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Trends 2023: Financial Services Industry Overview


11 min read

The adoption of digital technologies in financial services is gaining momentum. Cash transactions, face-to-face meetings with financial advisors, and even ATMs are all aspects of financial services that are becoming less common.

The convergence of customer demands, technological advances, and government choices will significantly impact the direction of the financial industry market trends in 2023.

Here are the six most important things that will shape the future of this industry, which changes quickly.

We hope that this overview of the financial sector will help you learn more about this business that is always changing and help you make better decisions.

What is the financial services industry?

The term “financial services” describes a wide range of goods and services the financial sector offers, from insurance and money management to payments and digital banking.

Credit card issuers and processors, established banks, and new entrants are just a few examples of the many players and interconnected mechanisms in the financial services industry. The financial services industry overview tells us that many people have decided to take care of their finances from the comfort of their homes due to the ongoing coronavirus epidemic. To keep up with this trend, banks, and new fintech companies are improving their technology and adding to what they can do with remote banking.

Financial services industry overview

Private, retail, and business banking are three broad categories that get under the influence of financial industry trends. These three groups represent the entire landscape of key players and influencers for businesses and organizations looking to climb the corporate ladder.

Personal Finance

Personal finance involves budgeting, saving, and spending one’s own income and other monetary resources over time, taking current expenses and planned purchases into account. Companies in this field prepare people for every important life event, from buying their first car to saving for retirement.

The financial sector outlook shows that as more money management moves online, customers are looking for financial institutions with online platforms and mobile apps that let them manage their personal accounts and keep track of their financial health from anywhere.

Banks and credit unions that provide personal finance management (PFM) services tend to attract younger, tech-savvy customers. A few large companies dominate the personal finance industry.

Chime: An American neobank whose mobile app offers banking services for free. They have developed a new Visa card to help people get a loan. Chime has also strengthened customer loyalty by providing $200 incentive check advances to one hundred thousand consumers during the coronavirus epidemic.

N26: A virtual neobank based in Germany. In addition to a free bank account and personal loans, N26 also offers a set of tools for personal finance management, which is an important insight of the financial sector outlook for 2023.

Personal Capital: A D2C (direct-to-consumer) digital wealth manager based in the United States. It helps people save money and prepare for retirement.

Varo: The first neobank will receive an FDIC license and a national bank charter in 2020. Insider information says that once Varo gets the go-ahead, it will add personal loans, credit cards, and mortgages to its offers.

Cleo: This service has an interface similar to Facebook Messenger, which you may be familiar with. You can now download the app, which uses an AI-powered chatbot to track your finances and provide customized recommendations based on your spending habits and other factors.

Consumer Finance

Consumer finance allows customers to make large purchases over time, such as a home or education, with manageable monthly payments. The financials sector outlook shows us that the main companies in the consumer financial services industry are credit card companies, mortgage banks, and companies that offer personal and student loans.

Here are examples of companies in the consumer finance industry, but you shall understand how big is the financial services industry:

American Express: A widely used payment method due to its convenient credit card services and many rewards programs. American Express has teamed up with Marriott Bonvoy to offer points for spending at gas stations and restaurants on the credit card, focusing on travel as a way to change the benefits because of the epidemic.

Ally Financial: Ally Financial has been operating exclusively online since going public in 2014. It offers a range of banking products, including mortgages, credit cards, and personal loans, as well as car loans and insurance.

LendingTree: The largest online lending marketplace in the United States. If you’re looking for a loan, LendingTree can help you get the lowest rates on anything from a car loan to a mortgage, a personal line of credit, savings and checking accounts, and even insurance.

Corporate Finance

According to the financial services industry report, investments, capital structure, value-added initiatives, and resource allocation are all aspects of a company’s financial activities that come together under the umbrella term “corporate finance”.

Accounting, analysis, treasury, and investor relations are all important parts of corporate finance, which aims to increase the value of a company.

In the world of corporate finance, there are three main ways to raise capital:

The value of a company’s privately held shares, as opposed to its market value on a public exchange. Wealthy individuals often buy shares of bankrupt private firms or shares of public companies that have been around for some time but are in difficulty. The finance industry outlook shows that they have a significant financial impact on the businesses they support.

Capital invested in a new business in the hope of its rapid and sustainable growth is called venture capital (VC). Due to the high risk of investing in new businesses, venture capitalists usually put in less than half of the company’s equity.

Angel investors are wealthy individuals looking to invest their money in new firms after studying a financial industry report. When angel investors invest, they essentially buy a part of the firm from the founders.

Financial services industry challenges and problems

Since the COVID-19 epidemic started, the financial sector has been known for being able to handle high levels of volatility well.

Around the world, financial service providers have responded to the epidemic with remarkable resilience and flexibility, helping individuals, businesses, and governments get back on their feet.

The relevance of AI and ML will grow as the banking industry invests in technology to replace old alternatives, which are financial industry trends 2023. As a result of the pandemic and the restrictions it put on traditional banking and insurance services, market leaders have put more money into projects that change how technology works. This has given their digital channels a new lease on life.

Financial services companies want to find ways to get customers and take care of them without using branches. For the past few years, they have been focusing on digital omnichannel, and now they are also looking into deep technology areas like meta-space and Web 3.0 that could change the customer experience.

Digitalization with an increased emphasis on cloud technologies is one of the biggest financial sector trends and will pave the way for contactless, highly efficient customer service and lead to a reallocation of funds for this purpose. In the financial services industry, operating paradigms are changing, so for local digital businesses to gain market share, they will need a new way to go to market (digital assets, metaspace, fintech, embedded finance, etc.) or form partnerships.

Post-COVID-19, the BFSI sector has made significant progress toward digitalization. Given the innovations that fintechs have brought to financial services, especially customer experience, many large banks and insurance companies have followed in their footsteps or partnered with several fintechs. The current architecture of the digital stack should be complemented by expertise in data acquisition and storage, and then an analytical layer should be overlaid on top of it.

By 2025, various regulatory measures will have an impact on the industry and become the biggest financial services industry challenges, especially on account aggregators, digital lending guidelines, regulator expectations on data availability and depth of regulatory reporting, collaborative lending initiatives, and most importantly, ensuring a secure way to deliver financial services to customers. Financial and banking organizations have begun to align their digital transformation efforts with environmental goals. The degree of digital change can be partially measured by its sustainability.

In 2023, digitalization, decentralization, and decarbonization will remain the three main areas of innovation for the company. While digitalization will continue to drive efficiency, reduce costs, and expand revenue streams by diversifying into new products and services, decentralization will offer entirely new business models. Decarbonization and ambitious goals to reach zero emissions will continue to be the most important things in the sector. They will also have a big effect on long-term investment strategies and business priorities.

The financial services and insurance industry (BFSI) is pushing to incorporate environmental, social, and governance (ESG) objectives into its products, procedures, and overall business strategy. The financial services industry outlook shows that international banks and other financial institutions will increase their efforts to mitigate the risks associated with climate change. Currently, Europe is far ahead of the rest, with the US and Asia playing catch-up.

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Digital transformation on the cloud

The cloud has become a critical component of modern banking. The cloud is more about the methods used to perform computing than the physical location of that computing. The cloud is increasingly seen as an entry point to advanced ideas, advanced processes, and higher levels of automation.

The financial services industry outlook 2023 tells that most banks and other financial service providers can greatly benefit from the use of cloud computing. Financial institutions can become truly customer-centric and data-driven when they break free from the constraints of legacy technology. Similarly, wealth management is evolving into an ecosystem industry based on communication and resource sharing. To participate in this new environment, digital transformation and open technologies are essential.

Minimize costs and maximize profits

The banking and wealth management industries are constantly adapting to the changing economic landscape driven by technological advancements, according to the financial services sector outlook. This lets financial organizations deal with problems that used to be incompatible, like growing their business while cutting costs and getting better at managing risks.

Improve the user experience

In an era of global turmoil, it is important to retain customers. Research shows that half of the clients believe that their chief financial officers need to improve their digital skills to meet rising customer expectations. In the post-pandemic era, customers still value choice, even though phone and video conferencing are more popular than face-to-face meetings in branches.

Industry mergers and cooperation

Mergers between the banking and investment sectors are gaining momentum if you outlook financial services. People with multiple institutions often want to combine their accounts and negotiate more favorable terms. It is important to remember that the decision to separate banking and wealth management was made for reasons that were more beneficial to the banks than to their customers. Providing customers with what they want today and supporting future mergers and acquisitions requires digital technology.

Data-driven approach

Thanks to data and analytics technologies, decisions made in the front office are no longer based on guesswork. Financial institutions need advanced technologies such as artificial intelligence and machine learning to make sense of their data and unlock its full potential. Research shows that 43% of asset management and pension providers will invest in improved analytics in the next year, so if you don’t, your competitors will.

Large-scale, real-time solutions

The shift to instant financial transactions is gaining momentum around the world. An overview of the financial services industry shows that while real-time payments have been around in other major economies for more than a decade, growth has been slower in the United States. This is partly because there are so many different banks in the United States (about 5,000) and so many different states (50). In fact, real-time is ushering in a new era of immediacy in banking and wealth management, even though most of the talk about real-time is about P2P payments.

By the end of 2022, 45 million transactions will have been processed through The Clearing House’s RTP network. While this is happening, the US Federal Reserve is planning to roll out its real-time payment scheme in 2023. According to preliminary observations, the advent of real-time opens up endless possibilities for creativity. Customer expectations will rise, and as a result, standards for what constitutes a positive interaction will change. The shift to real-time payments and financial services is already underway, so now is the time to be ready.

Take advantage of ESG

Despite rising energy prices, 41% of asset managers consider ESG (environmental, social, and governance) investments to be critical and expect them to grow in the coming years. Having strong environmental, social, and governance (ESG) competencies is now a competitive advantage for asset managers. Successful ESG investments, however, are data-intensive and technology-dependent. In fact, an asset management organization’s ESG strategy cannot be separated from its technology approach.

Embed finance

Thanks to modern technology, financial institutions can provide services where and when they are needed. If this practice is used by a lot of wealth managers, it will help them reach new markets and give their current clients new and useful services.

The current economic uncertainty is temporary, like all storms. The old saying goes, “You don’t turn off the main engine when flying through a storm.” With a solid foundation of “cloud first”, financial institutions can be prepared for the upswing and a bright, conflict-free future in which data will be the driving force to go beyond customer satisfaction. Now is the time to dive headfirst into the work required to create the financial services of tomorrow.

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Finding a direct path to a better tomorrow is not unusual.

The financial services sector has demonstrated its resilience and adaptability in the face of unprecedented uncertainty over the past two years. Real estate, insurance, investment management, banking, and capital markets organizations around the world have responded to the epidemic with remarkable resilience and adaptability, helping individuals, companies, and governments get back on their feet.

However, progress is continuing. Now that the world is facing a perfect storm of geopolitical and economic crises (the Russian war in Ukraine, inflation, supply chain disruptions, and the possibility of a regional or global recession), 2023 promises to be the year when more regulation and transparency requirements become market realities.


What is the future of finance 2023?

The following trends primarily shape the future of finance in 2023:

  • Digital transformation on the cloud
  • Better user experience
  • Industry consolidation
  • Data-driven approach
  • Scaling and real-time processing
  • ESG practices
  • Embed finance

What is the future of the financial services industry?

Although traditional banks still hold the lion’s share of the business lending market, the fintech ecosystem is projected to expand at a CAGR of 6.3% between 2022 and 2028. The financial technology sector is expected to continue its rapid growth in 2023.

By the end of 2022, mobile chatbots, cashless banking (including ATM withdrawals), and personalized messages from banks and insurers will become commonplace.

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