The 21st century has seen a lot of changes and development within the finance industry, and the continued digital acceleration we’re seeing will only keep this momentum of growth going.
It’s important to prepare for these changes so that you can quickly adapt and leverage these disruptions to your advantage, allowing you to build and protect your future wealth.
5 reasons this decade is a critical time for the finance industry
The finance industry will definitely see a lot of changes in the coming years, so we’ve highlighted five key trends and factors that will impact the industry’s direction of growth and, by extension, how you manage your wealth and finances.
1. A multipolar world is impacting the worldwide finance industry
Globalisation in the world has significant ramifications for the international monetary system.
Thanks to how interconnected the world economy is, currency values are affected by the actions of governments and central banks around the globe, instead of the value of gold.
The value of gold or the gold standard used to be the main benchmark for currencies because countries used to convert paper money into a fixed amount of gold, so this fixed price of gold buys and sells gold at that price–this determines the value of currency.
This has been replaced by fiat money on the government’s order, and it’s the currency that must be accepted as a means of payment.
Economies like the US have the tendency to affect others more than most, and this position makes them the world’s bank and creates conditions for it to be more desirable and ‘safer,’ to price and trade in their fiat money, US dollars.
A multipolar world encourages different economies to determine market prices and changes, allowing more nations to participate and contribute to the international monetary system.
This means more activity will flow into the global economy, and you’ll feel the effects of changes like more allocations made for development investments or shifting regulations to curb inflation, which you wouldn’t expect to directly affect the value of your money.
2. The global economy is constantly changing
A multipolar world has also resulted in a growing global economy, which has its own set of advantages and disadvantages. It can lead to robust growth as more economic opportunities open up between multiple countries, making way for international trade and investment.
This also means that commodity prices are significantly affected by current events around the world. One relevant example is how the Ukrainian crisis has exacerbated food shortages around the world. Food, fuel and fertiliser costs are rising around the world because of the crisis and commodities rise along with increases in rates of basic goods such as these.
International transactions between major economies in the world drive the global economy, encouraging worldwide innovation in products cornered and market competitiveness in different countries. International transactions also help underdeveloped countries import and export their products more freely, so they’re able to better contribute to the global economy.
A country’s stability could be disrupted if there are too many restrictions on imports through trade tariffs or exports through trade quotas.
It’s almost impossible to find one country unaffected by what’s happening in another one at any point in time. This hyper-connected global economy means making an investment anywhere is the same as taking a chance on world trade and on all its risks, influencing the ways that your investments will be affected:
- Current events will impact commodity prices
- International trade and investment are affected by globalisation
- Interest rates shift with economic growths and slumps
3. The necessity for digital currencies is accelerating
The launch of digital currencies is one of the most innovative developments in this century, and it’s become one of the most popular ways of making transactions globally.
Central bank-backed digital currencies have been launched in 11 countries around the world, and interest is continuing to grow despite the failure of FTX cryptocurrency exchange in 2022.
Digital currency is also a claim on the central bank. Instead of actually printing physical money, a government’s central bank will issue a cryptographic form of money issued in electronic form, and this will be backed by the full faith and credit of the government.
It’s different from electronic payments which are a way to avoid pulling out physical cash, so these are transactions that are only backed by commercial banks or the payment provider.
Digital currency is becoming more necessary in this decade as governments want to find ways to make transactions cheaper, simpler and safer, with digital equivalents of paper money posing an increasingly viable option as nations move towards sophisticated systems.
For consumers, this means being able to transact without having to deposit any physical money into a bank account and relying on one commercial bank platform to send or receive money. The backing of a central bank could mean that digital money is tagged and monitored by the government and is more likely to be affected by its own moves in international trade.
4. There is an increase in personalised and intelligent fintech services
Fintech is continuously evolving as more improvements and developments are launched in the industry. It’s already a part of daily life for most consumers, and it will only continue to become more essential in everyday use as fintech continues to evolve.
Some trends in fintech will be more apparent to you than others in the coming years, as the digital space continues to keep up with the needs of consumers. The following trends may show up in your daily transactions, whether behind the scenes improving your experience or at the heart of the action when you receive money, sooner than you think:
- Blockchain: It may be most familiar in conversations about Decentralised Finance (DeFi) or non-fungible tokens (NFTs) but distributed ledger technology is growingly acting as the framework of the digital world. It can be used for more applications moving forward, so it’s only a matter of time before blockchain helps maintain records of your transactions as well.
- Sensors and Internet of Things: Sensors may have already been part of your day and you didn’t notice; some ATM machines can now detect how many people are lined up to use them, while other sensors are used in micro-payment transactions to allow for small payments without a user having to enter their credit card information, like in the case of contactless tap-to-pay transactions that register in the blink of an eye.
- Autonomous Finance: If you’ve ever set up a scheduled utility bill payment, then autonomous finance is something you’ve encountered. These systems perform financial transactions without the involvement of humans and remove the hassle of manual fund management or filing paperwork, especially for insurance claims.
- RegTech: Regulatory technology could be the next aspect affecting your investment into the global economy. These solutions automate the monitoring and reporting of data with tools that handle large datasets or unstructured information, designed to help financial institutions keep up with changing regulations in different jurisdictions.
These will potentially impact you and how you manage your finances, so it’s helpful to pay attention to these developments and be aware of how they can be used to your advantage.
5. Customer expectations are consistently getting more sophisticated
Today’s generation of customers is tech-savvy and knowledgeable. They’re discerning of the financial services they receive, and they expect an elevated experience from their providers.
This in turn impacts the way financial institutions provide their products and services as they attempt to meet customer expectations. The pandemic fundamentally changed how people receive income, process information and value experiences, so service providers are challenged to keep up with the allowances that consumers expect from establishments.
If you notice that a current provider retained essentially the same clunky, unresponsive app from before the pandemic, then you probably are of the same opinion as many other consumers who have taken their business elsewhere until their providers meet their needs. In general, expectations have changed on three finance-related fronts:
- Flexible payments: Institutions provide more options to pay, whether it’s cash or contactless, and will continue to do so as long as digital reigns supreme.
- Variable finances: Sources of income are not as straightforward as they used to be, so institutions will be trying to keep up with new spending and borrowing habits.
- Human focus: The establishments that survived the pandemic are those that understood how compassion and humanity play a big role in transactions, aside from the simplicity they require.
The next decade is shaping up to be one full of transformations and rapid innovation, so there will be new uses for things that are already familiar. Investing in paper money may phase out soon, but having a relatively stable investment in gold, for example, will help you keep up.
Are you ready for the changes in the finance industry? Future-proof your finances the easy way – simply download the Nauggets App and start your gold savings journey today.