In our digital age, current events have an increasingly swift impact on our finances. Extreme weather events, warfare, and other forms of political and economic unrest on the other side of the world are all communicated instantaneously. Those events in turn carry the capacity to impact finance trends in every market.
Of course, seasoned investors make a point of keeping up on international news, and many of the heavy hitters are reliably quick to move their fortunes to greener pastures. The impact of all this can rapidly trickle down within one day on Wall Street and spread to international markets.
Nowadays, we don’t have to look too far for a vivid example.
The Covid-19 pandemic emptied office buildings and retail spaces worldwide. The subsequent need for accommodating remote workers just to stay in business became self-evident. Most of us can only now wish we had been holding stock in Zoom. In the space of one year, that company’s earnings soared to $1 billion.
Of course, we all do our best to comb through reliable finance publications trying to predict where the marketplace is headed. We hope to stay on top of finance trends. Likewise, we also know that pinning the entirety of our financial resources on one product or service is increasingly risky. Ongoing market volatility doesn’t necessitate that we know everything, which is obviously impossible, but that we maintain an awareness of megatrends that have the potential to carry a far-reaching impact. Here are five current finance trends that stand out for investors and business owners, large and small.
Artificial Intelligence-Empowered Automation
Deep down inside, we all want to be superheroes, whether we admit it or not. As children, we imagined what it would be like to fly or rescue helpless people from imminent disaster. As adults, we tend to harness that gift of imagination to work smarter than the next business owner, increase profits, and increase the stability of our enterprises. It all boils down to wanting to accomplish more, faster, and more accurately.
At the risk of (only slightly) overstating the case, the rise of artificial intelligence carries with it the very superpowers we’ve only previously dreamed of. Of course, many of us are uncomfortable with the idea of computer programs that make decisions for us. However, that over-simplification doesn’t paint a realistic picture of what AI-powered business automation can accomplish for businesses of all sizes.
AI has moved well beyond its “early adopter” phase.
AI-powered business automation is poised to revolutionize the fintech sector and several other industries. It holds out the promise of freeing business owners from the mundane. They can ditch those low-value, and quite frankly dull chores that tend to crop up.
For example, how often have you struggled to find time to dream up new products or services? How often have your efforts to improve existing infrastructure fallen victim to the need to plug numbers into a spreadsheet…for hours on end? AI might hold the key to giving you and your staff additional bandwidth for thinking and fine-tuning.
One obvious application is the use of AI to lock down the security of online transactions and devices. Most of us aren’t necessarily thinking about AI-powered software when we use our smartphones. Still, many of us open these devices based on our facial features, thumbprint, or speech recognition. AI undergirds all of those everyday activities. Chatbots, also fueled by AI tech, free human beings to focus on tasks other than repeatedly answering the same question.
Reliance on Blockchain Technology
In the recent past, the term “blockchain” has been associated primarily (or even exclusively) with cryptocurrency. Those unfamiliar with the technology can even mistakenly think they are one and the same. True, blockchain technology provided the platform that launched cryptocurrency, buts its applications are by no means limited to that investment. In an era plagued by hackers and ransomware, blockchain technology is coming into its own as a means of enabling banks and other financial institutions to cut the costs associated with online transactions and yet keep robust security protocols in place.
Blockchain, as complex as it may seem, boils down pretty quickly. It offers anyone the ability to create an unchangeable electronic record of financial transactions. Blockchain cuts out transactional third parties — such as banks or governments. It ensures a safe, secure platform for two parties to engage in business deals. Assets traded or exchanged might be real-world (houses, real estate, products, etc.) or otherwise. Blockchain technology has tremendous untapped potential. Larger business concerns such as Wells Fargo and Mastercard have already taken the plunge.
The implications of this trend for financial institutions are immense. Blockchain has already demonstrated its reliability in both efficiency and security in the world of cryptocurrency. As the need to provide tight security while simultaneously reducing the cost of transactions increases, businesses of all sizes can expect blockchain-enabled technology to become an everyday part of how they handle their finances.
Increased Need for Regulated Money Managers
In challenging times, people will cast about for security. This immutable law of human behavior has helped give rise to the ongoing popularity of SEC-monitored registered investment advisers (RIAs). These investment professionals differ from traditional brokers in that an RIA has a fiduciary responsibility to always act in the best interests of their clients. Despite the economic uncertainties brought about by the Covid-19 pandemic, or perhaps because of those challenges, the number of RIAs skyrocketed. Every indication is that this will continue to be the case.
Experts contend that there is still room to grow, and they expect the number of RIAs to continue to climb. The number of individual advisers and larger firms being added to the RIA fold shows no signs of slowing down. As of June 2021, RIAs managed a record $110 trillion in assets for more than 60 million clients.
Today, there are close to 14,000 RIAs operating nationwide. These companies, both large and small, employ nearly a million people. It’s not surprising that investors are attracted to financial advisers who are obligated to put their client’s interests first. The improvements in technology and infrastructure that came about as the workforce shifted to remote work have only added to the ascendency of RIAs. This is one of those notable finance trends that is increasingly attracting well-heeled clients’ attention (and assets).
While there will likely always be a need for in-person banking, almost all the routine interactions customarily associated with banking can now be conducted online. Furthermore, since most of us have our smartphones close at hand, we have access to financial institutions at our fingertips. The revolution in online banking made it possible for customers to take care of financial transactions 24/7. Experts predict that digital banking will skyrocket in the next few years as more and more people begin to count up their savings in time, fuel, and hassle.
In particular, the entry of Millenials and Gen Z into the workforce can only cause exponential growth in the digital banking sector. These freshly-minted wage earners grew up as digital natives. However, most consider themselves too busy to add a visit to the local bank to their financial ritual or routine. Brick-and-mortar locations are great for maintaining a safe deposit box and other in-person services, but most of their needs can be answered online. Further, many of the newer digital-only banks don’t even have branch offices as we knew them. Therefore, these newer institutions can pour infrastructure cost savings into more competitive interest rates, elimination of fees, and other incentives.
Increased Focus on Customer Loyalty Programs
Banks and other financial institutions have long known the value of attracting new customers, but those victories are typically hard-won. Convincing anyone to move their accounts from one provider to another does not normally come cheap. There is a lot of reluctance and foot-dragging to overcome. When contrasted with the cost of keeping existing customers happy, the decision to invest in ongoing improvements to the customer experience makes all kinds of sense.
One obvious answer is to ramp up customer loyalty programs and rewards. In addition to financial benefits, the psychology behind offering these incentives is surprisingly powerful. When rolled out successfully, rewards and loyalty programs cause existing customers to feel an increased bond with their financial services provider. For example, McKinsey and Company released a research report which showed that well over half (59%) of paid loyalty program customers were “more likely” to choose that brand over a competitor in the future.
Whether these loyalty programs are paid or bundled with new product offerings will depend on the type of financial services offered. Paid programs can leverage the emotional investment that generally comes with “having some skin in the game” but must demonstrate real value over the long haul. Rewards programs for new customers should remain in play, but those must be set against a backdrop of continuity. Existing customers must repeatedly see why it’s better to stay where they are than bolt to another provider.
Select Resources for Further Study
At first blush, many current finance trends in finance might come off as either too complicated or too expensive for the average consumer or business owner. However, the people and companies pioneering these finance trends generally aren’t developing their offerings to suit the elite exclusively.
As always, success for any new trend typically rises or falls based on marketplace share. While you may do well to hold off a bit on some trends, waiting for prices to come down or the market to adjust, there are others — cybersecurity for online transactions leaps to mind — that demand immediate attention. Below are a few resources you can use to learn more as you seek to launch, build, and secure your increasingly-convenient future.
- Money Magazine
- Reuters News: Finance Markets
- Wall Street Journal
- The Disciplined Investor with Andrew Horowitz (Podcast)
- Money for the Rest of Us (Podcast)
- Millennial Investing with Robert Leonard (Podcast)
- Nerd Wallet’s Smart Money (Podcast)
- Planet Money (Podcast)