Financial Services Business Plan for your Business Aspirations

A financial services business plan is vital to starting a new, expanding your current, or purchasing an existing financial service business.

South Africa’s financial services sector, backed by a sound regulatory and legal framework, is sophisticated, boasting dozens of domestic and foreign institutions providing a full range of services: commercial, retail and merchant banking, mortgage lending, insurance and investment.

The South African banking system is well developed and effectively regulated, comprising a central bank- the South African Reserve Bank- as well as a few large, financially strong banks and investment institutions, and a number of smaller banks. Many foreign banks and investment institutions have operations in South Africa.

2023 will be a challenging year for financial institutions. Innovative new technologies are redefining the sector, shaping the services that financial organisations offer, the ways in which they interact with consumers, and the ways in which they apply new sources of data across departments. But the onset of growing economic instability is putting entire markets in jeopardy and threatening to yield mounting uncertainty for lenders and borrowers alike. Nevertheless, the evolution of financial services is set to continue.

Top trends for financial organisations in 2023:

1. Open Banking will dominate the future

According to Statista, the number of global open banking users “is expected to grow at an average annual rate of nearly 50 percent between 2020 and 2024, with the European market being the largest”. Considering how open data benefits consumers as well as financial players, it’s easy to understand why this trend will become increasingly popular moving forward.

By granting third parties access to consumers’ financial data, organisations can better understand how consumers behave, what they want, and most importantly, what they need. In turn, financial institutions can therefore improve their customer experience, which results in higher retention and engagement.

PwC states that Open Banking has created a £7.2 billion revenue opportunity. Financial institutions are beginning to act as they look to embrace this opportunity. 47% of banks developed Open Banking APIs in 2021, with another 25% following suit in 2022. In addition, this momentum has been furthered by political action, such as President Biden’s Executive Order on Promoting Competition in the American Economy.

2. Cloud-native systems will replace legacy alternatives

Leading financial organisations continue to embrace cloud-native systems. For example, in 2020, HSBC signed a long-term deal with Amazon Web Services to move their existing legacy functions over to new cloud-based alternatives. And then there’s Deutsche Bank, which partnered with Google to deliver a cloud-native “fully-managed environment for applications”.

But why is the cloud so important? According to IBM, cloud-based systems support increased agility, decrease IT costs and operational expenses, and play a key role in ensuring that employees can be effective when working remotely.

Hybrid working is the future – in fact, 90% of employees surveyed by Loom are happier with the increased freedom that working from home gives them. By leveraging cloud-native systems, employees can access crucial financial data at any time and any place. With cloud-native capabilities, financial institutions can maintain high performance at all times and dramatically improve both customers’ and employees’ satisfaction.

Cloud-native architecture and systems also enable faster new feature development and automatic upgrades (instead of disruptive updates that require downtime).

3. Artificial intelligence and machine learning will increase in importance

Artificial intelligence (AI) and machine learning (ML) make organisations more efficient and more effective. These technologies gather, sort, and analyse enormous datasets in seconds – and are almost error-free. Financial institutions can spend their time acting on these data-driven insights, instead of wasting unnecessary time and effort manually digging through the data itself.

IDC predicts that by 2026, 85% of organisations will use AI and ML in some capacity to augment their foresight, resulting in a 25% increase in productivity. Low-code/no-code AI is a great example, allowing people without coding knowledge to build applications themselves. While Gartner reported that “low-code tools will make up 65 percent of all app development by 2024”, Forrester also outlined that low-code/no-code industry spending was on track to reach approximately $21 billion by this 2022.

Whether these technologies are used to personalise service offerings, better understand consumers’ behaviour, or reduce errors, AI and ML will only grow in importance moving forward.

4. Cybersecurity will become a top priority

Cybersecurity has always been crucial for financial institutions. However, with the number of data breaches up until the 30th of September 2021 exceeding the total number of events throughout 2020 by 17%, it’s clearly more of a concern than ever before. These cyber attacks have a wide-ranging impact on organisations. In fact, 42% of businesses say that digital fraud prevents innovation and halts their expansion into new channels.

Cybersecurity breaches are particularly damaging for financial institutions. Their customers’ financial and personally identifiable information (PII) are incredibly valuable for hackers – and security breaches may well result in the bank losing a huge quantity of customers as well as revenue.

Hence, financial institutions must prioritise cybersecurity in 2023 and beyond. They must not only optimise their own internal processes, but they must also be selective about only working with third parties that put data security at the heart of everything they do.

Components of a well-developed Financial Services Business Plan include:

Executive summary: Is positioned first in the business plan and includes management and company key information, the amount of funding or grant request, the purpose thereof, the mission and goals of the business.

Management Summary: Provides information on your management and staffing structure.

Services: Will you provide commercial, retail and merchant banking, mortgage lending, insurance and/or investment services?

Market analysis summary: Includes strategies for targeting market segments, as well as information on your competition and competitive edge.

Strategy and Implementation summary: The marketing strategy should include a sales strategy, sales forecast, and milestones to be achieved. Include a SWOT Analysis.

Financial projections: Includes 8 documents namely the management account, income statement, balance sheet, cash flow, cash forecast, break even analysis, loan amortisation schedule, and fixed asset schedule with charts, ratios, and calculations.

Annexures: Includes supporting documents for your business plan, namely management and company (if applicable) documentation, contractual agreements, and tax returns.

At DTC, we understand the intricacies of the various requirements and criterion for a well-developed business plan. Our developments are often used to secure funding, secure non-repayable business grants, create a vision for the business and the management thereof. No matter the use of the document for your business (to raise funding and/or non-repayable business grants), we guide you through the procedure. We provide access to our extensive funding network from across the country!