10 trends in banking and finance 2023

Despite massive challenges, banks have deployed technology and displayed impressive agility to continue to serve customers, maintain productivity and reassure regulators. The rise of FinTech companies is heaping even more pressure on the sector by offering real-time, 24/7 solutions that appeal to many consumers, particularly digitally savvy younger generations. The popularity of online-only or ‘neobanks’ that operate solely online has helped make FinTech one of the fastest-growing industries globally. That growth shows no signs of slowing down. Indeed, PWC has reported 88% of incumbent financial institutions to believe that part of their business will be lost to standalone FinTech companies in the next five years1.

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Key industry trends

  1.  Rising rates drive product innovation

    As interest rates increase, banks will be motivated to introduce new and innovative financial products to attract and retain customers. This could include offerings similar to those in other industries, such as Amazon Prime. By providing a suite of services and benefits, banks can differentiate themselves from the competition and create a compelling value proposition for customers. The rise in interest rates will act as a catalyst for banks to take advantage of new technology and think creatively about the services they offer. This is an exciting time for both banks and customers, as the drive for innovation will lead to the development of new and innovative financial products that meet the changing needs of consumers.
  2. The renewed importance of the branch

    The banking and finance industry is experiencing a renaissance of its brick-and-mortar branches. In recent years, many banks have shifted their focus towards digital channels and online services, but without in-person interaction, many banks have struggled to maintain close relationships with their customers. However, 2023 is set to see a renewed focus on branches and the role they play in delivering personal, face-to-face banking services. Branches will be reimagined and transformed into community hubs that provide a range of financial services, from account management and loan applications to investment advice and financial planning. This shift will enable banks to build stronger customer relationships, provide more personalized experiences, and increase customer loyalty. As a result, the branch will once again become an integral part of the banking and finance landscape, providing customers with the convenient and accessible services they need to manage their finances.
  3. Exploring the possibilities of the metaverse

    The rise of the metaverse is set to demystify the world of virtual reality and bring new possibilities to the banking and finance industry. Just as mobile technology revolutionized the way we access and manage our finances, the metaverse has the potential to completely change the game. Banks will have to navigate new and unfamiliar territory, but managing risk is what banks do. The metaverse presents an exciting opportunity for banks to offer immersive and innovative financial services and experiences to their customers. Whether it's through virtual branch visits, interactive investment tutorials or real-time budget tracking, the metaverse has the potential to transform the way we interact with our finances. As the metaverse continues to evolve, banks that embrace this new technology will have the opportunity to stay ahead of the curve and deliver the financial services of the future.
  4. Attracting and retaining the right talent

    As the banking and finance industry continues to evolve and change, the importance of the right culture and talent cannot be overstated. The demands made on bank leadership to attract and retain the best talent will only increase. Talent has become a burning platform that must be given the attention it deserves. Banks that prioritize the development of a positive and supportive work culture, as well as offering competitive benefits and opportunities for growth and development, will be better positioned to attract and retain the best talent. This will lead to improved customer experiences, increased innovation, and overall success in the highly competitive world of banking and finance. Banks that neglect the importance of culture and talent, however, risk being left behind.
  5. Navigating the evolving landscape of risk

    The banking and finance industry is constantly facing new risks, whether it's economic uncertainty, cybersecurity threats or changes in regulation. However, banks that focus on helping their customers solve their problems, rather than solely on collections, will be better positioned to outperform their peers. By taking a customer-centric approach, banks can build stronger relationships and increase customer loyalty, even in the face of new risks. This can involve offering financial education and resources, developing tailored financial solutions, and providing support during difficult financial times. By focusing on their customers and helping them navigate the complex and constantly evolving landscape of risk, banks can not only survive but thrive in the competitive world of banking and finance.
  6. Data as a product

    Data has become an increasingly valuable asset in the banking and finance industry. Traditionally, data has been seen as a means to an end, but a shift in mindset towards treating data as a product has the potential to transform the foundations of banking. Banks that view data as a product and invest in the technology and infrastructure to manage, analyze and utilize this data will have a distinct advantage over their peers. By leveraging data to deliver personalized financial services, increase operational efficiency and make informed business decisions, banks can improve the customer experience and stay ahead of the curve in an increasingly competitive industry. The future of banking and finance will be shaped by those organizations that view data as a valuable resource to be leveraged for growth and success.
  7. From disruptors to enablers: the evolving role of FinTech

    FinTech have disrupted the traditional banking and finance industry, but they are now poised to play a new role as enablers. Incumbent banks have the opportunity to reassert themselves as the rightful owners of banking, but they will need to find FinTech-like offerings at reasonable prices. By partnering with FinTech, banks can bring innovative financial services and technologies to market quickly and efficiently, improving the customer experience and staying ahead of the curve in a rapidly evolving industry. The relationship between banks and FinTech is no longer one of competition but of collaboration and mutual benefit. 
  8. Addressing the climate crisis

    The climate crisis is a pressing issue that requires collective action from all industries, including banking and finance. While banks cannot deliver net zero emissions on their own, the pressure to address the climate crisis is rising. In 2023, the focus will be on finding common ground and achieving a consensus on how banks can play a role in mitigating the impact of the climate crisis. This can involve offering green financing and investment products, reducing emissions in their operations and partnering with organizations to drive sustainable solutions. By embracing their responsibility to the environment, banks can not only mitigate the risks associated with the climate crisis but also position themselves as responsible and forward-thinking organizations. 
  9. The shift to life centricity

    In the era of big techs and super-apps, banks are realizing the importance of addressing their customers' holistic well-being, rather than just their financial journeys. This shift to life-centricity will involve creating financial products and services that cater to the broader needs and goals of customers, rather than just their immediate financial needs. By focusing on the total well-being of customers, banks can create deeper and more meaningful relationships, improve customer satisfaction and loyalty and better understand their customers' needs and behaviors. 
  10. Core modernization

    Modernizing technology is a constant process in the banking and finance industry, but 2023 is poised to be a watershed moment for the start of core modernization. A convergence of forces, such as advancements in technology, increased competition and changing customer expectations, is driving the need for banks to modernize their core systems and processes. Core modernization involves updating and transforming outdated systems, improving operational efficiency and enhancing the customer experience. By embracing core modernization, banks can stay ahead of the competition, improve their risk management and better serve their customers.

Outsourcing: a key strategy to embrace emerging trends

Outsourcing can play a critical role in helping banks achieve the various trends and changes that are shaping the banking and finance industry. By outsourcing certain processes, such as technology and operations, banks can tap into specialized expertise, access the latest technology and systems and improve their operational efficiency. Additionally, outsourcing can provide banks with the flexibility to quickly and cost-effectively respond to changing customer demands and market conditions. 

As an example, In the context of core modernization, outsourcing can provide banks with the resources and expertise to modernize their core systems and processes, without having to invest heavily in internal resources. By outsourcing key functions, banks can focus on their core competencies, such as customer engagement, risk management and product innovation. In 2023, outsourcing will continue to be an important strategy for banks to embrace as they navigate the changing landscape of banking and finance and achieve their goals and objectives.

As the pressure builds on banks and financial institutions to reduce costs and drive efficiencies, smart executives are partnering with respected outsourcing providers that have the experience, technologies and workforce talent to deliver results. Valued at $85 billion in 2020, the global BFSI (Banking, Financial Services and Insurance) outsourcing market is projected to reach almost $175 billion by 20282 as more institutions join the almost 80% of retail banks that already outsource at least one part of their business operations3.

There are numerous benefits for outsourcing in the banking industry, including:

  • Cost savings: employing staff is one of the greatest costs carried by any business and outsourcing select roles and teams to nations such as the Philippines is a sure way to ease the load. The lower cost of living means salaries is heavily reduced, with businesses paying 70% less for highly qualified talent than they would onshore. Then there are the savings that come from not investing in infrastructure for staff, such as additional offices and furniture.
  • Access to a global talent pool: many happy banks and financial institutions have learned that outsourcing hotspots are home to a large and ever-developing talent pool of skilled and committed workers. Renowned for their tech competency and attention to detail, the Philippines workforce operates in a fiscal and financial system almost identical to conditions in Western countries and is supported by dynamic financial tracking and reporting tools.
  • Increased productivity: one of the great benefits of outsourcing in banking is it allows in-house staff to focus on higher-value tasks. Be it mortgage servicing, loan processing or back-end administration, outsourcing firms are experts at handling high volumes of repetitive, time-consuming work. This means the organizations that employ them have more time to dedicate to strategic priorities such as delivering better customer experiences, creating new products or managing compliance risk.

Banking services to outsource

Once seen as the domain of contact centers and data entry specialists, many banks and financial services institutions are looking to outsource more complex or technical teams to help boost their capabilities, including:

  • Back office support: the financial sector is renowned for processes but many organizations find themselves overwhelmed by the number of labor-intensive nature jobs to be completed. The ability to outsource back-office functions such as HR, Workforce Management, Personal Assistance, Payroll and Data Analysis is liberating for stressed managers as it ensures their onshore staff can focus on high-value projects that help deliver long-term goals.
  • IT and digital: the complex and fast-changing nature of IT means banks and financial institutions face an increasingly difficult battle to stay on top of their evolving systems. Fortunately, countries such as the Philippines boast a huge talent of IT specialists who are ready to either deliver or oversee the digital systems that are so crucial to the success of the modern venture. Best of all, they come at a wage cost up to 70% less than the limited number of recruits on home soil.
  • Operations: an increasing number of banks and financial institutions are reaping the benefits of outsourcing entire Operations teams to hubs such as the Philippines. Normally highly specialized and differing according to the needs of an organization, Ops teams streamline processes, identify issues and opportunities, and respond to specific business needs. The best part is they are built to be responsive, so once an outsourced Operations team is established, they can proactively adapt and evolve to meet the needs of the changing landscape.

The need for banking and financial executives to be more agile, innovative and open to new ways of doing business is growing by the day. Learn more about why developing an innovative, cost-effective customer acquisition strategy can help cement your organization as the bank of the future.

1 https://www.pwc.com/id/en/not-migrated/majority-of-global-financial-services-companies-plan-to-increase.html
2 https://www.alliedmarketresearch.com/bfsi-bpo-services-market-A11339
3 https://core-banking.bankingciooutlook.com/cxo-insights/the-rise-of-outsourcing-nwid-280.html