The challenges faced by the financial industry change from generations to generations. For example, in the 1900s, the gangs robbed various banks, whereas, in today’s era of digitalization, there are online financial issues faced by people.
With digital banking and finances, the ways to steal money has also changed. Digital technology has revolutionized the financial sector, but the challenges of the financial industry have increased.
Digitalization in the financial industry has brought in a lot of positives but at the same time has attracted a lot of challenges too. There are a few of the major challenges faced by this industry which is mentioned below.
Challenges Ahead of Financial Industry
Amidst all the challenges, the global financial sector is finding ways to overcome these challenges and trying to make its survival smooth.
- Regulatory Compliance
The regulatory environment is dynamic and ever-changing. It is a constant challenge for all types of financial institutions.
Many companies are working towards reducing the burden of compliance. With the advent of the latest technology, the burden can be reduced by bridging the gap between the financial service industry and regulators.
These companies create few applications. These applications help in automated audits and reporting.
- The use of Big Data
The use of big data has been proved to be beneficial as well as an obstacle for the financial industry. The banks need to protect their interest while diving into consumer databases and news feeds.
To reap benefits for organizations, a strong data analytics technology is the need of the hour. This has to be sorted but sorting through torrents of unstructured data to collect useful information.
To financial industry can benefit from data analytics solutions as they can lead to a transformation in risk management, asset management and trading etc.
Also, they can be used in debt management as well. With the variety in loans available such as same day loans by direct lenders and unsecured personal loans, data analytics can prove to be a boon for the financial industry.
- The use of Artificial Intelligence
The prediction of the financial service industry with the introduction of AI can transform the sector completely. AI solution providers provide opportunities related to open banking, automated wealth management and customer verification etc.
AI has already been helpful for the banking sector. It allows the customer to get alerts from the bank for any suspicious activity. There are more powerful technological advances on the way to give the industry a new experience altogether.
The major challenge for the financial sector is to benefit from AI without being victimized and falling prey to it. Research and development are being done around this question of victimization.
- Introduction of FinTech in the financial sector
Contrary to the hope of the banking industry, the FinTech companies have not disappeared completely and are still prevailing in the market.
Conversely, these FinTech companies have transformed into rivals for the cash and the customers.
The financial sector has lately realized that it is better to befriend these companies rather than opposing them.
- Customer Retention
The competition in the financial industry has been on the rise and is getting intense day by day. The concept of brand loyalty is vanishing from the industry.
The customers are more service-oriented as they demand more automated services, personalization and easily accessible services.
Customers prefer staying at one place. Hence, the institutions offering all these services can capture the market and be the market leader.
These institutions have to understand the customer mindset and work accordingly.
Customers are more service-oriented rather than brand-oriented. The institutions offering all these services at one point will succeed in customer retention.
- Employee Retention
Along with customer retention, employee retention is another challenge in the financial industry. Lately, it has been difficult for them to attract and retain employees as well because of the increasing challenges in this industry.
The basic requirement for employees in this industry is tedious hence having a problem in finding employees.
A change in the mindset of institutions is required if they want to attract new employees. The long working hours have to match up with the pay benefits.
Also, the culture has to be cohesive and dynamic to contribute to the growth of the employees.
The institutions should be accommodating with the employees’ lifestyle and needs to reap benefits out of their workforce.
Change is the only constant and has to be adopted by the institutions to attract a stable and qualified workforce.
In case of no employment, there are many other options, i.e., to get a loan with unemployment benefits.
With such options available, employees can wait rather than taking up any job that is not beneficial to them.