This year, banks will face unprecedented pressures and demands. The solidity of their results will give them some room to respond effectively, but the context of rapidly increasing interest rates calls into question some of the drivers of development. The decisions banks will make in the coming months and the priorities they will set for themselves promise to be decisive. By Jerome Baroy, Executive Director, Head of Banking at Accenture
What are the 10 trends expected to reshape the banking industry in 2023?
- Higher interest rates lead to product innovation
The wave of technology has helped break many of the obstacles that could limit market movements. Higher interest rates, along with inflationary pressures, will stimulate competitive dynamism. This is why, if they want to retain their customers, banks will have to innovate more than ever this year and be able to cover a wide range of customer needs. Some will certainly consider creating some sort of Amazon Prime banking, i.e. a suite of personal and connected products and services, that increases value generated and loyalty (more than 80% of US households are Amazon Premium subscribers with the commissions being collected in the subscription increasing in importance).
- Agency revival
As the pandemic has shown, without face-to-face interactions, banks struggle to engage and maintain close relationships with their customers, especially when it comes to local customers (individuals, professionals and very small businesses). With the digital revolution, the communication surface in general has evolved, but in favor of more impersonal banking services, which increases the need for banks to reconnect with human contact. So we can expect in 2023 to see banks invest more proactively in advisors as a mentor for personalization and client relationships, within the branch, but also more broadly across all value-add contacts. This will involve a significant shift in regulatory and distribution models, with more personalized pathways and with broader coverage (which can already be seen in real estate with support beyond just financing).
- From the metaverse to the Web3 revolution and generative artificial intelligence
The metaverse won’t turn the bank in 2023, but it will continue to generate interest and attract investment. If, like mobile twenty years ago, the metaverse is in the process of creating a new world of possibilities for banks, 2023 should focus above all on the new possibilities it can offer on a larger scale than before. Web 3 Which marks the emergence of data decentralization and a new level of relevance with the advent of Generative artificial intelligence whose applications are numerous, from highly relevant marketing to operational efficiency and cost control.
- Reinventing the Employer Promise
At a time when employees increasingly need to work in agile and flexible teams, to acquire new skills and plan their career paths differently, the war for talent will be at the center of attention. More than ever, the ability to attract scarce skills and support the development of human assets will be the key feature of performance for banks, which must also be able to respond to employees in a growing search for meaning.
- The absolute presence of risk
And while banks emerged from the pandemic relatively unscathed in terms of credit losses, new risks have emerged in 2022. Geopolitical conflicts, climate change, the energy crisis, and inflation have increased. shadow banking… are all elements that make the future uncertain, both for banks and for their clients. Players who make this risk a priority in their management will outperform their peers – not only because they will reduce their exposure as much as possible, but also because they will create the conditions to further confirm their usefulness to clients looking for confidence, stability and long-term commitment.
- Data becomes a product
To a large extent, the data promises that the digital age brings to banks have not been realized. Data is no longer seen as carbon dioxide but as oxygen that can irrigate the activity of banks. It must be managed as an asset in its own right, with a ‘product manager’ able to unleash their full business and relational potential. As such, new paradigms, such as the data grid (or ‘data grid’), are instrumental in fundamentally rethinking the approach to data in the Bank.
- Fintech: From disruptors to agents of change
If the evolution of the economic context and access to liquidity is a game-changer for fintechs, their contribution will continue to be important thanks to their ability to innovate by looking for new types of responses or approaches to the challenges that characterize the relationship. This new deal will certainly make financial technology companies less threatening than full partners, and able to support them in accelerating the transformations they lead, in order to strengthen and increase their positions, whether in global finance, investment or payments.
- The inevitability of energy transfer
More than ever, banks are called upon to act against global warming and to maintain their commitments to carbon neutrality. However, the magnitude of the challenge is that they will only be able to achieve this by engaging all stakeholders: from politicians to opinion leaders, via regulators and scientists, while closely connecting their clients. The increased visibility of the energy transition would make possible a clearer sharing of their respective roles and contributions to the collective challenge.
- At the heart of customers’ lives
Redesigning and digitizing customer journeys has truly improved the experience with more simplicity and convenience. However, this digitization should not take place at the expense of human support, which remains central to the relationship between banks and their customers, especially in a tense economic environment. Therefore, the ability of banks to improve the relevance and personalization of their approaches, particularly through better use of data, will become a key differentiator as far as it relates to the human being, able to convey the empathy or even emotion that often accompanies financial topics. In the face of unprecedented societal challenges, an important differentiator will also come from the ability to advise clients outside of rigorous banking products and place itself at the center of clients’ lives, starting with the realities of their needs rather than the responses of products. Housing, the energy transition, mobility or aging are some of the areas of articulation that banks have to explore.
- Essence has its reasons
For various reasons, banks have only partially responded to the need to modernize their infrastructure and core systems. The year 2023 will be a turning point in this regard, more than 60% of the world’s top 100 banks We’ve met, we announce that they’ve started a modernization process or are preparing to do so, which is a prerequisite to fully taking advantage of the capabilities offered by cloud, artificial intelligence, and data, but also platform approaches that are in line with growth connecting systems, both internally and with external partners.
In a year 2023 marked by strong elements of uncertainty or even turbulence, banks are facing new horizons that present many opportunities for acceleration and differentiation.
By Jerome Baroy, Executive Director, Head of Banking at Accenture
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