Lately, the finance industry has gone through sudden digitization pushed by the impact of COVID-19. Banks switched to internet banking, whereas the trading floors moved to remote trading. In short, the finance industry was able to weather the digital tsunami and continue its operations. However, more significant challenges await in 2022. The technological disruptions would change the way financial institutions function and operate.
Besides digital mediums, we would experience high reliance on digital currency. Likewise, personal trading and mobile banking applications will dominate the finance industry. At the same time, robo-advisory services will make it more convenient for people to invest money, unfolding new investment opportunities. It will also unravel saving forums that will promise financial security upon retirement.
All you have to do is monitor all the tech trends and adapt to these changes. If you want to learn more about it, have a look below. Here we are highlighting six transformations in the finance industry to look out for in 2022.
1. Smart Saving Avenues
In 2020, high-interest rates made it lucrative for people to save money in fixed deposits and debt securities. As liquidity has found its way into the stock market, will investors be lucky again in 2022? Probably, not. Thus, this is the time to explore technology-led saving avenues. For starters, you can hedge gold against inflation. In addition to being a precious metal, its value never depreciates.
Moreover, people with long-term saving plans can open up a Roth IRA account instead of a conventional retirement fund. It charges tax on money going into your account but makes all future withdrawals tax-free, promising a secure future. For more clarity, you can perform a Roth IRA conversion analysis to maximize your retirement saving efforts. It would also enable tax diversification since you can hedge against the rising tax rates through this account.
2. Expansion of Digital Currency
Back when we heard of bitcoin, everyone thought it to be a new fad. Little did we know that this digital currency would change the dynamics of the finance industry. In 2022, we will see cryptocurrency’s integration with almost every area of the financial world. From eCommerce payments, savings to insurance, crypto is likely to become the primary mode of payment.
Therefore, entrepreneurs have to build financial solutions within this ecosystem. They have to create ways to accept payments through crypto and promote the concept of digital currency. Tesla’s owner has also stepped into the crypto world, enabling people to buy cars through cryptocurrency. Thus, now is the time to configure a wallet and set up a payment system integrating digital currency. Initially, the user rate for crypto payments would be lower than credit cards or PayPal. Still, it would keep you ahead of the industry curve.
3. Blockchain Technology
Nowadays, blockchain has become one of the leading innovations in the finance industry. It aims to reduce fraud, secure transactions, and manage risk within the global financial system. But unfortunately, not many financial institutions are well-acquainted with this technology. As blockchain is yet to become a significant part of finance, let’s help you learn more about it.
- Blockchain makes the finance industry more transparent. It encourages people to perform transactions on a public ledger, making it easy to detect and track fraudulent activities.
- Payments made on blockchain are more traceable than in traditional banking, closing doors for money laundering.
- Blockchain also provides an opportunity for consumers to benefit from low-cost financial services. After all, there isn’t any intermediary, i.e., the bank involved in the transactions.
4. Evolution of Zero Trust Networks
Today, trading is no longer confined to corporate floors. The new world of financial architecture will decouple finance-related activities through zero-trust networks. These enable location-independent secure access, allowing people to trade from anywhere.
In addition, the system’s operational resilience will incorporate global infrastructures like the cloud. The versatility of this network will allow investors to trade beyond the borders. Hence, they can purchase stocks, bonds, and other financial instruments in countries offering higher returns. Above all, the zero-trust networks decouple security from the complexity of IT infrastructure. Instead of firewalls and network protocols, it maintains data assets and focuses on identity verification. Thus, securing all the financial information from the risk of potential cyberattacks.
5. Buy-Now Pay Later Stores
FinTech firms are jostling to offer millennials interest-free payment plans. Customers have different credit options available, whether purchasing a Boohoo’s satin skater dress or Apple’s iPhone 12. Out of which, the ‘buy now pay later’ stores have exploded. Some even call them the ‘future of millennial finance.’ After all, it is a way for retailers to make customers spend more money and boost revenue generation. Thus, they happily pay lenders generous commissions too.
As this is becoming a trend, every entrepreneur should integrate the “buy now pay later” option on their websites. You can make people sign up for a credit agreement by collaborating with a financial institute to make it a two-click process. They would handle all the hard credit checks, whereas you can enjoy increased sales and profits. Remember to introduce interest-free payment plans to ensure transparency.
6. Robo-Advisory Services
The inevitable takeover of robots in the wealth management field is an emerging trend across the finance industry. It would be more like an automated process with mathematical algorithms designed explicitly for investment decisions. In other words, it would be an online portfolio management solution that will allow people to make investment decisions. The robots will deliver product proposals to clients via a smartphone app, uncovering potential investment options.
At the same time, Robo-Advisors can create investment portfolios and manage them every week. The algorithms will monitor the fluctuations in the market, providing clients with all information beforehand. For instance, if a stock is about to crash because of market dynamics, the advisors will inform immediately, helping you reduce losses. These advisors will keep a real-time check on selected investment strategies, ensuring investors enjoy substantial returns.
For companies to remain competitive, they must upgrade their financial services. Besides providing more value to the customers, you have to stay on top of industry transformations. These would reshape the infrastructure, changing the way how things happen. From modern-day saving techniques to bitcoins, the finance industry is evolving. Therefore, keep a close eye on emerging trends and adapt quickly to grow your business.