September 29, 2022
The implementation of COVID-19 has irreversibly altered the banking industry. While the global epidemic compelled banking institutions to embrace digital change in 2020 and 2021, 2022 will see that change institutionalized, resulting in the emergence of a new normal. We all know that in the world of finance, there are always new trends and changes to watch out for. It’s important to stay up-to-date on the latest trends so you can make sound business decisions. So what are the top investment banking trends to watch for in 2022? Let’s take a look.
As the banking and financial services sector looks to address environmental, social, and governance (ESG) concerns, sustainable finance products are becoming a reality. Banks are willing to forego short-term profits to stay ahead of regulators and environmental groups, and fintech is providing the ideal opportunity to adapt to these new requirements. More social impact initiatives, providing access to environment-related investment opportunities and finance guidelines that align with net-zero goals and other sustainability objectives, are likely to emerge in 2022. This is a positive trend that will aid the banking and finance industry in its transition to a more sustainable future.
As we approach 2022, artificial intelligence (AI) is poised to make significant strides, establishing itself as the most powerful wave of technology that will transform the world. With every major industry utilizing AI and increasingly intelligent machines to supplement or replace their work, the potential applications of this technology are virtually limitless.
The banking and finance industry is gradually catching up to this trend. Chatbots assist customers in organizing their financial affairs, and banks use machine algorithms to detect cybercrime patterns. The banking industry is being impacted by rapidly evolving diverse AI technologies in a variety of ways, and organizations are increasing their investments in AI to realize its full potential.
AI can be used to assess critical data and improve business efficiency in a variety of ways. It can help with fraud detection, risk management, and customer service, to name a few applications. In 2022, we can expect to see even more widespread adoption of AI in the banking industry as organizations seek to capitalize on its numerous benefits.
Real-time payments have grown in popularity in recent years as both businesses and consumers seek faster, more efficient methods of sending and receiving money. Real-time payment networks provide a direct link between banks and their customers, allowing for instant fund transfers. This is especially advantageous for those in the gig economy, as they can receive payment for their work immediately rather than having to wait for traditional bank processing times. Real-time payments are also gaining popularity among businesses because they provide a more efficient way to pay bills and invoices. There is no need to wait for traditional bank processing times with real-time payments; instead, businesses can receive payments immediately, regardless of weekends or holidays. Real-time payments are expected to remain at the top in 2022 as businesses and consumers seek faster, more efficient ways to send and receive money.
The trend of open banking, which was supposed to take off in early 2020, is now looking more promising than ever before. Open banking is a vision that requires financial institutions and banks to provide regulated third parties with access to customers’ financial data. With this data, these third parties can develop new apps and service platforms. Open banking offers transparency to the consumer and more opportunities for investments in the BFSI sector. This emerging trend will enable financial organizations to deliver full-spectrum, client-centric banking capabilities and remain competitive in the market.
Cryptocurrencies are still in their early stages, with much work to be done in terms of standardization, usability, and global acceptance. However, actions taken by central banks and other financial institutions in the last year indicate that digital currencies are here to stay. The introduction of central bank digital currencies (CBDCs) is a significant step forward because it represents a genuine effort by government agencies to integrate cryptocurrencies into the existing financial system. Moreover, increased regulatory clarity surrounding cryptocurrencies is aiding in the development of trust in the asset class among both retail and institutional investors. As a result, we can expect to see continued growth in the adoption of digital currencies in the coming years.
With technology becoming increasingly important for banks, a well-publicized shortage of engineering, data, and security talent highlights the stark reality that banks aren’t as appealing to prospective employees as they once were. There is an unmet need for technical workers, but these positions represent only a small portion of the talent required by the banking industry. Younger talent, in particular, requires flexibility and wants to feel valued in their jobs. They perceive the banking culture to be rigid, hierarchical, and overly formal, which has resulted in a disproportionate share leaving the industry. Forward-thinking banks are developing integrated plans to address their employment issues holistically. They are mapping future skill requirements and employing a variety of strategies to attract and retain top talent.
The financial services industry is currently buzzing about Decentralized Finance or Defi. Defi is a system that uses blockchain and similar technology to enable secure, programmable, real-time transactions between holders of digital assets. Because there is no centralized entity regulating these transactions, defi is often referred to as bankless finance. This implies greater risk, but it also implies greater control and lower processing fees for participants.
Many of the world’s largest banks, including Goldman Sachs, are beginning to use bitcoin and other cryptocurrencies. Others in the investment banking industry are speculating about how blockchain will change the industry. However, one thing is certain: Defi is still in its early stages, so staying up to date on the latest developments in this space is critical.
For example, new protocols and platforms that improve functionality and security are constantly being introduced. Furthermore, the sector is seeing an influx of new users and projects, which is fueling innovation. With all of this activity, it’s clear that Defi will have a significant impact on the financial services industry.
The customer experience is essential for any business looking to build a strong relationship with its consumers. In recent years, brands have increasingly looked to create an omnichannel experience to provide customers with greater flexibility and convenience. The banking industry is no different, with technology playing an important role in bridging the gap between physical and digital experiences. By engaging more digitally with customers, investment banks can provide a better overall experience that meets the needs of today’s consumers.
While this approach has many advantages, it is important to remember that creating a great omnichannel experience is not without challenges. It can be difficult to balance the need for personalization with the need for privacy, and it is critical to ensure that customer data is used responsibly. Furthermore, banks must exercise caution not to over-digitalize the customer experience, which can lead to frustration and confusion. Given these challenges, investment banks that focus on providing a great omnichannel experience will be well positioned to succeed in 2022.
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