Financial service firms are facing many challenges today.
For most this has to do with the rapid changes in technology and customer expectations. While most financial firms have embraced the technology revolution, there are still many challenges these companies must face.
These are some of the challenges that they face:
We all are prime targets for cybercrime but financial service firms especially. Because of the sensitive data, we are more likely to be a target. Statistically financial service firms were hit 300 times more than other businesses.
These attacks cost financial service firms millions of dollars and indirectly cost us as well. They need to continue coming up with innovative solutions to stay ahead of these cybercriminals.
Keeping Up with Regulators, CRS requirements, and new directives
Regulations in the financial service industry continue to increase. Banks are spending a large part of their income on making sure they’re compliant. They are focusing on themselves (not being exposed to fines) and not the best interest of their clients.
The whole idea of the new directives for KYC (Know your client), the source of money, and the CRS (Common Reporting Standard) was to fight money laundering and target black money globally. Banks that traditionally made a fortune from dealing with money without asking any questions about the sources started to implement the directives, and the result was a direct hit against their loyal customers and small businesses who found themselves in a nightmare to open, close, or transfer accounts, to transfer monies and to invest monies. As the bank’s legal advisors tried to decipher and implement the directives, mostly harming the most vulnerable and loyal clients who have nothing to do with money laundering or tax evasion. A professor of economics in one of the world’s leading Universities said “the Banks took a wrong turn and now young entrepreneurs will devise ways to provide banks core services more efficiently.” We may see some banks in the future losing their market share significantly or even closing down.”
According to KPMG, there are 10 key regulatory challenges financial service firms will face in 2022:
- Geopolitical change: companies must become more global (as the clients are already global) and expect business change and disruption of what they are used to.
- Divergent regulation: must anticipate continued differences in global regulations among protectionist and localized public policy agendas.
- Data protection and governance: they must protect their data at all costs
- Operational resilience: plan for the unexpected. It will happen
- Credit quality: firms must apply what they’ve learned from past credit cycles
- Capital and liquidity shifts: even though there may be an easing of regulatory capital and liquidity requirements, firms should not weaken their risk management
- Compliance agility: must have a solution for agile streamlined and realistic compliance
- Financial crime: It’s OK to be innovative but don’t do too much at the cost of increased risk for financial crime.
- Customer trust: firms must maintain the trust of the customers
- Ethical conduct: do the right thing no matter what
Consumers continue to expect a lot from their financial institutions. Many want more personalized services from their financial providers.
According to the 2019 Accenture Global Financial Services Consumer Study, one in two consumers wants holistic fiduciary advice for families focusing on their life journeys, goals, and strategies. They want an analysis of their spending habits and advice on how to invest.
Half the survey respondents say they still want an in-person banking experience along with a digital one.
Beating the Competition
Competition within the financial services industry is still robust. Consumers want more personalized service. They also want more automated services with easier access to them. Institutions that provide all these services will dominate their share of the market.
Consumers are less concerned with brand loyalty and identity.
Institutions that take this into account will be the winners in 2022.