1.

Digital transformation
Financial management as an area is witnessing a colossal and continuous
focus on digitization and the adoption of new and emerging technologies to
bring in operational efficiencies, enhance superior customer experiences.

Artificial Intelligent, Big Data Analytics, Machine learning application to

finance is transforming the financial management domain. There are tools,
technologies and platforms which are specifically focused towards financial
management and having hands-on knowledge will be of immense value to
the next generation workforce.

McKinsey has identified four digital technologies that are re-shaping the
finance management which are: Automation and robotics, which helps in
improving processes; Data visualization, which gives end users real-time
easy to understand financial information; basic analytics, which helps in
efficient decision support; and advanced analytics, which can help business
to uncover hidden shareholder value and growth opportunities.

2. Digital finance and digital money

The next trend in financial management is Digital finance and Digital Money
(DFDM). DFDM encompasses a plethora of new financial products,
financial businesses, finance related software, and new forms of customer
communication and interaction all of this delivered by FinTech companies
and innovative financial service providers.

Today, many banks or traditional insurance companies are facing

competition from ‘FinTech’ companies, as new products and services are
being floated by them almost every month.

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The next generation workforce who focus on financial management must

learn the new ways to reach and engage with technologically savvy
clientele and have sound knowledge about DFDM.
3. Cryptocurrency - the next big thing
Knowledge about cryptocurrency -- a digital or virtual currency that is
secured by cryptography, which makes it nearly impossible to counterfeit or
double-spend is also mandatory for the workforce of the future.

Having knowledge about cryptocurrencies which are decentralized

networks based on blockchain technology and have a distributed ledger
enforced by a disparate network of computers -- is expected in the next
generation workforce who will enter the financial management domain.

4. Focus on user experience

Humancentric design has gained paramount importance in recent times.
Banks are now aware that it’s not enough to create usable interfaces for
banking service delivery but the experience given to customers at every
touch point of digital interaction is important.

These trends are re-building the financial services industry. By building out
personalized experiences for customers, banks and other financial industry
brands will stand to grow their market share and build retention through a
loyal customer base.

Hence, all aspects related to enhancing user experience is also

“necessary” for an individual who would get into the financial management
area.

5. New risks and challenges

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Finance management professionals will face an expansive new set of risks

that come with technology, the most serious of which are perhaps external
security risks. Hence, they must be aware and must constantly update
themselves about the risks and challenges thrown by ‘Fintech’
implementations.

With technology playing a major role in financial management, new risks

and challenges is also a trend today. New regulations to face and mitigate
the risks are dynamically created by regulatory bodies.

New legal regulations brought by Reserve Bank of India (RBI), Securities

and Exchange Board of India (SEBI), Insurance Regulatory and
Development Authority of India (IRDAI), Pension Fund Regulatory and
Development Authority (PFRDA) and others have to be studied and the
finance management professionals have to be updated and must also
adapt to a variety of new regulations throughout time.

- Article by Dr. Ramakrishnan Raman, Director, Symbiosis Institute of

Business Management (SIBM), Pune, and Dean, Faculty of
Management, Symbiosis International (Deemed University)

Read: Financial Management as a promising career option

Read: 4 r

1. The Financial Services Industry Embraces

Blockchain

Search interest in “blockchain” has risen a staggering 2,700% in 10 years.

For years, blockchain technology has been synonymous with

cryptocurrency. However, experts believe that the technology will now
become more integrated with existing financial systems.

For example, using blockchain would allow banks to conduct cheaper,

more efficient transactions while maintaining tight security.

It can also be used to handle peer-to-peer lending, an industry that could

see a growth of up to $150 billion by 2025.

More banks are transitioning to cloud-based banking in 2023,

and blockchain will no doubt play a role in this.
HSBC and Wells Fargo already use blockchain technology to settle forex
trades.

Paypal, Mastercard, and JP Morgan all allow users to make payments on

their networks using blockchain currencies.

This involves cryptocurrency, of course, but it shows banks’ willingness to

embrace blockchain.

It’s not just banks incorporating blockchain, either.

AXA, the French multinational insurance company, uses blockchain

technology when insuring clients against flight delays.

An Ethereum blockchain then connects both the insurance contract and air
traffic data.

As soon as a flight is over two hours late, the system takes notices and
automatically triggers the insurance payout.

2. More People Download Personal Finance

Apps

During the pandemic, downloads of personal finance apps grew roughly

90%.

Finance apps like Mint, Prism, and EveryDollar provided exactly what
people were looking for and their popularity went through the roof.
 7.7 billion people have smartphones and access to personal finance apps.

These apps not only help people manage their money, but they offer ways
to invest in stocks and crypto.

It’s not just the ability to manage your money remotely that’s attracting
people, either. People specifically like having the power to run their
financial world (literally) in the palm of their hand.

6 out of 10 users prefer using finance apps over a desktop website.

And as the US adopts open banking, which will make financial apps even
safer, this number will likely increase. And skeptical users who harbored
security concerns might be persuaded to take a second look.

Square’s Cash App remains the most popular personal finance app
available, and among its list of benefits is a rewards system, which ties into
what we discussed above about customer loyalty programs.

Searches for “Cash App” have risen 338% over the last 5 years.

3. More People Get Their Money

Professionally Managed

A new kind of wealth manager is quickly becoming the de facto money

manager for many consumers: RIA.
A Registered Investment Adviser (RIA) is a firm that is regulated by the
Securities and Exchange Commission and specializes in giving financial
advice and managing investments.

Compared to typical broker-dealers, RIA’s have what is known as a

fiduciary duty to their clients.

This means that they are required to put their client’s interests before their
own when making financial decisions.

This kind of high-touch and client-focused model is gaining traction in the

US.

At the end of 2020, RIA’s managed a collective $110 trillion supplied

by over 60 million clients around the US This is compared to roughly $20
trillion at the beginning of this century.

Total AUM managed by RIAs and broken down by type of client.

In addition, there are now just under 14,000 RIAs nationwide, employing
close to a million people.

The number of RIA’s in the US by year.

Even at this growth rate, 47% of RIAs still believe that the industry has a lot
of room to grow.
A study by Schwab found that over half of investors prefer to have a
fiduciary (an RIA) manage their money compared to any other model.

The trends that are driving RIA growth.

Overall, it seems that the growth of the RIA industry is leading more
Americans to consider letting a professional manage their money.

4. Loyalty Programs Drive Repeat Business

From half-full punch cards sitting in the back of your wallet to website-
specific rewards programs, the idea of a loyalty program is nothing new.

However, we’re seeing an uptick in loyalty programs in the finance world.

Loyalty programs have long been a popular way to keep customers coming
back, but they’re usually offered in retail and the food industry.

Now, loyalty programs are practically mandatory, even in the financial

services industry. Many believe that they’re only going to get bigger, better,
and more competitive.

In August of 2021, an American Banker/Monigle Agency survey of banking

customers found that, regardless of financial institution or product, “rewards
and loyalty remain paramount to the customer experience”.

Most customers, 80% of millennials and 68% of non-millennials, would

be willing to sign up for a premium loyalty program offered by their favorite
brands.
Repeat customers spend at least 33% more than new customers.

And more than 80% of millennials and almost 75% of baby boomers like to
get rewards simply for engaging with their favorite brands, whether or not
they make a purchase.

A good example of this is CitiBank’s “thankyou” rewards program, which

lets customers earn points by simply using their mobile apps or ATMs.

Customers feel increased loyalty after joining a loyalty program.

A survey conducted by McKinsey & Company showed that consumers who

belong to paid loyalty programs are 62% more likely to spend more money
on that brand.

Interestingly, when it comes to free loyalty programs, that number is only

30%.

Banks are losing the “tender wars” to companies like PayPal and programs
like Buy Now, Pay Later. Offering a good loyalty program may be one of
their few remaining options to bring consumers back.

5. Banks Further Embrace The Cloud

Banks were already gravitating towards the cloud pre-pandemic, but the
pandemic really sped things up.

As people grow warier of physical contact, the demand for digital services
rises, so banks need a way to scale up quickly.
The cloud provides just that.

Market research company IDC estimates that global spending on cloud

services will surpass $1.3 trillion by 2025, just three years away.

Banks and credit unions will be a part of that, with heavy hitters like
JPMorgan Chase and Arvest Bank already converting part of their core
systems to a cloud-native platform.

Jim Marous of The Financial Brand believes that cloud banking is the
future, citing the fact that IBM has developed cloud solutions specifically for
the financial industry.

Microsoft introduced its own offering last year with Microsoft Cloud for
Financial Services.

According to Genpact, banking industry CIOs claimed that updating their

applications to function in the cloud helped their companies to adapt in
2021.

Another survey, this one conducted by Harris Poll and Google Cloud,
showed that, of the 1,300 financial services leaders polled, 83% of them
were using the cloud as part of their primary infrastructure.

MANTL is one of the companies that is focused on the cloud banking

market.

Search interest in “MANTL” over the last 10 years.

The company basically helps traditional banks expand into the digital
market.

MANTL does this by developing products that allow banks to automate

back-office functions, set up an online presence, and onboard customers
digitally.

Overall, the company boasts that its customers can expect to receive four
times more account applications with a digital offering powered by MANTL.

Artificial intelligence plays a big role in the adoption of cloud services. Not
only does AI provide chatbots, but it can also analyze transactions, monitor
for suspicious activity, and perform other tasks just as well if not better than
human counterparts.

Investing in AI would generally cost more than banks would be willing to

consider, but if AI was packaged with cloud services, that becomes a very
appealing offer.

6. Banks Move Past Overdraft Fees

Overdraft fees have long been a thorn in the side of bank customers
everywhere. They’re known for not only being excessive but also having a
tendency to snowball and reach absurd amounts.

According to the Consumer Finance Protection Bureau, overdraft and non-

sufficient funds revenue totaled $15.47 billion in 2019.
Of course, that doesn’t mean that banks will just up and get rid of them
(though Ally Financial did just that last year and Capital One followed suit in
January), but multiple institutions are implementing new features designed
to help customers avoid fees at all costs.

Bank of America added a feature called Balance Connect, which allows

users to automatically transfer money to and from accounts to prevent
possible overdraft fees.

There’s still a fee of $12-per-transfer, but that’s less than the usual
overdraft fee. Plus, there’s less chance of it compounding as dramatically.

PNC is offering a new feature called Low Cash Mode that will let customers
change the order in which transactions are processed in order to avoid
overdrafts.

JPMorgan Chase is giving customers more opportunities to restore

overdraft balances before they get charged a fee. They’re also letting
customers access direct deposited paychecks two days early.

There are two major factors in banks suddenly looking to eliminate or

lessen overdraft fees:

One, everyone is doing it, and no bank wants to be the last one charging
overdraft fees. In an age where consumers want loyalty programs, going
the opposite direction is a good way to go out of business.

Two, with the release of the CFPB report mentioned above, the agency
announced their intentions to begin zeroing in on banks that have, as
Director Rohit Chopra puts it, “become hooked on overdraft fees to feed
their profit model”.

7. More Non-Tech People Get Into Crypto

As of November of 2021, total cryptocurrency market capitalization

had topped out at $2.79 trillion.

Last year saw a lot of traditional investors taking an interest in crypto,

with 7 out of 10 of them planning on taking the plunge in the future.

They’re not the only ones showing interest, either. Venture capitalist firms
purchased over $27 billion in crypto in 2021, almost five times more than
they spent in 2020.

Venture capital firms invested $27.4 billion in cryptocurrency in 2021.

In a move that should signify that crypto is, in fact, getting even bigger, US
President Joe Biden recently signed a bill that requires all crypto
exchanges to be reported to the IRS.

This sort of oversight wouldn’t be necessary if cryptocurrencies weren’t

poised to become even more popular.

The very first Bitcoin ETF - exchange-traded fund - hit the New York Stock
Exchange in October, allowing traders to invest in a more conventional
way.
Instead of buying crypto, they’re instead able to invest in companies that
have a financial stake in crypto. So, they’re still susceptible to its volatile
nature, they’re just inserting a middleman.

Search interest in “cryptocurrency” over the last 5 years.

Interest in cryptocurrency isn’t limited to the private sector, either.

As of September 2021, the El Salvador government now demands that all

of its local merchants accept Bitcoin as legal tender.

This prompted other Central American countries, like Honduras and

Guatemala, to begin looking into central bank digital currencies.

This also had an impact on the US, where 27% of Americans

polled answered in favor of adopting Bitcoin.

While some countries, namely China, are strongly opposed to

cryptocurrency, the vast majority are considering how they can bring crypto
into the fold.

Conclusion

Things are definitely moving away from traditional financial practices.

Unsurprisingly, everything is going digital.

Financial services are looking at the cloud and the blockchain, customers
are looking at mobile banking, and everyone is looking at crypto. It’s an
exciting time to be in the financial services industry.

There are several current trends and issues in financial management, including:
1. Technology: Technology is improving the efficiency with which financial
managers run their operations. Online brokerage firms are seeking new ways
to capture and keep their customers by broadening the services they offer
and keeping the fees they charge highly competitive.
2. Regulations: In the wake of a slowing economy and corporate scandals, the
SEC assumed a stronger role and implemented additional regulations to
protect investors from fraud and misinformation.
3. Mergers and Acquisitions: A wave of merger mania hit the global securities
markets as the securities exchanges themselves have begun to consolidate to
capture larger shares of the world’s trading volume in multiple types of
securities.
4. Strategic Advising: Finance departments are taking the position of a strategic
adviser and improving financial agility.
5. Modernizing Finance Software: Finance departments are modernizing their
software to keep up with the transformation that is accelerating in every part
of all enterprises.
6. Blockchain: The financial services industry is embracing blockchain technology
to conduct cheaper, more efficient transactions while maintaining tight
security.
7. Digital Banking: Digital banking is becoming more popular, and there is an
increased reliance on blockchain technology.
8. Artificial Intelligence: Artificial intelligence is being used to empower
automation in finance.
9. Regulated Money Managers: There is an increased need for regulated money
managers.
10. Economic and Regulatory Impacts: Current issues in finance include the
economic and regulatory impacts of the financial crisis and the growth of new
types of finance.
Overall, the financial management landscape is changing rapidly, and companies
need to stay up-to-date with the latest trends and issues to remain competitive.