According to a report published by World Bank, 71% of people in developing countries have a financial account and around 1.4 billion people worldwide are still unaware of financial services.
The finance sector is one of the fundamentals of the world economy. It is a set of institutions, markets, and legal & regulatory bodies that permits all transactions. According to the International Monetary Fund (IMF), financial services are process by which individuals and businesses acquire financial goods using payment modes such as includes electronic fund transfers (ETFS), debit and credit cards, and checks.
The pandemic and the recent bank crisis of Silicon Valley Bank (SVB) and Signature Bank, global markets are still showing some strains with the rising interest rates across the globe. Countries such as Germany and New Zealand entering into a recession, the world GDP has surged from year-on-year growth of 6% in 2021 to 3.1% in 2022 but the adoption of technology-enabled innovations in financial services is estimated to create a positive impact on the financial sector.
New Trends in Financial Services
In the past decade, the finance sector has been through some ground-breaking changes with new emerging trends that are reshaping the sector with some advance and effective services.
In the past decade, the banking sector has drastically changed the course of the global economy, especially with digitization. The COVID-19 pandemic has highlighted how digital infrastructure can play a crucial role in understanding and delivering financial services with the integration of digital payment, digital IDs, and trusted data-sharing platforms.
Currently, two-thirds of adults are making or receiving digital payments, and in developing countries, 36% of adults receive a payment into their accounts and 83% of those make digital payments. This number is expected to grow rapidly in the future as major banking and big tech companies are entering into the ongoing race of digital payments.
2. Finance Apps
With the ongoing digitization, one thing reshaping the finance sector is the rise of finance apps. Finance apps are making a revolutionary change for the global economy. Traditional banks are partnering with big tech giants such as Apple, Google, and Samsung to develop their one-stop applications for financial services.
Apple, one of the biggest tech giants, has partnered with Goldman Sachs and launched a credit card which was designed to help customers lead healthier financial life. On March 28, 2023, Apple launched, Apple Pay Later services for US customers. With these services, customers can easily track, manage, and repay their Apple Pay Later loans in one convenient location in Apple Wallet. Apple Pay is enabled through the Mastercard installation program and Goldman Sachs, one of the leading banks in the US is the issuer of the Merchant payment credentials used to complete the purchase.
3. Artificial Intelligence Becoming Ubiquitous
Since the recent launch of Open AI’s GPT-4 and Google’s BARD, AI is on the verge of becoming ubiquitous. According to International Data Corporation (IDC), by 2026, 85% of global enterprises will combine human expertise with AI, natural language processing, and Machine Learning (ML) for pattern recognition and to enhance workers’ productivity.
Global industries are integrating AI into their platforms and services for better outcomes and to increase their productivity. However, the financial sector cannot entirely rely on AI, as the risk of the financial crisis is high with a minor mistake in the pattern projections and predictions.
Future of Financial Services
With these ongoing trends in the finance sector, the financial services market is growing at a CAGR of 9.7% and is expected to surpass USD 58.69 trillion by 2031, creating more economic opportunities for the global economy. Governments across the globe are imposing strict regulatory bodies on financial markets and financial service providers to keep records of all finance-related activities.
Over the past two years, the financial services industry has demonstrated its ability to successfully navigate unprecedented levels of uncertainty. From facing the supply chain disruption during the pandemic, and the confluence of economic and geopolitical challenges – the war in Ukraine, the financial services industry is still rising, but the possibility of a global recession – 2023 is going to be the year with more regulations and requirements of advanced tools for transparency in the financial services industry.