It is no surprise that the pandemic has pushed business owners to accelerate their digital transformation journeys. Digitalization seemed obvious and inevitable with all the lockdowns, restrictions, and hybrid work models enforced globally. And overall, the banking, financial services, and insurance industry (BFSI) did a pretty good job, swiftly adjusting to the new normal and embracing the latest digital banking trends.

So, where do banks invest their money? And what should those seeking stability and business continuity expect next?

Statistics don't lie and financial technology is thriving in the next-generation banking ecosystems:

• Fintech providers receive an impressive $50bn in funds and 500+ new fintech companies are launched annually
• The global fintech investments for 2020 alone hit $44 bn amid the pandemic
• The American fintech sector raised $12.8 bn in 2021 Q1
• The fintech market is projected to reach almost $310 bn in 2022

We should admit that fintech works and there's no reason to think that it will slow down any time soon. Our future is Gen Z who are willing to spend more only when they get higher convenience. So, fintech solutions have it all sewn up because they make our lives so much easier. But what else is out there?

We can agree that things like AI, ML, and RPA are no longer the future—they are the present. We’ve seen the BFSI sector dominating the RPA market with a 29 percent revenue share in 2020. Meanwhile, 40 percent of financial organizations plan to invest more in intelligent process automation in the next few years. So, if these technologies are the present, then which ones will drive the future?

Forrester suggests that leading banks will shift their digital transformation focus to hiring top engineering talents and building more secure financial systems. But is that all? Not even close. So, let’s see what initiatives are worth your attention in 2022.

What is sustainable finance? It refers to investment decisions that take into account environmental, social, and governance (ESG) considerations. Currently, the EU even has a set of Sustainable Finance Disclosure Regulation (SFDR) rules. And banks, to their credit, have fully embraced their social responsibility.

Finance and sustainability are expected to go hand in hand in the short run. So, it is no surprise that sustainable finance is among the top trends for the BFSI sector. Together with fintech, banks will have the perfect chance to adapt to these new SFDR requirements by creating future-oriented, sustainable finance products. We should expect more social impact initiatives, better access to environment-related investment opportunities, new transition finance guidelines aligned with net-zero goals, and other sustainability-linked bonds.

This trend was supposed to take off in early 2020, though it didn't. Why? One reason was that 41 percent of European banks missed the March 2019 deadline for the PSD2 open banking pilot phase. Also, banks that later met the June deadline for open banking API testing didn't deliver high-quality interfaces.

But here comes 2022, and the trend is more promising than ever in terms of the collaborative approach and connectivity between banks, fintech vendors, and regulators. What is open banking in simple words? It is a concept that obligates financial institutions and banks to give regulated third-parties access to customers’ financial data. Of course, such access is provided only with customers' permission and will be used for the development of new apps and service platforms.

Open banking means better transparency for consumers and more opportunities for market players ready to revive the BFSI sector. Financial organizations will be able to deliver full-spectrum, client-centric banking capabilities as a service and remain competitive. Finally, the global open banking market share is projected to reach over $43 bn by 2026. Meanwhile, 90 percent of financial leaders expect the open data economy to boost organic growth by 10 percent.

Initially, the BNPL boom started in e-commerce, but it's now rapidly conquering the BFSI industry as well. Investors poured around $4 bn in BNPL companies in 2021. Talking about the most popular buy now, pay later apps, there are trailblazers like Afterpay and Klarna that partner with Stripe. Affirm has agreements with Shopify and Amazon. Apple Pay promotes the trend in cooperation with Goldman Sachs. Meanwhile, Splitit leverages Mastercard and Visa to provide buy now pay, later with no credit check.

This market tendency offers customers financial transparency, no added fees, installment plans, and a great alternative to traditional crediting. So, it'll only keep growing as online shopping is thriving. Moreover, the list of providers expands monthly with buy now, pay later catalogs now having 10 plus companies. So, this is a perfect opportunity for traditional banking institutions to discover new value sources and keep up with consumers' demands.

It's worth mentioning that some of the technological advances we've only anticipated before are now everywhere in finance processing routines. Those advances would be:

1. Hyperautomation and RPA
2. Wealthtech
3. Increased cybersecurity
4. SupTech and RegTech
5. Cloud computing
6. Neo banks
7. Embedded financial services
8. Decentralized finances
9. Big data, AI, ML
10. Digital banking (going cashless)

We also continue witnessing the rise of banking as a service, video and voice-enabled banking, and faster cross-border payments.

We all realize that banking enterprises face significant digitalization challenges amid the ongoing pandemic, recurring lockdowns, and economic volatility. All this requires reconsidering the overall operational strategy, establishing mutually beneficial partnerships with fintech vendors, and enhancing engineering capabilities across organizations. But what we know for sure is that we are going through unique transformations and the technological future can still have a few tricks up its sleeve.