By Rav Hayer, Managing Director and Wayne Brown, Senior Director, Alvarez & Marsal
In 2022, the financial services industry saw a continued focus on digital transformation while the world marked the beginning of post-pandemic life and began facing tough macroeconomic challenges.
Many businesses are looking to transform their digital capabilities using the most recent technologies to get ahead and build on the good foundations they have laid in recent years. With this in mind, here are our top digital predictions for financial services in 2023:
- Artificial Intelligence (AI) will become more revolutionary
AI will play an increasingly important role in what makes a successful financial services enterprise. We expect financial institutions to increase their governance oversight, implementing policies to ensure AI is used appropriately, to see that sufficient human oversight is in place and make sure those using AI are properly trained and can adequately monitor for problems. As there is no universal standard on what exactly AI governance should look like, we may see legislators set out their visions for AI regulation, and AI will be increasingly important in shaping outcomes in line with regulatory intent.
- The shift to green finance will continue
As the emphasis on Environmental, Social and Governance (ESG) increases, both customers and staff have increasingly prioritised climate change in their decisions. The vigilance over potential “greenwashing” has meant increased sensitivity for banks, calling for both better data and traceability. A common set of minimum standards is crucial to efficiently allocate financial resources to green projects and assets and market and risk analysis. Banks need to ensure their data is sufficiently robust to ensure they are able to provide the necessary transparency.
- Hybrid working will accelerate digital transformation and vice versa
We expect to see the trend towards hybrid or fully-remote working to continue. The benefit will be felt by employees through self-service developments, such as being able to access relevant HR information from any device. It will also make a change in how we recognise one another with reward and recognition being able to take place through apps. Collaboration tools such as real-time co-authoring and instant translations can provide wide benefits for a business.
- Financial super app?
The rise of superapps has been sharp, owing to younger generations that are mobile native and demand cleaner, more seamless experiences. While this is the norm in China, other regions still lack a main player. STC Pay in Saudi Arabia is now moving to create a digital bank and carry over its customers, which may in effect create the biggest deposit institution in the country through an entirely different route.
- Cloud adoption to accelerate amidst increasing regulatory scrutiny
Financial services organisations will continue their shift to the cloud for scalability, better data management and reduction of costs. In turn, regulators will place more scrutiny on concentration risk amid the challenges presented by a failure – a key example being Amazon’s AWS outage in 2021, with some companies going down and having no failover. Regulators do not want providers putting all their eggs in one basket, and the reliance on one outlet is seen as enough to put cloud providers within the perimeter of regulators’ purview. We think this creates a good opportunity for cloud providers to partner with each other for failover. This would produce a rigid and solid system but cloud providers would need to consider how to mitigate against anti-competitive behaviours.
- Open finance data to finally come of age
Financial companies are leveraging open data and partnerships to gather more and diverse information from clients. Companies can now gather more information to offer personalised products (e.g. tailored underwriting that includes open banking data as well as traditional credit data). The increased workload in forbearance and collections will see the use of open data become ever more crucial and practical. The Saudi Central Bank (SAMA) recently launched an ‘open banking lab’, in line with its Open Banking Framework issued in 2022. The lab aims to foster innovation and accelerate the development of open banking services across the Kingdom.
- Seamless customer experience journey
Today’s savvy consumers are no longer tethered to one device or limited to a single channel. They frequently switch between voice, email, chat, and social, and expect financial services providers to effortlessly meet their needs across channels and touchpoints. This is more than transacting – it is interacting, and it relies on big data and understanding clients wants and needs. Some mortgage providers now bring different channels – self-service, voice, webchat, and social media – together on a single platform. This is key for the future and will have to become much more prominent across the whole of the financial services sector.
- The race for skilled personnel will heat up
Many product and customer experience (CX) teams already lack crucial skills including design thinking, business analytics, technology developers. This will only intensify and contribute to the war for talent currently taking place – those with skillsets in product management, engineering and data are all key and in short supply. CX is key, as businesses continue to evolve their digital offers, they need people that understand CX. Mass lay-offs at tech companies may help those in search of talent. There is also a duality at play; new jobs are emerging and there is a marked lack of true product owners.
