2023 will present challenges and opportunities for the financial services industry. Read on to learn which trends are worth paying attention to, and how companies operating in the world of finance can not only weather the economic storm but, with the support of the right software development partner, emerge from it stronger than ever.
Companies face ever-increasing pressure to keep pace with technologies
Staying competitive and keeping up with technology are common goals for companies regardless of industry – but in a fast-moving one like financial services, it is of vital importance. While the range of tools and technologies reshaping how companies conduct business and engage with their clients is vast, there are three key developments to pay attention to.
Open banking: Leverages open application programming interfaces (APIs) to empower third-party developers to engineer applications that serve financial institutions and their end customers. For businesses, this can lead to lower transaction costs, higher conversion rates and reduced service costs. For customers, open banking can deliver faster access, increased transparency and enhanced control of personal finances. These benefits help explain why, according to Statista, the number of open banking users worldwide is forecast to increase at an average annual rate of 50% between 2020 and 2024. In Europe alone, 2020’s 12.2 million open banking users is expected to reach 63.8 by 2024.
Cloud-native systems: The advantages of cloud computing, like increased organizational agility, reduced operational costs and convenient accessibility, have been well documented. The intuitiveness, transparency, and reliable security, whether from public, private or hybrid cloud solutions, has turned reluctant users into committed advocates. Gartner reports that worldwide end user spending on public cloud services alone is forecast to grow 20.7% to $591.8 billion in 2023, up from $490.3 billion in 2022.
Artificial intelligence (AI) and machine learning (ML): While AI and ML offer numerous benefits to the financial software development, perhaps the most advantageous one is the ability to collect, organize and analyze vast datasets in a matter of seconds. This not only saves significant time and resources, but drastically reduces the possibility of error. Moreover, companies can swiftly operationalize this data – turning valuable, up-to-the-minute insights into credible, data-driven strategies. This real-world value supports PricewaterhouseCoopers research which argues that AI’s potential contribution to the global economy by 2030 will total $15.7 trillion.
Implementing these technologies will enhance the effectiveness of a company’s internal processes, free up personnel for high-level tasks and create new revenue streams. More importantly, they will first and foremost exceed end customer expectations and deliver rewarding customer experiences, which, in a fiercely competitive market, should be top priorities for executives. Having in-house development teams with the capacity and competences needed to effectively develop these solutions is a tall order, which is why companies are looking for a software development partner to engineer these technologies, along with other Banking as a Service applications.
Mitigating risks and ensuring compliance remain paramount
While security is important for any business, for the financial services industry, it is crucial. Cybercrime is rampant in the financial industry given the amount of valuable data connected to banks, investment groups, real-estate firms and insurance companies – places people, businesses and governments keep money. Given this vulnerability, extra measures are needed to shore up systems, protect data and reduce threats.
It’s worth remembering that data security and privacy, though often used interchangeably, are not exactly the same thing. Data privacy refers to the ethical (and legal) collection, processing, management and storage of data. Beyond safeguarding users’ data, companies need to ensure regulatory compliance. According to the United Nations conference on Trade and Development (UNCTAD), 137 out of 194 countries have put in place legislation to secure the protection of data and privacy, though regulations vary country to country. For companies operating across borders, abiding disparate rules requires evolutive, dependable solutions.
Data security refers to protecting personal data from unauthorized third-party access and exploitation. There are several strategies which help to defend against threats, including encryption (changing script into an unreadable format), data masking (hiding personally identifiable information), data resiliency (how an organization recovers from failures like power shortages) and data erasure (using software to overwrite data on storage devices). Companies may not have the in-house workforce or skillsets to develop these strategies, which is why many turn to external development teams.
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Financial service companies face ever-increasing pressure to protect data and stay complaint to dynamically changing regulations. By engaging the services of an experienced software development partner, firms can smoothly adopt technology that ensures the safety and accessibility of data, while guaranteeing full compliance and reducing exposure to legal fines, lawsuits and reputational damage.
Accelerating a digital transformation, without losing sight of your core business
Across the financial services world, companies need to find the right balance between adopting new technologies and focusing on their core business, without getting bogged down with complex technical issues. This is all the more pressing given the economic downturn impacting all industries, but in particular the financial services sector. Bloomberg reports that between January and September 2022, revenue from dealmaking and sales of new securities at the five biggest US banks fell by 47%. The ability of markets to rebound in 2023 is already in doubt, with sizeable reductions in staff expected across the financial world. Goldman Sachs, one of the world’s most influential investment firms announced cuts that will impact 3,200 employees – roughly 6.5% of its workforce. Since the priority of financial services companies should (and will) be on maintaining core businesses, the technical innovations they require would benefit from outsourcing to an experienced software partner who has the ability to learn the business context and technical competences to engineer solutions that generate real-world value.
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While these innovations will sometimes be transformative, like moving from monolithic architecture to microservices, migrating to cloud or implementing Internet of Things (IoT) technology or embedded software, the support from an external development team is not solely connected with disruptive change. Indeed, the easy ability to scale up and down, depending on the scope of work, makes it easy for these teams to complete a wide range of tasks – big and small. For financial services, this could simply be about helping to create unified customer experiences or enhancing user interfaces (UI) and user experiences (UX).
For companies in the financial services industry, working with a software development company means not only ramping up capacity and speeding up time to market, but also maximizing resources. Additionally, a software partner:
- Assumes the burden and costs of finding and retaining talent,
- Possesses the niche expertise required for emerging technologies,
- Elevates in-house staff through knowledge-sharing and proven best practices.
When searching for a software partner, CTOs and other executives should refer to case studies, listen to client testimonials and evaluate whether a prospective partner is a good cultural match. With over two decades experience supporting companies in the financial services industry, teams spread out throughout Latin America and Europe and a culture that prioritizes openness and ownership, it’s easy to see why organizations turn to Software Mind. Fill out the form below to get in touch with experts who are ready to learn about your goals and build a cross-functional team to help you achieve them.
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About the authorMaureen Fitzpatrick
An Account Executive with over 25 years’ experience helping financial services firms tackle challenges and find innovative solutions to meet their most demanding business needs, Maureen has worked with companies around the globe. Over her career, she's delivered solutions for a wide range of financial services firms, from banking and brokerage to alternative investment firms. A keen interest in emerging technologies and practical use cases has enabled her to gain the insights necessary to understanding how the business of financial services operates and how companies can transform in a rapidly changing world.