6 Financial Services Trends to Watch 

Financial services organisations have always kept a pulse on new technologies, but the global landscape shift in 2020 rapidly accelerated the importance of committing to digital transformation. With very little warning, teams had to radically evolve operations to meet new employee and customer demands.

Now that the dust has settled, it’s time to answer some important questions around the future of financial services. Which changes are here to stay? How should brick-and-mortar locations operate moving forward? How is the industry landscape shifting? How can momentum from the past two years be preserved as digital solutions are made a more permanent part of everyday operations? What’s the right balance to strike between security and customer experience?

To help your team answer those questions and more, Docusign has identified six critical trends in global financial services.

1. Banking customers have more options than ever

In the last few years, the industry has been flooded with new banking options. Challenger and neo-banks like Latitude, Humm, Prospa, Athena, Nano and others have gained traction with their innovative technology and online-only services. Some neo-banks focus on target markets such as SMB loans like Prospa or teenagers like imb Bank. We’ve seen many of the established players launch or acquire digital only offerings like the recent launch of unloan, a fast digital home loan with a discount that increases every year. NAB has recently acquired and rebranded 86400 into Ubank. Bengido and Adelaide Bank’s digital bank is known as Up Money and Up Banking. The major banks have created fintech venture arms like CommBanks X15 Ventures which backs innovative digital solutions and are further cornering niche markets.    

We’ve also seen growth in white-labeling and partnering with other industries. With the rise of embedded finance and banking-as-a-service, tech giants and retailers are joining the mix and redefining the banking landscape. It’s clear that the evolving marketplace is full of new ideas and if a bank wants to stay competitive, innovation is necessary.

2. Banking customers increasingly expect a mobile-first experience

Besides competition from new players in the market, banks also face pressure from existing and prospective customers who embrace digital-first transactions. This is not a trend that is exclusive to the pandemic. 80% of Australians now prefer to do most of their bank services online or by phone. Initially online banking consisted of day-to-day transactions and bill payments but this has now extended to larger transactions like loans and other more complex transactions. One of the major Australian banks reported a 32% decline in branch usage since 2019. The way to provide customers with better service and retain their loyalty is to improve their in-app experience. According to ABA data, in Dec 2021 65% of home loan value was refinanced with another bank. That’s up 5% YoY. This is an indicator of how hard it is to retain customer loyalty and consumers' current willingness to try new or different options with better digital experiences and faster decisioning.

Poorly designed digital experiences are a primary attrition driver for banks, and younger generations in particular favour mobile devices for activities like opening a deposit account. 

People are still banking, they’re just managing their transactions on their mobile devices, either self-serve or via assisted online experiences. For more complex transactions, bankers still exist but they are now leveraging digital technologies to support their interaction with customers in a more convenient and delightful way when needed. 

With these preferences in mind, it’s no surprise that banks rank customer digital experience as their number one business challenge and priority investment area for the coming year. Financial  institutions looking to elevate their customer experience should consider increasing SMS outreach efforts, improving self-service capabilities with embedded tools, simplifying complex applications with guided experiences and adjusting processes for recent changes in legislation that allow new types of agreements and transactions to be signed electronically or digitally. The goal of these investments is not just to meet customers where they are now, it’s to anticipate where they are going and exceed those expectations.

3. Financial institutions must adapt to accommodate a hybrid workforce

Another important audience to serve is employees. In conjunction with customer preferences to take banking outside the four walls of a local branch, employees are embracing work from more locations. Among financial institutions, 70% expect to pivot to hybrid work. As part of that shift, they need to thoughtfully consider how they foster collaboration and productivity across remote and in-person environments.

An easy place to start making that transition is the technology ecosystem. By connecting the pieces in that infrastructure and making the entire system easy to navigate, financial institutions can ensure that employees have a smooth interaction from any work location. In the past two years, teams got used to relying on Microsoft Teams, Zoom and Google to keep employees connected. By adding integrations to these communication tools as well as key banking systems (like Salesforce, Docusign, nCino, Digidocs, Nextgen, Pega), financial institutions can streamline workflows and keep employees and brokers connected from anywhere.

Any team preparing for the anywhere economy can start by examining their current internal workflows and identifying manual steps that can be replaced with secure, automated and connected digital tools. It’s the easiest way to prepare employees for success and improve internal efficiency for critical business processes.

4. Investments must be made in cybersecurity and fraud mitigation

Rapidly digitising internal and external interactions introduces an organisation to a series of new security vulnerabilities. Financial Institutions need to innovate in a way that will refine, secure and de-risk processes and systems.

FIs aren’t the only ones keeping an eye on the evolving security landscape. Today’s regulators know that the landscape has changed and are keeping a tighter watch on financial institutions. In addition to existing APRA regulatory requirements, Australia’s new Critical Infrastructure Reforms and mandatory cyber incident reporting are applicable to banking, superannuation, insurance, and financial markets infrastructure including data storage. Embedding monitoring solutions particularly for 3rd party vendors is top of mind for financial institutions. 

Identity management is another hot topic across many industries but particularly for the banking and Public sectors. Robust identity verification solutions with various levels of security, based on the risk and value of the transaction, are core to fraud mitigation. Regulators and industry leaders continue to collaborate through the recent consultation on the Trusted Digital Identity Framework and on further opportunities for the public and private sector to collaborate and innovate new authentication practices and solutions. 

From a global perspective, Australia is an early adopter of Open Banking practices which has  brought greater regulatory attention to data sharing and security. It has also introduced significant opportunities for new innovative and efficient digital processes that allow customers to more easily and quickly complete things like loan applications without having to provide 200 pages of financial evidence as an example. It also means customers can switch products and banks more easily which means competition for financial institutions is more fierce than ever. However, institutions have a great opportunity at the moment to differentiate with unique digital experiences if they plan and execute their open banking strategies well.  

As financial institutions make plans to shore up security efforts, the Docusign team has a few recommendations to keep in mind. First, incorporate various authentication and identification solutions (e.g. multi-factor authentication, knowledge-based authentication (KBA), and electronic identity verification) into your system to enhance security. Manage that system with a robust central administration that tightly controls access to sensitive documents and customer information. Finally, leverage advanced analytics to track activity in real time, detect potential threats and respond to incidents quickly.

5. There are opportunities to innovate and digitise in new revenue-creating areas

If any financial institution is relying solely on traditional streams of revenue, they will likely eventually run into trouble. Overdraft fees on accounts, loans and credit cards have dropped 70% over the past decade further squeezing margins; Australia has some of the lowest merchant fees in the world; and as the Reserve Bank raises interest rates in an effort to combat rising inflation, subsequently, financial institutions may see a decrease in 2022 lending volumes.

Against this backdrop, it’s important for financial institutions to look for other revenue opportunities. Banks are highly focussed on their Digital strategies as a key customer experience differentiator. Easy to use digital experiences with faster turnaround times are significantly shifting market share amongst the major lenders. It’s a matter of digitise or be left behind. It’s not just end customers that are choosing but brokers are favouring banks with integrated digital solutions as well. Financial Institutions are introducing new digital products and services such as the ‘10 minute loan’ for those that qualify in an attempt to further grow revenue and brand themselves as digital first.

Financial Institutions have also reaped the revenue rewards of digitisation by creating greater capacity to serve at a time when new loan commitments rose 86% (since Jan 2020). In the lending space, those that integrated digital experiences were far more prepared to handle the volume, could respond with faster turnaround times and grew revenue and market share over their competitors. For lenders, the biggest challenge in document preparation is repetitive data entry. A digital application process, managed with a contract management tool, is an easy solution to that problem. These tools help financial institutions improve efficiency and lower cost for lending business. 

With strong adoption of digital practices now commonplace for retail and business transactions, financial institutions are focussing on deepening automation. From a process perspective, a contract management solution can integrate contract data with core systems, reduce workflow bottlenecks, simplify signatures and improve analysis with concept-based intelligent search functionality. Digital transformation efforts have also moved towards more complex transactions where even greater benefits can be achieved throughout the contract lifecycle where negotiation and contract analytics are required. .

6. Increasing pressure to improve sustainability

There is more pressure than ever for financial institutions to go beyond superficial “greenwashing” efforts and demonstrate truly sustainable practices. There’s more information than ever for eco-conscious individuals to uncover information about resource consumption and simple lip service will no longer be convincing.

The push is coming from both customers, shareholders and employees. Research shows that 54% of Gen-Z and millennial consumers would consider switching their primary bank based on environmental, social and governance (ESG) factors. These can also be important considerations for prospective employees who are concerned with finding an employer with a mission that matches their personal values.

FInancial institutions need to incorporate sustainability into every part of their operations, starting with a reduction of energy and paper consumption. They can also explore products and services that contribute to broader sustainability efforts, such as green home improvement loans, sustainability linked incentives and ESG-focused investments.

Planning the blueprint for tomorrow’s financial services 

Financial institutions have a significant opportunity to future-proof their systems. These six trends illustrate the direction the industry is headed and proactive financial institutions will evolve to meet expectations. To keep up with all the industry changes and customer demands, they’ll need a more powerful set of business tools.

Security and trust are always at the forefront of financial service providers’ priorities.  Embracing a digital-first approach, sustainability initiatives and streamlined processes for both customer and employee experiences will allow them to stay relevant and competitive in this ever-changing market.