Banking and Finance – Trends for 2022 and beyond

By Stella Lim, Managing Director, Asia-Pacific at SWIFT | 21 December 2021

What are some trends Finance Professionals and CFOs can look forward to in 2022?

With Asian consumers set to comprise half of global consumption growth in the next ten years, the demand for financial services by Asian consumers is set to increase, according to the McKinsey Global Institute. 

In 2022, this demand, the post-Covid vaccination uptick, and improving economies will bring about many changes in the financial services industry. Here are some big ideas to reflect on as we close off the year and think about what’s in store for the next 365 days. 

A single standard 

As the industry shifts to ISO 20022, the emerging global and open standard for payments data around the world, we can expect to see higher-quality data across the payments ecosystem, and by extension, higher-quality payments for all. 

This new standard will significantly enhance cross-border payments. Already used by payment systems in over 70 countries, in the coming years, it is poised to become the de facto standard for high-value payment systems of all reserve currencies, supporting 80% of global volumes and 87% of the value of transactions worldwide.

We’ll see end-to-end transaction orchestration that provides transparency and immutability of data, allowing for seamless and frictionless interoperability among global partners and stakeholders by bridging different formats and channels. 

Competitively priced low-value payments 

When transacting internationally, consumers and small businesses often face challenges that include opaque costs, less visibility on their payments, and a lack of certainty on when their payments will arrive.

With the payment service SWIFT Go, specially designed for low-value transactions, financial institutions can help their SME and retail customers send low-value payments anywhere, direct from their bank accounts, quickly, reliably and at competitive prices. This shift will mean cross-border payments are well on their way to mirroring the speed and ease of domestic transactions. 

APIs hold great potential

The use of application programming interfaces (APIs) within financial services will rise as the world relies more on APIs on our phones, web applications, and software applications, to exchange information. APIs provide a standardised approach to create seamless interoperable services across the financial services industry and other areas, such as between tokens and account-based networks. 

By tapping on APIs, businesses can improve customer experiences in payments, treasury, compliance, security, and more. However, to fully harness its potential, the financial services industry needs to keep standardisation, interoperability, and collaboration top of mind. Consumers are looking to move their money faster, across platforms and networks, and they want options. 

Akin to how consumers can see where their orders stand in the supply chain when transacting online or ordering food delivery, the securities industry and companies need to collaborate and work towards a model that provides better visibility throughout the settlement and reconciliation value chain.

Humans are still necessary

The financial services industry is grounded on principles of trust, fairness, inclusion, low latency, and low errors – which technology has helped fine tune – but human inputs and filters are still required to address issues like trust and inclusion. 

Artificial intelligence (AI) and machine learning (ML) are increasingly embraced as the future of financial institutions and favoured for their efficiency, compliance, and ability to deal with large amounts of data. But the data being processed needs to be high-quality, and the parameters clear. 

Where humans come in is when sensitive decisions such as loan approvals need to be made, for example. As transactions increase in volume, delivery must be hybrid – human interaction can be amplified through technology, but with it is only with the human touch, that technology will do the work it was created to do, better. 

The dilemma of data 

Along with other industries, data is already the new currency in the financial services ecosystem, as processes become digital, data-driven, and increasingly interconnected. But beyond just collecting data, organisations need to take privacy and anonymity more seriously. 

One potential solution is the use of confidential computing, which makes use of software cryptographic techniques to ensure that when data does not end up in the right hands, it cannot be used for any other purposes even if the third-party wanted to. But issues of cost and skills means it’ll be a while before we see financial institutions adopting this. 

The future of finance is in our hands

With the pandemic accelerating the use of technology on how the world – and the financial services industry – operates, technology can be used to make lives better, processes more efficient, and our world a more sustainable one. 

Financial institutions have a pivotal role to play in making sure the future is as evenly distributed as possible and provide access to solutions that drive far-reaching change to communities when it comes to payments. 

Given how quickly the financial ecosystem has changed in the past few years, these developments can happen next year, or next week, but one thing’s for sure, innovation and implementation will be the only way forward for the financial industry.