3 hot 2021 finance trends: what to expect and how to prepare
Even though all predictions are highly speculative, it’s difficult to resist the temptation to make some financial prognosis at the beginning of a new year.
If we’ve observed, however, key major developments in the finance industry for the last two to three years, especially in fintech, it shouldn’t be too difficult to predict changes in the next 12 months.
First, there’s increasing importance regarding the role of big data. The more data you have, and the more sophisticated the tools you have to interpret it, the bigger the chance you will succeed in leading the whole industry.
The leading tools for interpretation of big data are based on AI, which is another hot topic in finance.
We witness a constant battle for talent – although this is often hidden to the public. Automation is a big dream for businesses around the world, but only how great a team (and its skills) are will determine whether or not a business organization will succeed, be average, or fail altogether.
Another value that has a huge impact on every industry is innovation. The more we pursue innovative solutions, the greater results we are able to achieve.
There are more of these kind of factors to take into account; however, here are the three main trends that will shape financial industries in 2021.
A new way of defining financial institutions – especially banks
Entrepreneurs who are entering financial industries around the world see things from new and fresh perspectives. They ask different questions in comparison to traditional finance experts, therefore they have access to new solutions.
There are more and more fintech visionaries who want to enable people to send money to everyone from everywhere, with no barriers- just like you’re now sending emails or texts from your mobile.
For younger generations, social media companies like Facebook or online sellers like Amazon might become key financial institutions. What is the role of a bank? Banks allow us to store money, to move money and to have quick access to financial instruments, especially credit. Do we still need banks to do that?
If you use the first principle of thinking, then the answer is no. We don’t need banks to deal with money. Regardless of whether the money we use is cryptocurrency or fiat money. The new definition of a financial institution also means the expansion of new business models.
The winners will be those who gain our trust
Transparency and trust are the foundation of every financial system. If you don’t trust a bank, you will not keep your money there. You will move it to another bank, or switch to cryptocurrency. If you don’t trust a payment method, you will not make a payment.
There are two factors that build trust:
The first is utility. The bigger the utility, the bigger the trust! The second is universality. The more something is well-known, the greater our trust.
That means that every clever entrepreneur with a big enough marketing budget and with a really useful, high quality financial tool or service can relatively quick and easily gain our trust, at the cost of traditional financial institutions.
The rising need to diminish the gap between rich and poor
There is no real progress if it’s reserved for only the chosen few. There are certain kinds of natural reasons for human poor performance; for example, when someone consciously chooses not to work enough or not to develop their skills. However, there are more significant reasons resultant of social inequity and lack of equal access to a good education and resources.
The desire to make life better for everyone might change the perception of money itself – and also the meaning of work. In the near future, Universal Basic Income will finally gain traction. If everyone receives a decent amount of money every month, regardless of their material situation, it will transform our understanding of individual and social needs – and probably the whole concept of social construction.
I hope most of us understand that whatever we do should be done for the common good, to benefit the public and to protect the environment. We no longer can afford projects, especially in finance, that can benefit only the few at the cost of the wellbeing of society.
Besides, the stronger humanity is, the faster progress becomes, the greater the quality of life, the greater personal freedom and individual wealth becomes too.
All these major trends are enabled by one more important factor – the development of a cashless society. Without the expansion of electronic money, it would not be possible for these three trends to develop.
How to make sure we are prepared for these new times in finance? We should systematically compare what banks offer with what fintech companies bring to the table. Let’s keep our fingers on the pulse to avoid missing a financial revolution.