A global recession is looming. 2023 will see businesses go back to basics—cutting costs, focusing on core priorities, and investing in productivity.
The only difference for banks is that they need to do all this while supporting their customers to survive the recession.
Can they? Read on to find out.
Seshika Fernando
VP Banking and Financial Services,
WSO2
1. Innovation, Meet Recession
2023 already looks like a trailer for a doomsday movie: War in Ukraine, tensions over Taiwan, global food crisis, global energy crisis, climate change, and, of course, the likelihood of global recession. By comparison, the 2008 global financial crisis feels like child’s play!
This means belt tightening for everyone. That usually spells ‘rampant cost cutting’! But should it? Can banks innovate their way out of this? Can they do both? Well, yes! But only if they are astute about technology investments.
The key will be to shift focus from edge trends to real-world innovation around automation, moving data, efficiency, and headcount reduction.
Banks that invest in strengthening their position for the economic upturn, will thrive.
“Banks will batten down the hatches, but prepare for the upturn”
2. When the going gets tough… get soft
2023 will be challenging for everyone (not just the banks). While many customers (retail and business) are not yet in distress, their financial health is certainly declining.
The need of the hour is ‘empathetic’ banking. It’s a tough ask, when recessionary pressures will push banks to reduce access to loans, increase cost of borrowing, and move toward foreclosures.
Taking a data-driven approach to maintain and earn consumer trust with concrete, targeted actions can help consumers navigate the rough seas of 2023.
Banks that proactively prepare their consumers for risk will benefit in the long run, because relationships built during tough times are generally the long-lasting ones.
3. ‘Phygital’ is sexier than Digital
2023 is not the year to open a branch in the metaverse.
With all the hype around edge digital frontiers and the seeming cure-all of AI and ML, banks may feel compelled to cut costs, by removing physical contact points. And yet, consumers rate hybrid experiences higher than purely digital or purely physical ones.
What consumers need in the coming year(s) are hybrid, ‘emotionally-aware’ experiences that provide personalized support, with an understanding of their unique (and likely difficult) circumstances.
To deliver great hybrid experiences, banks must connect insights and decisioning across all channels. They must invest in making a customer’s banking journey better and improve their real-time experiences.
4. Tech Talent Shopping Spree
The Great Resignation and Quiet Quitting did not leave a good taste in anyone’s mouth. But banks may have better luck attracting and retaining employees in 2023.
Forrester predicts that by the end of the year, roughly 10% of current fintechs will either be acquired by a bank or have them take an equity stake of at least 50%. Banks that are unable to buy fintechs outright will pinch their talent instead, as plummeting VC funding forces fintechs to cut between 10% to 40% of their workforce.
Banks (the good ones) are geared to take over tech talent that would have earlier winced at joining a traditional bank. Thanks to COVID-19, many banks have embraced flexible working arrangements and can also offer attractive salaries owing to revenues from high interest rates.
The real winners will be those that diligently automate and optimize employee performance so they can retain new talent once the situation starts to improve for startups.
5. Cloud Core … be there in 3 Years
The winners of the next decade in banking will be those who are better at CX. There won’t be one winner. There’ll be winning ecosystems. In the short term, personalized insights and advice will be key to assist struggling consumers and companies alike. This is an opportunity to make a lasting connection with them.
To win CX … You. Just. Can’t. Be. On. Legacy. So, “living with legacy”, or “legacy workaround”, or integration and API magic to build an abstraction around legacy core and hoping any of those would solve your digital transformation challenges is just delusional.
Your focus should be on moving to a modern cloud core and being there within the next three years.
In fact, much of what I share with you over the coming year will address this very point.
