Nadine Pichelot, Senior Vice President Finance, Anaplan
There has been no shortage of uncertainty in the financial services sector over the past two years and given the current economic climate, there is surely more change on the horizon. In the midst of all this complexity, what can we expect to see from the industry, and from the financial leaders managing these institutions?
Following are three thoughts on what’s to come for the financial services industry in 2023.
Banks will retool the customer experience
Banks have long prioritised any efforts to drive strong customer engagement – taking cues from customers who want their experience to be secure, accessible, and efficient. Brick-and-mortar banking, for instance, has been on the decline since the mid-1980s, a trend that was accelerated by COVID-19 restrictions and labour issues in recent years. Now, with recession fears continuing to rise and banking leaders focused on cost cutting, it’s not surprising that swathes of banks across the UK have decided to close the doors of their physical premises.
However, retail branches have long provided a key touch point for banking customers, so this likely will not be the death of retail bank branches, rather a rebirth. These banking staples will never go away completely, and for good reason. Instead, as retail banks take a deeper look at their distribution networks to optimise their capacity and costs across their different channels, the retail bank footprint will be reimagined.
With the accelerated wave of digitisation transformation over the last three years, many banks have already started the process of reshaping communication points between banks and their customers – whether it be in the form of more convenient in-app banking features, the introduction of chatbots, or more seamless processes. As consumers continue to move away from the high street banks have shifted their focus to a more hybrid experience, with convenience in mind.
Now it’s about getting the balance right. This year, banking leaders will need to make sure that they align shifting customer needs with market realities. Rising costs, economic pressures, and a tight labour market will have an impact, but banks must be careful to not abandon the customer experience. Data and strong scenario planning capabilities will be critical to successfully delivering a banking environment that reduces risk while also driving customer loyalty.
CFOs will go beyond numbers to become financial storytellers
An unpredictable market will also put more pressure on financial leaders, who’s institutions will look to them for guidance and strategic thinking. Naturally, in this type of environment, people are seeking reassurance, so it’s not surprising to see investors, customers and employees turning to their CFOs for a clear picture of what to expect in the months ahead.
Despite the fact that CFOs are usually thought of as “numbers people” and not narrative creators, financial leaders will need to develop their reporting to include a better, more accessible image of what steps the business is taking to be resilient this year. They will need to communicate a story beyond their quarterly results. But the way this is conveyed to each stakeholder will be completely different.
Each group requires unique considerations. For instance, how do you try and convey incoming price hikes to your consumers without jeopardising their loyalty? How do you segment financials to align with the ESG ethical investments that customers are gravitating towards? Getting this right comes down to having appropriate data points and strong reporting to support your message across audiences.
Socio-economic changes will require increased agility and an ability to quickly pivot the business
Rising interest rates will see income increase for the banks but will also see an uplift in the number of customers unable to meet loan repayment commitments; inflation volatility will drive a change in customer investment behaviour that will negatively impact the fee income of asset management firms; conversely, wealth managers will experience an upturn as customers seek guidance on how to maximise returns from available capital; and insurers will see claims inflation increase with profitability margins squeezed.
It is therefore a fine balancing act for banks, investment firms and insurers to both maximise current shareholder value and to strengthen the long-term reputational brand of the organisation, by offering affordable products.
Financial leaders will need to have an even more eagle-eyed view on product pricing, leveraging machine learning and socio-economic data to run a range of simulations and stay ahead of the market.