It’s no secret that the financial services industry experienced disruption over the past couple of years. The COVID-19 pandemic exposed many significant cracks in the industry. Digital acceleration meant that many traditional high-street banks struggled. But, at the same time, other digital banks thrived.  

What will 2023 bring for the financial services industry? From the rise of online banking and its impact on traditional banks to the increasing importance of technology and security, we spoke to a few financial services experts about what those in the industry can expect to see next year and beyond. 

Hans Tesselaar, Executive Director, BIAN 

“Over the past few years, banks have faced immense disruption and struggled to transform its organisation with technology. Our research with IBM found that 88% of banking executives are troubled by their bank’s commitments to multiyear projects, interoperability across technology environments and theft of sensitive data. A lack of industry standards is also causing significant problems and hindering the organisation’s ability to bring new services, at the desired speed, to market.  

In 2023, banks must focus on adopting a coreless banking model, which enables the delivery of banking services that aren’t longer dependent on legacy systems. This approach will empower banks to select the software vendors required to obtain the best-of-breed for each application area without worrying about interoperability. Furthermore, this model will translate each proprietary message into one standard message model, meaning communication between services is significantly enhanced, ensuring that each solution seamlessly connects and exchanges standardised data. A system that can be reused and utilised from day one, and the ability to be used by other institutions, will mean the opportunities to connect the financial services industry are endless.”  

Charles Southwood, Regional Vice President, N.Europe & MEA at Denodo

“Regulation and compliance will continue to dominate the business landscape in 2023, especially within the FS sector. This is because emerging technologies – alongside the ever-evolving concept of online banking – have provided a platform in which the majority of customer interactions now take place in a digital format.  

The result of this is a never-ending stream of data and digital information. Of course, if used correctly, this data can help drive customer experience initiatives and shape wider business strategies, giving organisations a competitive edge. However, before FS organisations can utilise data-driven insights, they need to ensure that they can adequately protect and secure that data, whilst also complying with mandatory regulatory requirements and governance laws.

Regulatory compliance in FS is a complex field to navigate. Risk comes in many different forms and, due to their very nature (and the type of data that they hold) FS businesses are usually placed under the heaviest scrutiny when it comes to achieving compliance and data governance, arguably held to a higher standard than those operating in any other industry.   

As a result, next year FS businesses – and others operating in the space – will heavily invest in new regulation technologies and those that will help them to get a handle on their data. One such technology is data virtualisation. Through a single logical view of all data across an organisation, it boosts visibility and real-time availability of data. This means that governance, security and compliance can be centralised, vastly improving control and removing the need for repeatedly moving and copying the data around the enterprise. The best way to ensure future compliance is to control your data. By providing total visibility, next year data virtualisation will contuinue to emerge as a key tool helping organisations to regain control and win the war for compliance”.  

Monica Hovsepian, Global Financial Services Lead at OpenText

“It’s safe to say that the financial services (FS) sector has experienced astronomical change over the last few years. The rapid and significant development we’ve seen in tech has led to challenger banks, fintech and big techs redefining the industry. These organisations can go further than traditional banks to meet customers’ needs and this is setting new standards when it comes to customer expectations in retail banking. 

Over 2023, we can expect to see these standards evolving ever further. In the short term, banks and FS organisations will be attempting to pivot to better meet the needs and address the concerns of their customers. Understandably, the swiftly worsening cost of living crisis is currently a huge priority for many customers. As such, we’ll see the forward-thinking organisations placing customers at the forefront of their activity in the coming months. The banks which go the extra mile to reassure and inform their customers will see the most success in this respect.

For example, in the face of recent rising interest rates, millions of UK homeowners with a mortgage were thrown into panic and confusion. Some banks and lenders were able to rapidly and proactively communicate what these changing rates meant for individual customers, others were not so helpful. Especially in the face of great financial and societal uncertainty, those which are able to reassure their customers in a proactive and empathetic manner will come out on top. In order to achieve this, we can expect to see banks continuing to progress their digital transformation initiatives and further integrating the relevant Artificial Intelligence (AI) and Machine Learning (ML) capabilities. 

In order for incumbent banks to be successful in their digital transformation journey and achieving optimal customer experiences, they need to address the employee experience as well. Ensuring that employees have the applications, visibility, tools and means to effectively address customer needs will be the critical factor in differentiating banks.” 

Petru Metzger, Head of Payments at Endava

“As consumer cashflow reduces, we will not only see a surge in the use of credit and products like Buy Now, Pay Later (BNPL), but we’ll also see new industries adopting subscription models. Consumers will have the option to spread the cost of products and services for everything from fresh groceries to car subscriptions inclusive of embedded insurance and maintenance services. However, although BNPL will continue to be popular, it will come under pressure due to fluctuating interest rates. As a result, the B2B sector will see a boost in cash advance and other models to help businesses. Beyond BNPL and subscription models, more businesses will move into the FX and money movement space and embedded models will increase – a development that will require complicated B2B2C and C2B2B models” 

Brett Beranek, General Manager, Security & Biometrics, Nuance

“Financial services organisations of all sizes have seen digital interactions and call volumes rise over the last two years. Like all brands, banks must offer great customer experiences to remain competitive. But the nature of their business means security must always be a top priority. Traditionally, adding security meant adding friction to the customer and agent experience, so financial institutions will prioritise investments in technologies that strengthen security and CX simultaneously.

Traditional authentication methods – such as PINs and passwords – are archaic and no longer fit for purpose. Passwords are being sold on the dark web, exploited for fraudulent activity and have even cost unfortunate individuals vast sums of money in terms of recovery if lost or stolen.

In 2023, an increasing number of banks will turn to modern technologies – such as biometrics – to robustly safeguard customers.  We’re already seeing banks get immense value—including 92% reductions in fraud losses and 85% increases in customer satisfaction—from biometrics solutions that eliminate authentication effort for customers while making life very tough indeed for fraudsters. Over the next 12 months, I expect to see many more financial services organisations following in their footsteps.” 

Okan Ozaltin, General Manager, Payment Solutions, Signifyd

“Fear of fraud and the need for authentication has been slow and cumbersome for merchants and consumers in the past. While authentication has been greatly improved through SCA and 3DS 2.0, it still causes friction and unnecessary purchase abandonment. The payment ecosystem itself requires a holistic approach in transaction verification and approval from merchant through to payment provider and issuer.

Heading into 2023, taking a layered approach to authentication, that is, balancing friction, risk, and customer experience, will ultimately open up new channels for merchants and support them with growing their customer loyalty and therefore, revenue. Ultimately, what merchants are looking for is to maximize their revenue conversion, protection and cover from fraud and abuse, while also being free to provide a seamless customer experience.

As regulations, expectations, and innovations evolve within the payments ecosystem, PSPs (and other payment providers) will need to rely on strong partners to provide holistic solutions to their merchant bases, ultimately becoming a key ingredient to any tech stack and growing their own network.”