What’s next? Five Trends and Developments to Watch

What’s next? Five Trends and Developments to Watch

Over the past years, the financial services industry has changed, but instead of solely looking backwards at our progress, we are shifting our attention to five trends and developments that will shape the future of financial services in Malta and beyond.

• ESG versus Greenwashing

Without a doubt, environmental, social and governance (ESG) topics will continue to gain in importance in the years ahead. Globally, the number of ESG regulations and standards has nearly doubled in the last five years, and since the Covid-19 pandemic, ESG has become an even more important subject as it is not only seen as a way to do well but also as a way to mitigate risk in the long term. While sustainable finance is a growing sector, and more and more financial firms in Malta as elsewhere are starting to measure and disclose their ESG impact, a key challenge going forward will be to combat greenwashing. We are seeing that investors, regulators and the general public are exercising greater scrutiny of corporate sustainability efforts. ESG pledges must translate into real action to avoid accusations of greenwashing.

• The War for Talent Intensifies

Talent is needed across all segments of the financial services industry, and competition to attract the greatest minds has intensified. Compliance and regulatory roles are among the busiest areas for hiring, while the rising importance of artificial intelligence (AI) and Big Data analytics in financial services are positioning the sector in direct competition with the technology industry. Traditional financial services companies are now finding themselves competing with hip tech companies that offer more casual working environments and a greater acceptance of remote work. Recruiters say financial services firms need to change to be able to build or buy in talent. Companies must redefine their attraction and retention strategies as various surveys found that people who want a greater level of flexibility – either time or location – are most likely to seek out new opportunities.

• Boom in AI Implementation

Artificial intelligence is one example of a new technology that has been fast-tracked by the Covid-19 pandemic, partly because it reduces the need for face-to-face contact but also because it offers a solution to staffing issues. From using AI to power chatbots and providing 24/7 customer service, to utilising the technology for critical functions such as anti-fraud and regulatory compliance, innovative financial services companies are already making multiple use of new technologies. Over the next years, AI implementation will continue to increase across a broad range of internal, customer-facing and staff support applications, including authentication processes, robo-advisory and cybersecurity.

• Customers Want Personalised Services

The financial services sector has been slow to join the personalisation era. However, it’s the most important trend you can pay attention to as it captures the essence of what modern consumers want. Individual service and attention. Many financial firms are now trying to catch up as they realize that today’s consumers expect a greater level of personalisation. In financial services, this is not so much about personalised products, but more about information, service and expert advice, delivered to the right individual at the right time. This is where customer intelligence, data and AI come into the picture. If traditional financial providers don’t start offering personalised experiences, tech giants and /fintech start-ups will step in to fill the gap.

• A Changing Tax Landscape

The global tax landscape has seen significant changes over recent years. Initiatives such as FATCA, BEPS and the Common Reporting Standards have significantly affected the operational requirements of financial institutions, while the more recent drive towards a minimum tax rate has prompted Malta to review its current tax imputation system. The expectation is that by 2025, Malta will have a new tax system. The overhaul marks the first palpable change in Malta’s corporate tax regime since the early 1990s, when the legal and regulatory system for the country’s financial services industry was created.