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The Rate of Digital Transformation Will Continue to Accelerate In 2021

Booshan Rengachari, Founder and CEO,  FinzlyBooshan Rengachari, Founder and CEO, Finzly
For financial institutions, perhaps the biggest long-term impact of the COVID pandemic is the sea change that has resulted in terms of digital transformation. This will continue in 2021 as consumers have become more comfortable with – and more demanding of – their institutions’ digital banking capabilities. No longer are consumers content with simply accessing balance and transaction information via their mobile device, they now expect the ability to conduct all manner of banking through the channel, from using bill pay, to managing investment accounts, to applying for loans, to sending and receiving person-to-person (P2P) payments with friends and family.

The shift to remote schooling, working and online retail has pushed the development of innovative new technologies and there will continue to be a steady stream of new fintechs and service providers entering the marketplace, adding to an already competitive environment. By necessity, this will encourage more and closer collaboration between providers and financial institutions to ensure that service offerings align with customer needs and expectations.

While the overall state of the economy remains in flux, banks and other financial institutions, for their part, have weathered much of the challenge of 2020 comparatively well with many recording healthy profits for the year and this should fuel their growth strategies in 2021. According to S&P Global, 2020 witnessed a mere 112 deals worth $27.67 billion in mergers and acquisitions compared to the 258 deals amassing $55.05 billion that the industry saw in 2019. M&A activity is predicted to pick back up with some large deals already slated for 2021.

Institutions not necessarily looking to acquire others or be acquired themselves will likely reinvest some of their 2020 profits into new technology and infrastructure upgrades. In particular, community financial institutions will be carefully evaluating their payments infrastructure to ensure that they are positioned to support the future demands of real-time payments, embedded payments and faster payment capabilities that programs like RTP® and FedNow℠ promise to deliver.

In fact, community financial institutions will continue a shift that is already underway from large, inflexible, legacy technology to more modular, user-friendly, API-enabled technology that allows them to more quickly respond to changing market dynamics while providing customers with a modern user experience. This will likely manifest itself in the form of “no-code” or “low-code” cloud and/or micro-services technologies that will serve as the platform for financial institutions to continue to innovate and experiment as they work to better cultivate and grow meaningful customer relationships through the digital banking channel.

If the experience of 2020 demonstrated nothing else, it is that adaptability and responsiveness are going to be the keys to success for financial institutions moving forward. For the financial services industry, one positive that has emerged from the experience of 2020 is the substantive gains made toward better serving customers.
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