There’s no doubt that 2020 threw banking, accounting, and finance companies for a loop, but there is light at the end of the tunnel. A new year represents a fresh start, and there are brighter days to come. The financial industry has always been an active one that, in many ways, is the backbone of our country’s economic activity. No matter your niche, these 2021 financial industry trends will help you create a strategy for the coming months.
2021 COVID Legislation
Since the pandemic hit the United States, it seems that there’s been constant discussion of COVID legislation. There have been several passed relief bills that relaxed banking and accounting regulations, extended deadlines, changed maximums or minimums, and much more. Notably, the Paycheck Protection Program created billions of dollars in loans for companies.
These laws were created to keep stability in the financial industry and lessen the economic disruption of the coronavirus. Given the ongoing impact of COVID-19, expect to see more relief legislation during 2021. While we can’t know when additional provisions will be passed or what new rules will look like, we do know that a different administration will be in power. With a House and Senate that seem to be aligned, anticipate faster and bigger legislative changes throughout the year.
Focusing on Better Financial Health
From a financial standpoint, COVID was devastating for millions of people and businesses. Many simply weren’t prepared for an emergency, let alone a disaster on a scale that we’ve never seen in our lifetime. In 2021, we’re already noticing that companies and consumers are rethinking how they plan for their financial health. This can take shape in many different ways.
Will people save more for a rainy day? Will they avoid risk in their investments? Will businesses put money in liquid assets that are easier to access at a moment’s notice? There will be a distinct change, and hopefully for the better. After all, 88% of banks have prepared or intend to prepare more comprehensive crisis management plans. Additionally, new financial health scores are coming out, while many expect new regulations to require banks to help their customers improve their finances.
Digitalization, Automation, and FinTech
While digitalization is not a new trend for the financial industry, it is one that is accelerating at a fast pace. COVID forced many industries to rely on digital initiatives, and this sector is no different. As 2021 continues, more accounting firms and departments will rely on cloud accounting services. This means they can avoid issues related to scalability or an in-house IT infrastructure. Cloud accounting allows for the real-time sharing of data, analysis, and reporting, and empowers accountants to focus on their expertise like never before. This is supported by the fact that over half of executives believe automation will have a huge impact in accounting.
Fintech, or financial technology, was also thrust into the spotlight last year. Those who hadn’t already been pursuing something in this area started to, and even more will in 2021. Many see fintech as an opportunity, so the demand will be higher than ever. Development of these financial technologies is accelerating as they move up the deposits and payments value chain. Whether it’s payroll technology for employers or fintech-as-a-service for smaller banks, financial technology is becoming more robust, safer, and easier to access.
Customer Engagement
In the midst of today’s digitalization, banks and other financial firms are striving to better engage their customers. Some may have explored digital channels and tools in the past, but in 2021 they will be an expectation. Organizations are relying on data to optimize their interactions across platforms while modifying their service delivery models. Customers want the ability to chat online, call, or even zoom with their advisors. Plus, 39% of banks plan to start using AI-based robot banking assistants in their biggest branches in 2021.
As banks and financial companies make the customer experience stronger and smoother, they’ll also seek to build more trust. Money is a delicate topic, and studies show that 54% of people trust at least one tech company more than they trust their own bank. Building relationships and proving trustworthiness to customers are top priorities, so expect to see new trends that support these priorities emerge.
Finding Purpose
Big banks and other large financial institutions have been villainized in the past as entities that exist solely to make money. While we know that’s not true, there was clear social change during 2020 that can’t be denied. Whether it’s a reaction to rising racism or to facing the prospect of mortality during quarantine, financial industry consumers and employees are focused intently on finding a greater purpose and meaning in life. That means banks, accounting firms, and other financial companies must follow suit.
Industry professionals are downloading mental health and meditation apps by the millions, a big increase over the past. Companies in touch with their workforce have already covered these types of apps as benefits to support their teams, setting an example for other financial employers. Additionally, 54% of CFOs plan to make remote work a permanent option in an effort to provide a healthier work/life balance.
Deloitte points out that the larger purpose of financial institutions is changing as corporate responsibility continues to increase. Organizations are revisiting their values, not only thinking about how they can support their employees and customers but asking themselves how they can support their local communities. Where are they donating their time and money? What positive impact are they making on the world? And, importantly, where do they stand with their diversity and inclusion initiatives? Environmental, social, and governance (ESG) reporting is now an important KPI, and it will spur companies to revise their strategies throughout the year.
2021 Financial Industry Trends
We’re not totally out of the woods yet, but we know 2021 will be a better year. The above financial industry trends will be shaping the foreseeable future, and as life goes back to normal later in the year, new opportunities and trends will emerge. By keeping up with what’s going on in the sector and adjusting strategies accordingly, your bank, accounting firm, or other financial organization can enjoy a successful year.
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