How is the next generation of financial institutions evolving?

Banking is undergoing a radical transformation. The way we use financial services in our daily lives is changing quickly, and financial institutions are constantly updating to make sure they can keep up in this new era.

But in order to compete in the new areas of banking, should financial institutions only realign and refocus on specific customer needs, or should they also go far beyond the current definition of financial services?

In this article, we’ll look into these questions, the future of banks and financial institutions, and how they will affect us in the long run.

Traditional Banking’s benefits are fading

The condition of traditional banking is at a turning point.

According to McKinsey, even though banks have been pushing for big changes recently, their margins are getting smaller and smaller. Some of them have gone down by more than 25 per cent in the past 15 years and are expected to go down by another 20 to 30 per cent in the next ten years.

Also, big technology companies like Amazon, PayPal, and others are getting more and more competitive in the banking domain, and financial institutions are coming to a crossroads because of this.

The main reason we can think of is that traditional banks haven’t changed their way of selling products, such as loans, corporate advice, checking accounts, etc., fast enough to keep up with how fast technology is changing other industries. Also, common people, for whom banks used to be one-stop shops for businesses, are getting more and more frustrated by the way banks have broken up their finances.

And this made it easier for technology companies and other financial institutions to get into the game.

Some people thought that because old, traditional institutions have been pushed back in the last few years, this was the end of the new fintech.

But this is the new beginning,

How? Let’s find out.

Banking is developing new markets and models.

So, a few years ago, all financial services used to be run by a few big banks, which we discussed earlier, but if you look at the current scenario, that time is over.

In the last few years, new entities like new money, fintech, and many others have entered the market that could change the future of banking. There are five main areas that will be at the centre of how banking will change in the near future. What are these? Let’s find out:

1. Daily banking services

When it comes to banking, one of the newer competitive fields is everyday banking. Checking and savings accounts, debit and credit cards, and electronic banking fall under this category. The reason people are attracted to these services is that they want easy, reliable, highly automated, and cheap banking in their daily lives. This will be one of the most central areas in the coming years.

2. Advice on investments

Investment advising is another burgeoning area of new banking services. These services include financial planning, investment management, retirement planning, insurance, and trust management. Investment advisors work with their clients to make customized investment plans based on their financial goals, willingness to take risks, and time horizon. They also help clients figure out how to deal with the complicated financial world and make smart choices about their investments.

3. Complex financing

Another area of banking that is growing is complex financing. This includes services like commercial lending, structured finance, and leveraged finance, which are complicated because they involve many different people, rules, and specialized products. And, most of the time, people and businesses use these services for bigger, more specialized financial needs, like mortgages, home equity loans, car loans, and loans to start a business.

4. Large-scale intermediation

This includes services such as trade finance, cash management, and correspondent banking.  It’s a complicated and specialized field that requires a deep understanding of corporate finance, cash management, portfolio management, M&A advisory, equity and debt financing, and other traditional investment banking services. Large financial institutions like investment banks and commercial banks usually offer it.

5. Banking-as-a-Service

Banking-as-a-service is also one of the emerging services. It includes payments, loans, and compliance. Banking-as-a-Service (BaaS) let companies offer financial services without investing in infrastructure or keeping up with regulations. It also lets companies get low-cost access to financial services like payments, loans, and regulatory compliance. By offering strong, secure, and efficient services and liquidity, BaaS lets clients focus on what they do best and offer services with added value.

Conclusion

Banking services are undergoing a radical transformation. The way that financial services are used in everyday life is changing, and new players are adapting to these changes so that they can do well in this new era.

On the one hand, in order to stay competitive, financial institutions are putting a lot of effort into giving their customers new and customized solutions. On the other hand, leaders in fintech are focused on offering services that big banks don’t yet have so that they can stay ahead of the competition. We haven’t even talked about the growing opportunities in Africa and the Middle East. All in all, the future is bright for banking applications.

Do you want to improve your banking stack with a new money market application? You’ve come to the right spot. Webmob Software Solutions has worked on a wide range of fintech services for more than seven years, so they can offer cutting-edge solutions for every part of platforms for lending and borrowing.

We are always here to help you at any point in the development process, from choosing a niche to putting the final product out there.

Get in touch with us right away to find out more.