financial Institutions

Sustainable, societal and charitable principles will underpin strategies at institutional, corporate and consumer levels and will start to show up in a multitude of ways including loyalty programs, investing strategies and affinity offerings.

Now more than ever, asset and wealth managers will focus on their customer segments to understand unique needs and interests with regard to environmental, social and corporate governance (ESG) and socially responsible investing (SRI) concerns. According to Forrester, “banks will need to get to know their customers (again)” in 2021. However, not all banks will transition into these initiatives with grace. Those that take the time, care and effort to understand the needs of their customers — both business and consumer (which have changed drastically over the last year) and to develop strategies for improving relationship value — will win.

 

3. We Will See Credit Unions Grow and Innovate

The rate environment and membership structure — together with ESG factors and affinity provided by member-owned banks — will drive further growth in this already fast moving segment of the market. CreditUnions.com lays out three lending trends to inform strategy in 2021. There is a true opportunity here for credit unions to differentiate by using their origin and legacy as key anchors if aligned to regional market needs. We will see several of these trends apply to credit unions as they grow and innovate.

 

4. The Use of Commercial Real Estate Will Transform

This transformation will go beyond the obvious set of changes to physical office space. Real estate will look like more mixed-use spaces that better cater to certain segments. Content plays and new offerings will take off and will seamlessly integrate multimedia with physical spaces. The large players will need to quickly revamp their teams and strategies to make the pivot.

Fundamentally, the shift to distributed work will also require employers to empower their staff with the resilience and flexibility to be adaptive to rapid change. New skills, mindsets and behaviors will be required. These emerging trends will drive long-term transformation toward employee experience as the future of work.

 

5. Well Begin to See Micro Everything

It will be critical that financial institutions have their data and analytics environments in order as well as a firm handle on their customer journeys and patterns to deliver superior service and capabilities — whether that means serving customers in micromoments, creating microcontent or enabling micropayments. We’ll likely see micro-driven automated commerce trending toward auto-bundling and nearly automatic ordering in subscription models too.

Banks need to completely reimagine how to build dialog and trust with their customers within these micromoments.

 

6. Empathy Will Stay in the Front Seat in Commercial Banking

Banks no longer have loan collectors lurking in the shadows; they are very focused on finding creative ways to help their customers now more than ever. Patience and empathy are essential skills for today’s bankers, according to American Banker. This year has been a big learning curve for the banks, and historically the underserved SMB market has suffered from not having the tools to self-serve — nor the level of customer service that the mid and institutional segments have enjoyed. With continued federal aid through PPP, Main Street and other programs, banks now need to fine-tune their new processes and digital offerings to retain their client base. The banks that develop nimble strategies will be the winners and my money is on the regionals who will capture market share from the larger players.

 

7. Many Market Entrants and Exits Will Be Unlikely Bedfellows Along the Way Toward Faster Innovation

FinTech magazine predicts that structural changes will need to occur across the industry, and there will be more partnering, more M&A and more consortia that come about as a result of the pandemic.

Collaboration to solve industry problems and to enable more plug-and-play should bode well for customers in the end. It will be critical for the larger banks and institutions to maintain a growth mindset and form multidisciplinary teams that can run fast at problems and rapidly “norm and storm” within these new partnership configurations — while having enough depth of experience to produce real outcomes. Banking-as-a-service is popping up everywhere, and it’s an example of where we are already seeing these partnerships emerge, especially in embedded finance paradigms.

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