Financial Services: Challenges, Innovations, and Future Trends Report

This report provides a comprehensive overview of the financial services industry, addressing its current challenges and future innovations. It begins by highlighting the disruptive forces impacting the sector, particularly technological advancements, and the hurdles faced by financial institutions. The report delves into the critical roles and functions of financial intermediaries and markets, emphasizing their importance in facilitating financial transactions and economic growth. It discusses the advantages of financial intermediaries, such as reduced search costs, risk distribution, economies of scale, and ease of transactions. Furthermore, the report examines various financial products, including pension plans and insurance policies, outlining their significance in financial planning and risk management. It then identifies key challenges in the UK's financial services, such as changing pandemic guidance, technology adoption, and international resilience. The report explores innovative technologies like AI, blockchain, and automation, emphasizing their potential to transform the industry. Finally, it concludes by stressing the importance of prioritizing consumers, investing in technology, and adapting to digital transformation to ensure the continued growth and resilience of financial services firms.

Introduction
Financial services have been and continues to be subjected to tremendous
disruption in all facets. Thinking back at how finance has evolved through time, there
have been moments of massive shift, but it is certainly safe to say that last century or
so has had the most influence for a variety of reasons. Today’s financial service
company faced several hurdles. Most of it is due to the quick advancements in
technology. While the great majority of financial institutions have embraced the
technological revolution, they nevertheless confront several hurdles (Linchpin et al.,
2021). As it progresses toward digitization, the banking business, like many other
industries, is undergoing extraordinary transformation. While most bankers have
begun to embrace the technology innovation, there are still obstacles to overcome
(Agency, 2019). Financial services firms are confronted with a number of critical
challenges, including rising trade volumes, periods of high market volatility, the
implementation of new regulations such as the Payment Services Directive (PSD2)
and the Fundamental Review of the Trading Book (FRTB), and the need to
accelerate innovation (FitzGerald, 2021).
Analysis and Critical Discussion
Financial intermediaries’ and financial markets’ fundamental responsibilities
and functioning are critical in the supply of financial services (CFA Journal, 2021).
Financial intermediaries are extremely important in the economy. A financial market
is a geographic place where financial instruments are traded. Financial markets
promote the transfer of money from issuance of debt through the employment of
financial intermediaries, which aids in the advancement of the economy. Financial
intermediaries are necessary for a variety of reasons, including the fact that various
parties have different needs, minimizing transaction costs, and avoiding asymmetric
information (CFA Journal, 2021).
Financial intermediaries provide limited advantages. The first is reduced
search expenses (Pettinger, 2019). This will allow us to discover the appropriate
lenders and delegate that task to a professional. Second, distribute the risk. Rather

of lending to a single person, we can deposit funds with a financial intermediation
that loans to a diverse group of borrowers (Pettinger, 2019). As a result, if one
collapses, we will not lose all your cash. Then there are economies of scale. A bank
may become more efficient in terms of deposit collection and borrowing (Pettinger,
2019). This allows for economies of scale, resulting in reduced average costs.
Finally, consider the ease of use of quantities. If we wanted to borrow £10,000, it
would be difficult to locate someone who was happy to lend the precise amount. A
bank, on the other hand, may have 1,000 customers depositing £10 respectively
(Pettinger, 2019). As a result, the bank can give you the cumulative deposits from
the bank, saving us the trouble of locating somebody with specific correct amount.
There are several pension and insurance plan options. A workplace pension
is a pension that is set up by the employer. The employer normally contributes to this
pension on a regular basis, usually on payday. Government tax breaks may also be
offered. There are two types of workplace pensions. First, defined contribution
scheme. This form of business pays out an incurred due on payments made to the
pension scheme by the employee or the employer. (UKPension, 2022). The pension
money is invested, and investments might lose value as well as gain value. Pension
expenses must also be factored in. Second, defined benefit. This sort of plan offers a
predefined set of services (UKPension, 2022). Consider retirement income. The
retirement income is normally estimated based on the employee's pay and the length
of time they have took part in the experiment. The employer must engaged to the
retirement fund, but workers may also be required to contribute.
While insurance products accessible from financial service providers are
financial goods that can help shield us from the danger of financial losses
(SafeCheck, 2019). In this regard, the security given by insurance will undoubtedly
allow us think more calmly and be able to perform more efficiently. One of the most
crucial forms of insurance to have is health insurance (SafeCheck, 2019). People's
ability to work, earn money, and instead enjoy life is dependent on their health.
Fortunately, many workplaces offer health insurance to full-time and even some part-
time employees. This is the first place to look because it is usually the most
economical.

In addition, life insurance.The most important aspect of getting life insurance
is supporting for people we leave behind (SafeCheck, 2019). This is especially
critical if people have a family that relies on their income to pay the expenses.
According to industry experts, a life insurance policy must cover 10 times of the
annual salary. This figure would be sufficient to cover ability to repay, burial
expenses, and offer a financial buffer for the family. Third, car insurance. This
protects private automobiles from catastrophic events, fire, damage, and accidents
(SafeCheck, 2019). All risk vehicle insurance and total loss only (TLO) car insurance
are the two types of car insurance. The automobile will be insured against all forms
of hazards, even minor collisions, with all risk car insurance until the vehicle is lost.
There are important difficulties in financial services in the UK, as well as
potential financial service innovations. The first is in terms of the prospect for future
challenges. Unsurprisingly, changing pandemic guidance was the top short-term
concern for financial firms in the coming year (EVERFI, 2022). With the UK presently
facing its third shutdown, many financial services firms will have had to adjust to
quickly changing instructions even before being polled. Businesses may also assess
the need to invest in work-from-home activities, and there may be doubt about
permanently reopening premises.
The second is in terms of technology investment and adoption. Historically,
the financial services industry has been sluggish to embrace digital revolution
(EVERFI, 2022). Issues with legacy applications, along with typically massive
datasets and an unwillingness to undertake potentially hazardous change
procedures, have resulted in many organisations falling behind the technological
curve. As a result, it is encouraging to see how much has changed in the previous
year, with 45 percent of financial services organisations investing in artificial
intelligence and machine learning technologies. New technologies now make
procedures easier, efficient, eliminate mistakes, increase communication, and alter
how people see and engage with money. Most significantly, these technologies may
tremendously help financial institutions.
Digital experience systems for banks are the sort of technology. They are not
new, but contemporary technologies are enabling financial institutions to transform
an already relatively young financial services technology (EVERFI, 2022). Hybrid

cloud solutions provide users with both privacy and accessibility. Then there is
blockchain. Blockchain is a new financial services technology trend that is altering
the financial world today (EVERFI, 2022). Blockchain is the technology that
underpins Bitcoin and is widely considered as one of the most promising options for
banks and other financial institutions today. Finally, chatbots and artificial intelligence
are available. They are playing an increasingly crucial role in the digital revolution of
banking (EVERFI, 2022). They are widely utilized by financial institutions, ranging
from large banks to local credit unions. Finally, automation in financial services.
RPA, or robotic process automation, is the most often used automation tool,
essentially automating fixed and repeated procedures (EVERFI, 2022). These which
was before rules can manage structured or unstructured data digitization,
authorization, risk alerting, and other duties. Many also have learning patterns, which
ultimately enhance over period as more information is collected (EVERFI, 2022).
The final critical problem is one of international resilience. Clearly, foreign
sales and earnings have a positive impact on business sustainability (EVERFI,
2022). In fact, this meant that companies who were not globally integrated struggled
more during the epidemic. This internationalisation provided them with a competitive
edge, allowing them to withstand the numerous storms of 2020. Further ambitions to
expand abroad are not only a positive indication for development, but should also
strengthen the sector's resilience.

Conclusion
While there are numerous worries, the fact that financial services firms are
investing in technology such as AI and machine learning, as well as continuing to
expand abroad, means that they are giving themselves the best opportunity of
efficiently dealing with any potential issues. To sustain their development and
resilience over the next 12 months, it is critical that companies continue to prioritise
their consumers, invest in technology, and stay ahead of digital transformation. The
effect of after crisis regulation on banks’ cash reserve ratios, including how the
current and future macroeconomic circumstances impacts the long-term viability of
banking as we know it. The way banks handle career development must evolve, as
must the finance industry experts of the future.

References
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