Monday, December 21, 2020

2021 Predictions for Financial Services

Innovation / Strategy

The triple forces of the pandemic, a change of administration in a very heated election year, and the incredibly low interest rate environment has yielded secondary effects of volatile market conditions, and major consumer and workforce behavior shifts. This has created a blazing crescendo of not only consumer discomfort and an unstable social atmosphere, but also a massive imperative for businesses to pivot and adapt to meet this opportunity.


The Banking and Capital Markets team here at Rightpoint is working closely with clients to plan for 2021 and beyond. Here are my seven predictions for 2021 affecting financial institutions.

1. The No-Code and citizen developer movement will take off.

A citizen developer is a non-programmer who builds business applications using development tools that do not require, or only at very low levels, coding expertise. The citizen developer movement has been growing in the background for a few years now and as it accelerates it reminds us of when traders coded their own algorithms in tools like excel and now Python. However, the citizen developer trend will prevail beyond the simple automation of operational workflows — with emergence of true no-code platforms it will start to drive and power customer experiences. The newly empowered knowledge workers that are being borne out of the workforce shift and the need for speed will be key drivers of this movement, aided by enterprise cost and efficiency directives for automation and integration. Gartner forecasts that three-quarters of large enterprises will use at least four low-code development tools by 2024 and that low-code and no-code  will make up more than 65% of application development activity.


Also, as Forbes details, there are pros and cons for the citizen developer movement but we will continue to see no-code platforms quickly rise and become verticalized, which will add value as shift to the cloud and as-a-service models take off and drive the need for microservices to enable open banking models and ecosystems. As a firm that has historically made a living off of custom development we see this as a next stage of software development maturity and we have invested in understanding this space so we can advise clients on the appropriate solutions and have also scaled up our teams to work on these platforms for clients.

2. Values-driven initiatives will proliferate through the fabric of financial institutions.

Sustainability, societal and charitable principles will underpin strategies at institutional, corporate and consumer levels and will start to show up in a multitude of ways including loyalty programs, investing strategies and affinity offerings. Now, more than ever, asset and wealth managers will focus on their customer segments to understand unique needs and interests with regard to Environmental, Social, and Corporate Governance (ESG) and Socially Responsible Investing (SRI) concerns. According to Forrester, “banks will need to get to know their customers (again) in 2021.” However, not all banks will transition into these initiatives with grace. Those that take the time, care and effort to understand the needs of their customers – both business and consumer (which have changed drastically over the last year) and to develop strategies for improving relationship value  will win. 

3. We will see credit unions grow and innovate.

The rate environment and membership structure together with Environmental, Social, and Corporate Governance factors and affinity provided by member-owned banks will drive further growth in this already fast-moving segment of the market. lays out three lending trends to inform strategy in 2021. There is true opportunity here for credit unions to differentiate by using their origin and legacy as a key anchor if aligned to regional market needs. We will see several of the trends listed in this blog apply to the credit unions as they grow and innovate.

4. The use of commercial real estate will transform.

The transformation will go beyond the obvious shift of changes to the physical office space. Real estate will look like more mixed-use spaces that better cater to certain segments. Content plays and new offerings will take off and will seamlessly integrate multi-media with physical spaces. The large players will need to quickly revamp their teams and strategies to make the pivot.


Fundamentally, the shift to distributed work will also require employers to empower their staff with the resilience and flexibility to be adaptive to rapid change. New skills, mindsets and behaviors will be required. These emerging trends will drive long-term transformation in the future of work

5. Micro-everything!

It will be critical that financial institutions have their data and analytics environments in order, as well as a firm handle on their customer journeys and patterns to deliver superior service and capabilities in the micro — whether that means serving customers in the micro-moments, creating and providing micro-content or enabling micro-payments. We’ll likely see micro-driven automated commerce driving toward auto-bundling and nearly automatic ordering in subscription models as well. 


Banks need to completely reimagine how to build dialog and trust with their customers within these micro-moments. Learn more about how to identify the micro-moments using research.  

6. Empathy stays in the front seat in commercial banking.

Banks no longer have loan collectors lurking in the shadows – they are very focused on finding creative ways to help their customers now more than ever and patience and empathy are essential skills for today’s bankers according to American Banker.  This year has been a big learning curve for the banks and historically the underserved SMB market has suffered from not having the tools to self-serve nor the level of customer service that the mid and institutional segments have enjoyed. With continued federal aid through PPP, Main Street and other programs, banks now need to fine tune their new processes and digital offerings to retain their client base. The banks that develop nimble strategies will be the winners and my money is on the regionals who will capture market share from the larger players.

7. Many market entrants and exits will be seen and unlikely bedfellows along the way to enable faster innovation.

As stated in FinTech Magazine, structural change will need to occur across the industry and there will be more partnering, more M&A, and more consortia that come about as a result of the pandemic. Collaboration to solve industry problems and to enable more plug and play should bode well for customers in the end. It will be critical for the larger banks and institutions to maintain the growth mindset and form multi-disciplined teams who can run fast at the problems and rapidly norm and storm within these new partnership configurations but have enough depth of experience to produce real outcomes. Banking as-a-service is popping up everywhere and is an example of where we are already seeing these partnerships emerge, especially in embedded finance paradigms. 


Whether you need help creating a new banking product or service or redesigning and innovating something that exists, our team is at the ready. Connect with our experts today.