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| Top 10 predictions for the financial services industry in 2023 |
The financial services sector is facing a challenging year as recession fears and political tensions cloud the global economic outlook. How will industry leaders use the advanced data and analytics available to them to address the challenges?
Here are some predictions from leading SAS experts on what users and financial institutions can expect this year.
Predictability decline
Anthony Mancuso, Director of Risk Solutions Consulting, said: “We do not expect chaos in 2023, but we do expect a return to a certain degree of predictability. labor market, supply chain difficulties.” All of these factors combined will inevitably lead to higher inflation and thus higher interest rates.” This is a clear policy response. As the world continues to struggle to weather the impact, we expect continued payment delays from retail and trading portfolios, as well as high market volatility warranting robust scenario analysis, near-real-time control capabilities and allowing for the general institutional resilience that defines the economic landscape today.
Placing the customer at the center of the decision-making process heralds a new era of exceptional customer loyalty
“The ability to make decisions throughout the customer lifecycle will be a key competitive advantage in attracting and retaining customers,” said Stu Bradley, senior vice president of Security Intelligence and Fraud. Risk, fraud and marketing decisions must be viewed holistically and combined into a single architecture to create a unique customer experience that gives organizations a competitive advantage. I expect that rising fraud losses and increasing automation will spark interest in centralized governance rather than differentiated solutions, as well as streamlining decision-making around customer acquisition and retention. "
"Zombie Corporation" ... fast chess dictates economic calculations
Stas Melnikov, Head of Portfolio Risk Solutions, said: “Rising interest rates and a stronger dollar point to historically high sovereign debt issues and ongoing political turmoil. This leads to a rapid collapse and exacerbation of market weakness. , especially in so-called "zombie" companies (bankrupt companies that earn enough to stay afloat and pay interest only) where it becomes more expensive and less expensive to borrow. Companies that lack strong balance sheets and cash flow generation will be at high risk of default, while companies that survive may prioritize earnings quality and cash flow sustainability over sustainability.
The Bank is increasing its commitment to corporate governance, social and environmental practices to improve resilience
Alex Kwiatkowski, director of global financial services, said: “In the midst of the current economic turmoil, one would expect financial institutions to roll back ESG initiatives, but there are signs that most banks are holding back the blow and even doubling down on their liabilities.” A recent survey of 500 officials found Bank executives 76% believe that financial services have an obligation to address social issues, while 64% believe the bank has a role to play in advancing social goals and stays behind other sectors.Service leaders recognize the opportunity to build long-term resilience even as they seek to address future challenges.Through The material importance of environmental, social and corporate governance, banks can come out of the present with rewards to increase customer confidence and retention. »
Digital currency leads the hunt for criminals
“While recent events will certainly lead to increased regulatory scrutiny, cryptocurrencies are not going away,” said Dan Barta, a senior corporate fraud and financial crime attorney. Fraudsters will continue to use digital currencies to hide their illicit activities and launder their illicit profits, but in turn, law enforcement and regulators will hone their ability to understand illicit money flows and circulation and enhance their blocking skills. Triangle of human trafficking, drug trafficking and money laundering, among other criminal activities, with speed and accuracy. "
Application Programming Interfaces and the Emergence of Cloud Computing
“As changes in the relationships between risk factors reveal limitations and vulnerabilities in traditional risk management systems, financial institutions will turn to APIs and other tools to fix or replace vulnerabilities,” said Martin Zorn, executive director of Risk Research and Quantitative Solutions. Cloud computing will also become increasingly important and accelerate niche solutions to market as companies first look to "bridging the gap" before replacing outdated systems en masse.
climate change risks to consumers
Naeem Siddiqi, Principal Consultant, Risk Research and Quantitative Solutions, said: “As people better understand the financial risks of climate change, banks will start charging fees for home and business loans. In fire-prone areas, they should be prepared to pay higher rates.”
Government regulators are riding the wave of AML modernization
“Our Financial Intelligence Unit has been deployed for a full year to combat the rise of criminals and tax evaders, who are becoming the most prominent to thrive,” said Sean Barry, Global Director of Fraud and Security Intelligence. “Innovators,” huge gaps in reporting effectiveness are questionable as global conflicts continue to rage. Step up to crack down on illegal actors Expect FIUs to reconsider their approaches to legal authority to support their mission technology systems We see Singapore, Germany and Canada as potential precursors to the first wave of innovation that will drive AML innovations focused on intelligence, artificial intelligence and data analytics capabilities in real time.
Declining globalization provides opportunities for fintech startups
Norman Black, Director of Insurance Solutions EMEA, said: “As supply chains continue to shrink and political and social pressures increase, we are witnessing the dramatic deglobalization that has dominated the world over the past 30 years. Global financial services companies operating regionally will rapidly adapt their strategies and operations And flexibility, which may open up new opportunities and enhance cooperation between local and regional financial technology companies and insurance companies with traditional industry players.These partnerships will be a valuable lifeline for technology startups, and companies that thrive will struggle to survive.
Financial services are experiencing a renaissance in scenario analysis
“Uncertainties around climate change, political turmoil, energy crises and other factors will spur a renaissance in scenario management and scenario analysis, as scenarios become dynamic outgrowths of particular risk models,” said Christian Macaro, senior advisor at Risk Solutions. Topics such as scenario building, scenario disruption, scenario risk analysis, and scenario reverse engineering answer questions not answered by traditional methods. "
Looking to the future with "SAS"
Would you like to know more about the future? Conducted by SAS in partnership with The Economist Impact, the Banking 2035 study looks at the shifting tectonic forces that will reshape and redefine the banking industry over the next decade.
You can learn more at SAS.com betterbanking or jump straight to the banking forecast by looking at SAS forecast rates for various industries.