The financial sector is constantly evolving as new technologies, economic conditions, regulations, and consumer behaviors reshape the landscape. Knowing the latest trends and forecasts can help investors, financial institutions, and everyday people understand what the future may hold for the world of finance.
This article will highlight some of the most important emerging trends and predictions regarding the future of various financial sectors according to financial experts and industry analysis. A comparison table is also included summarizing key details about each trend.
Digital Payments Takeover
Electronic payment methods like mobile wallets, P2P apps, cryptocurrencies, contactless cards, and bill pay systems are rapidly displacing cash and checks. Key predictions regarding the digital payments explosion:
- Mobile payments will surpass credit card payments by 2025.
- Over 80% of smartphone users will make proximity mobile payments by 2027.
- Cryptocurrency payments will achieve mainstream adoption as more companies accept crypto.
- Fintech apps will dominate P2P payments rather than traditional bank transfers.
- Digital wallets will become universal, replacing the need to carry physical cards.
Open Banking and Decentralized Finance
Open banking gives third-party financial apps open access to consumer banking data via APIs. Decentralized finance (DeFi) uses blockchain to disrupt financial intermediaries. Their growth will lead to:
- Wider adoption of banking apps that harness open banking data.
- Increased automation and digitalization of financial services.
- New decentralized lending, trading, and investment platforms.
- Less influence for traditional banks and institutions in finance.
- Mainstream appetite for programmable money and smart contracts.
Robo-Advisors Manage Investments
Automated, algorithm-driven robo-advisors like Betterment and Wealthfront will take over investment portfolio management:
- Robo-advisors will surpass human financial advisors in assets under management by 2025.
- Investors comfortable with tech will overwhelmingly opt for robo-advisor management.
- Hybrid human-robo advising services will also gain prominence.
- Simple automated portfolios built by robos will commoditize investment management.
- Robo-advice will greatly lower costs and barriers to investing.
Rise of Embedded Finance
Embedded finance integrates financial services directly into non-financial settings. Key predictions:
- Most daily financial tasks will happen in embedded finance scenarios.
- Super apps that consolidate services in one platform will dominate.
- Businesses from retailers to rideshares will offer their own branded financial products.
- Sector-specific embedded finance apps will tailor to niches like health or education.
- Financial decisions will be increasingly driven by data.
Automation and AI Transform Financial Operations
Artificial intelligence and automation will create major back-office efficiencies:
- Manual data entry, recordkeeping and reporting will be largely automated.
- Chatbots and voice assistants will handle customer service queries.
- Pattern recognition technologies will automate fraud detection.
- AI will automate options, trading, and investment analysis.
- Quantitative analysts and data scientists will be in high demand.
| Trend | Overview | Predictions |
|---|---|---|
| Digital Payments Takeover | Electronic payments like mobile wallets and cryptocurrencies displacing cash and cards | – Mobile payments will surpass credit cards by 2025<br>- Over 80% will use mobile proximity payments by 2027<br>- Cryptocurrency payments achieve mainstream adoption |
| Open Banking and DeFi | Open banking APIs allow access to consumer data. DeFi uses blockchain for decentralization. | – Wider adoption of banking apps using open banking<br>- Declining influence of traditional financial institutions<br>- Mainstream appetite for programmable money |
| Robo-Advisors Manage Investments | Algorithm-driven robo-advisors providing automated portfolio management | – Robos will surpass human advisors in assets under management by 2025<br>- Most investors will opt for robo-advisors<br>- Investment management will be commoditized |
| Embedded Finance | Financial services integrated directly into non-financial apps and platforms | – Most daily financial tasks happen via embedded finance<br>- Super apps will consolidate services<br>- Sector-specific embedded finance goes mainstream |
| Automation and AI Transform Operations | AI and automation create back-office efficiencies | – Manual data work largely automated<br>- Chatbots handle customer service<br>- AI used for fraud detection and quantitative analysis |
Outlook for Financial Careers
These trends will heavily influence financial sector jobs and skills demand:
- Data analytics, programming, and AI skills will be highly sought after.
- Need for traditional accounting and back-office finance roles will decline.
- Demand for customer-facing financial advisors with a human touch will persist.
- Open banking will create new API and connectivity developer roles.
- Cryptocurrency finance jobs like blockchain analysis will grow.
- Hybrid skillsets combining finance and technology will thrive.
Financial services continue to be shaped by changing consumer expectations, emerging technologies, and shifting market forces. By staying aware of the latest transformations and outlooks, finance professionals can gain an edge and ensure both individual and institutional success in the decades to come. The future of finance promises to bring innovative new products, disruptive competition, and unprecedented efficiency gains through automation.
Frequently Asked Questions About Financial Trends and Predictions
Which financial trend seems most disruptive?
The rise of decentralized finance enabled by blockchain and cryptocurrency has the most potential to fundamentally disrupt the financial system by removing intermediaries like banks and exchanges.
How long until cash is fully replaced by digital payments?
Most experts predict cash will still retain some limited niche uses for anonymity over the next couple decades but will be largely obsolete for legal transactions as digital payments dominate by around 2030.
What effects will robo-advisors have on the investment management job market?
As robo-advisors automated most portfolio management functions, demand will greatly decrease for traditional human portfolio managers and financial advisors who fail to adapt. But human advisors can survive by pivoting to higher value services.
Should professionals in finance be worried about AI and automation?
Back-office finance workers doing routine data tasks should transition to more analytical, technical roles to avoid becoming obsolete. Customer-facing advisors only doing simple transactions should also enhance their value-added consultative abilities.
Which finance skills will retain the most job security?
Jobs involving highly complex analysis, strategic decision-making, empathetic client relationships, creative solution development, and technology integration will remain secure. Routine repetitive tasks are most at risk of automation.
