Financial services. SAS outlines the major trends of 2023

As economic recession worries and geopolitical tensions cloud the global economic horizon, the financial services industry is bracing for a turbulent 2023. How will industry leaders use their data and advanced analytics to weather this storm?

SAS, the specialist in analytics and artificial intelligence, presents
the trends that will have the most impact on organizations in the sector
during the year 2023. Experts from the leading operator in its sector have listed the ten major changes that consumers, financial companies and supervisory authorities can anticipate during this year.

1- Predictability is back

“2023 will not be the year of chaos. It will mark the return of a certain predictability. The economic impacts of the global health crisis were predictable: pent-up demand, a tight labor market and a disrupted supply chain. The combination of these factors was to fuel inflation, leading to rate hikes as the obvious policy response”, says Anthony Mancuso – Director Risk Solutions Consulting. In an environment that will be marked by an increase in payment defaults and high market volatility, scenario-based analysis, near real-time monitoring and general organizational agility will be a key differentiator.

2- Customer-centric decision-making confirms a new era
commitment

The ability to make decisions throughout the lifecycle of a customer relationship will become an important differentiator in the race to acquire and retain customers. Financial players should think about holistic decisions integrating risk, fraud and marketing simultaneously, creating an exclusive customer experience that can set you apart from the competition. Stu Bradley,
Senior Vice President of Fraud and Security Intelligence predicts that “increasing fraud losses and the trend towards automation will drive centralized governance of disparate solutions as well as consolidation of decision-making capabilities during integration and throughout of the customer journey.

3- “Zombie companies” face an economic calculation

The raising of the borrowing rate by Bank Al Maghrib, like the central banks in the world, in particular the European Central Bank and the Federal Reserve of the United States, will push the local banks to align by raising the rates of credits. This could lead to an exacerbation of the financial situation of companies, in particular among the so-called “zombie companies” – those which do not realize
enough profits to cover their debts – as borrowing becomes more expensive and less plentiful. Companies that lack strong balance sheets and the ability to generate cash flow will therefore be exposed to a high risk of default, while those that survive are likely to prioritize earnings quality and sustainability of cash flows relative to their
rate of growth.

4- Banks are stepping up their efforts in terms of ESG for greater
resilience

In the current turbulent economic environment, financial institutions are expected to retreat from environmental, social and governance (ESG) initiatives, however there are signs that most banks are staying the course or doubling down. effort. A recent survey of 500 bank executives found that three-quarters (76%) think financial services have
the obligation to solve societal problems, yet 64% of executives believe that the banking sector is lagging behind other sectors in advancing ESG objectives. “Clearly, financial services leaders recognize the opportunity to build long-term resilience, even as they weather the coming storm. With ESG as a North Star, banks could emerge from this recession more fiscally resolute – and those leading the ESG revolution will no doubt reap the added reward of building customer trust and loyalty in the process. “says Alex Kwiatkowski, Global Director
Financial Services.

5- Cryptocurrency stimulates criminal organizations

While recent events will certainly bring increased regulatory scrutiny, cryptocurrency is not dead. Criminal organizations will continue to use cryptography to mask their nefarious activities and launder their ill-gotten gains. In turn, law enforcement and regulators will hone their ability to understand the movement and exchange of illicit funds. *”This while thereby enhancing the industry’s ability to triangulate human trafficking, drug trafficking, money laundering and other activities
criminals with speed and precision”, adds Dan Barta, Consultant
Principal in Fraud and Financial Crimes.

6- The rise of APIs and cloud computing

At the same time as the changing relationships between risk factors expose the limitations and weaknesses of legacy risk management systems, “financial institutions will turn to APIs (application programming interfaces) and other tools to correct or replace weak links as they are detected”, assures Martin Zorn, Managing Director Risk Research and
Quantitative Solutions. Because of this, cloud computing and speed-to-market of targeted solutions will become much more important as institutions first seek to “plug the leaks in the dam” before tackling large-scale replacement of
old systems.

7- Consumers are exposed to the risk of climate change

“As the financial risks associated with climate change are better understood, banks will begin to integrate them into mortgages and corporate loans” *confirms Naeem Siddiqi, Senior Advisor for Risk Research and Quantitative Solutions. Customers should be prepared to pay higher prices if they live in areas with active hurricanes, floods, and
of fires.

8- Regulators trigger a wave of modernization of the fight
against money laundering

Financial Intelligence Units (FIUs) have been present in global markets for more than a year. Criminals and tax evaders have become the biggest “innovators” of the cryptocurrency boom, leaving a significant gap in the effectiveness of reporting suspected activity. As global conflicts continue to fuel dramatically increased sanctions against malicious actors, FIUs will rethink how they operate and
legal authority over the IT systems that support their missions. “Let us cite in this sense the example of Singapore, Germany and Canada as likely precursors to trigger the first wave of modernization that will stimulate broader anti-money laundering innovation focused on Artificial Intelligence and time capabilities. real” launches Shaun Barry, Global Director, Fraud and Security Intelligence in this logic.

9- The loss of speed of globalization, a real opportunity for
fintech startups

Against a backdrop of continued supply chain contraction and mounting political and social pressures, we will see a massive rollback of the globalization that has driven the world for the past 30 years*. Norman Black, Director, EMEA Insurance Solutions said: “As business ecosystems evolve towards a more regional mode of operation, companies operating in the world of financial services will adjust their strategies and operations quickly and pragmatically”. This could offer new opportunities
geographically aligned fintechs and insurtechs to integrate with traditional industry players, driving agility and innovation for all. “As the business climate becomes less hospitable, such partnerships would represent a valuable lifeline for tech startups. Those who go there alone will find it difficult to survive,” he adds.

10- Financial services are experiencing a renaissance in analytics by
scenarios

The swirling uncertainty around climate change, geopolitical instability, energy crises and other factors will inspire a renaissance of scenario management and analysis. “Far from being a static output, the scenario will become a dynamic output of dedicated risk models,” says – Christian Macaro, Principal Risk Solutions Advisor. Topics such as creating scenarios, disrupting scenarios, analyzing the risks associated with a given scenario, and reverse-engineering a scenario will be able to answer questions left unanswered by traditional approaches.

Leave a Comment

Your email address will not be published. Required fields are marked *