6 Financial Services Trends to Watch in 2023

Several years of global upheaval have left financial services organizations facing an array of challenges and an uncertain future.

From rising interest rates and runaway inflation to supply chain disruptions and geopolitical instability, 2022 was a turbulent year. As we move further into 2023, a tightening economic environment and fears of recession continue to cast long shadows.

In response, firms across the financial services landscape—including banks, credit unions, wealth management firms and insurers—are focused on accelerating revenue streams and reigning in costs while maintaining a tight grip on security and compliance.

To meet these objectives and maintain resiliency in a volatile and fluid environment, financial institutions should increase investments in technology as part of their long-term strategy to future-proof their businesses.

In this series, we explore the most prevalent trends shaping the banking, insurance and wealth industries for 2023 and beyond.

1. An evolving competitive landscape

The ways consumers access financial services are rapidly changing as newer entrants like fintechs, digital-first providers and even Big Tech firms like Amazon, Meta and Google disrupt the marketplace. The emergence of cross-sector partnerships and embedded solutions at the point of sale are also placing heightened pressure on incumbent financial services organizations to continuously innovate to keep pace.

2. Consumers demand better experiences

As a younger demographic gains more financial power, they increasingly demand more compelling digital experiences. These experiences must match the convenience and ease of use that consumers have come to expect in their daily lifestyle interactions, from online shopping to streaming media. In fact, more than 70% claim they would switch to a financial services provider that offers a better digital experience than their current institution. To address these needs, organizations must prioritize offering mobile-friendly solutions and digital self-service options that provide customers with anytime, anywhere access to their financial lives.

3. Increase back-office efficiency through seamless integration and automation

Financial services organizations are transforming the back office by automating key processes, integrating systems and moving the tech stack to the cloud. These moves are designed to boost productivity and minimize costs and vendor footprint while enabling institutions to grow their business with fewer resources and less staffing. Integrating systems and streamlining manual workflows are essential steps toward enabling organizations to compete in the digital-first marketplace.

4. A brighter spotlight on ESG and sustainability

With every passing year, sustainability and environmental, social and governance (ESG) initiatives grow in importance as an area of strategic focus for financial services organizations. To achieve the goal of net-zero carbon emissions, firms are diversifying their product sets to offer more eco-friendly choices, like green loans and green funds. Firms are also redesigning their operations and supply chains to reduce their carbon footprint. Tracking and measuring ESG impact and investments will become increasingly important as regulatory scrutiny rises.

5. Doubling down on security

As remote work and digital transactions have increased over the past few years, cybersecurity and fraud risks have also grown. Per Flashpoint’s Risk Based Security division reports, “As of Dec. 9, finance and insurance entities across the world experienced 566 data breaches, which has so far amounted to over 254 million leaked records.” Regulatory entities, including the SEC, FFIEC and FTC, have taken notice, issuing updated guidance and rules to encourage organizations to adopt best practices in information security and cyber incident reporting. Financial services organizations must make security a key investment priority in 2023 and beyond.

6. Increasing regulation demands compliance

Security isn’t the only focus of regulators, and 79% of banks anticipate increased regulation in 2023. More broadly, as regulatory activity focusing on consumer protection, ESG and security evolves, firms should uplevel their processes for meeting compliance requirements—whether it’s creating an audit trail for the delivery of disclosures or employing powerful data analytics tools to address contract risks and obligations.

For a deeper dive into these themes and how they’re impacting your specific sector, check out our blog series covering emerging trends in:

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Manas Baba
Financial Services Industry Expert