# How can financial firms tackle the challenges that lie ahead in 2021? Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-01-28 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Financial Services Resilience Amidst Economic Crisis Meta Description: Discover how financial services companies stayed strong in 2020 through tech investment and internationalisation. Learn what challenges lie ahead. URL: https://financedigest.com/how-can-financial-firms-tackle-the-challenges-that-lie-ahead-in-2021html ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/untitled-design-32-1736838616437-compressed.jpg) _By **Paul McCreadie,** Partner at [ECI Partners](https://www.ecipartners.com/), the leading growth-focused mid-market private equity firm_ 2020 was a hugely difficult year for businesses, and yet there were still some sectors that on the whole managed to remain resilient throughout. When looking at financial services companies specifically, almost three quarters (74%) of mid-market companies remained resilient during the pandemic, despite large scale disruption. This statistic, from our latest [_Growth Index_ research](https://www.ecipartners.com/news-and-insights/growth-surveys/2020), is hugely positive news for the sector, especially when taking into account the economic crisis that firms have had to weather as a consequence of Covid-19. So, how did firms remain resilient, and how will they tackle the challenges in the year ahead? **Investment and internationalisation** Firstly, investing in new technology is a [key driver](https://www.financedigest.com/packaging-and-textile-industries-key-driver-for-digital-printer-market-demand-2021.html "Packaging And Textile Industries : Key Driver For Digital Printer Market Demand 2021") behind financial services remaining resilient in 2020. Traditionally, the sector has been [slow to adopt digital transformation](https://www.financedigest.com/is-the-road-to-data-transformation-slowing-digital-transformation.html "Is the road to data transformation slowing digital transformation?") due to problems with legacy systems, large amounts of data and a hesitancy around a risky change process. In the last year, it is promising to see that this is changing, with 45% of financial [services firms](https://www.financedigest.com/how-financial-services-firms-can-mitigate-against-their-top-data-security-threats.html "How Financial Services Firms Can Mitigate Against Their Top Data Security Threats") having invested in AI and machine learning technology – making it the top sector to have invested in this space over the last 12 months. One business that has been [investing in machine learning for the last few years](https://www.financedigest.com/halfway-through-2021-what-can-you-do-now-to-finish-the-2021-investment-year-strong.html "Halfway through 2021, what can you do now to finish the 2021 investment year strong?") – and reaping the benefits – is Avantia, the technology-enabled insurance provider behind HomeProtect. The business has undergone a large tech transformation in recent years, investing in an underlying machine [learning platform](https://www.financedigest.com/brand-strategy-tactics-for-an-online-learning-platform.html "Brand Strategy Tactics for an Online Learning Platform") and an in-house data science team, providing them with capabilities to return a quote to over 98% of applicants in under one second. This investment has allowed them to [improve customer service](https://www.financedigest.com/how-can-financial-firms-improve-customer-service-after-the-pandemic.html "How Can Financial Firms Improve Customer Service after the Pandemic?"), become more scalable, and in turn grow significantly. Additionally, half (51%) of [financial services firms](https://www.financedigest.com/financial-firms-can-use-technology-combat-todays-cybercriminals.html "How financial firms can use technology to combat today’s cybercriminals") have invested in cybersecurity over the last year, allowing them to protect their operating platforms and ensure they can continue to provide solutions to their customers. Secondly, it is clear across all sectors that international revenues and profits have a [positive impact](https://www.financedigest.com/broadcast-switchers-market-increasing-adoption-of-ip-live-production-technology-to-positively-impact-growth.html "Broadcast Switchers Market: Increasing Adoption of IP Live Production Technology to Positively Impact Growth") on business resilience. [Businesses](https://www.financedigest.com/a-taxing-issue-ten-tax-invoicing-pitfalls-that-international-businesses-must-avoid.html "A taxing issue: Ten tax invoicing pitfalls that international businesses must avoid") that weren’t internationally diversified in 2020 struggled more during the pandemic. In fact, [businesses who only had a domestic presence were three times](https://www.financedigest.com/isnt-it-time-open-banking-delivered-for-businesses.html "Isn’t It Time Open Banking Delivered for Businesses?") more likely to be considered to be the least resilient. Perhaps an attribute [towards financial services firms’](https://www.financedigest.com/russian-rouble-firms-towards-60-vs-dollar-stocks-up.html "Russian rouble firms towards 60 vs dollar, stocks up") resilience in 2020, therefore, was the fact that over half (53%) of firms already had a European presence last year, and over a third (38%) had a presence in North America. Having these diversified operations would almost certainly have contributed towards them successful [weathering the many storms](https://www.financedigest.com/how-digital-commerce-merchants-can-weather-the-economic-storm.html "How Digital Commerce Merchants Can Weather the Economic Storm") of 2020. **Challenges ahead** 2020 may be over, but many of the [challenges of the past year will continue](https://www.financedigest.com/hybrid-working-and-the-continued-security-challenges-for-financial-organisations.html "Hybrid working and the continued security challenges for financial organisations") into 2021, and companies will be looking to mitigate the impacts. According to our research, the biggest short-term concern involved changing pandemic guidance, with 42% of financial firms citing this as a [top](https://www.financedigest.com/should-your-business-reconsider-invoice-financing-top-tips-on-why-reappraising-this-method-liberates-business-cash-flow.html "Should your business reconsider invoice financing? Top tips on why reappraising this method liberates business cash flow") concern. With the UK currently experiencing its third national lockdown, many businesses will have already had to [adapt to rapidly changing](https://www.financedigest.com/insurers-must-reimagine-traditional-risk-models-to-adapt-to-climate-change.html "Insurers Must Reimagine Traditional Risk Models to Adapt to Climate Change ") guidance, exemplifying why this was the top concern. Brexit was only cited by 24% of financial [firms](https://www.financedigest.com/prioritising-employee-wellbeing-in-finance-firms-through-learning-and-development.html "Prioritising employee wellbeing in finance firms through learning and development") as a short-term concern, which is positive to see. However, due to Brexit, UK financial [services firms are no longer able to passport their services into Europe](https://www.financedigest.com/credit-agricole-and-caceis-to-buy-rbc-investor-services-europe-unit.html "Credit Agricole and CACEIS to buy RBC Investor Services’ Europe unit"), which may cause problems, particularly in the next 12 months as the Brexit deal is ironed out and the agreement is put into practice. While it’s positive that those financial firms surveyed weren’t hugely concerned about Brexit at this juncture, if this confidence is going to remain, the UK is going to need straightforward access to Europe and be able to operate there without issue. European [collaboration is vital for the ongoing success](https://www.financedigest.com/a-winning-team-how-corporate-champions-can-drive-successful-collaborations.html "A winning team: how ‘corporate champions’ can drive successful collaborations  ") of the industry, otherwise we may see these concern levels rise. As a continuation from last year, [businesses will also still need](https://www.financedigest.com/the-four-pillars-of-data-integrity-what-finance-businesses-need-to-know.html "The four pillars of data integrity: what finance businesses need to know") to be investing in working from home operations.  According to the research, 30% of [financial services firms are already planning to adopt remote working](https://www.financedigest.com/turning-a-blind-eye-wont-work-for-financial-firms-as-the-fca-tightens-its-grip.html "TURNING A BLIND EYE WON’T WORK FOR FINANCIAL FIRMS AS THE FCA TIGHTENS ITS GRIP") on a permanent basis, so it’s imperative that decisions are made now about whether they invest more in enabling staff to do this, or in their current office premises. **Remaining resilient in 2021** Clearly there were a number of [key factors](https://www.financedigest.com/automotive-soft-trim-interior-materials-market-size-key-players-growth-factors-regions-and-applications-industry-forecast-by-2026.html "Automotive Soft Trim Interior Materials Market Size, Key Players, Growth Factors, Regions and Applications, Industry Forecast by 2026") that stood financial services firms in good stead last year, and will ensure that they remain resilient in 2021. Investing in tech, as many financial firms did throughout 2020, can help businesses offer a better [customer experience](https://www.financedigest.com/getting-customer-experience-right-in-financial-services.html "Getting customer experience right in financial services"), and retain and grow market share through winning new customers. In terms of international expansion, [firms are already planning to capitalise on this area, with over half (51%) of firms planning overseas growth in Europe over the next](https://www.financedigest.com/german-engineering-firms-expect-hit-from-supply-chain-bottlenecks-next-year.html "German engineering firms expect hit from supply chain bottlenecks next year") 12 months, and 43% in North America. Further plans to expand internationally is not only a good sign for [growth](https://www.financedigest.com/passendo-appoints-harry-charalambous-as-head-of-demand-international-growth.html "Passendo appoints Harry Charalambous as Head of Demand & International Growth"), but should further increase resilience within the sector. Ultimately, in order to maintain their growth and resilience throughout the next 12 months, it’s imperative that the UK’s financial services firms continue to put their customers first, invest in technology and remain on the front foot of [digital change](https://www.financedigest.com/why-the-time-is-right-for-finance-to-embrace-digital-change.html "Why the time is right for finance to embrace digital change"). --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---