As recession anxieties and geopolitical tensions cloud the global economic horizon, the financial services sector is preparing for a rocky 2023. How will industry leaders wield their data and advanced analytics to weather the storm? Some of SAS’ foremost industry experts predict what consumers, financial firms and the parties protecting them can anticipate in the year to come.
Predictability returns
“2023 won’t be the year of chaos. In fact, 2023 will mark the return of some degree of predictability. The economic impacts of this once-in-a-lifetime pandemic were to be expected: pent-up demand, tight labor markets and supply chain struggles. These factors in combination were bound to stoke inflation, prompting rate increases as an obvious policy response. Anticipate increased delinquencies in retail and commercial portfolios and high market volatility as the world continues to navigate the fallout. Robust scenario analysis, near real-time monitoring, and general organizational agility will rule the day.”
- Anthony Mancuso, Director, Risk Solutions Consulting
Customer-centric decision-making launches a new era of differentiated customer engagement
“The ability to make decisions across the entire customer lifecycle will become a significant differentiator in the race to gain and retain customers. Think holistic decisions across risk, fraud, and marketing, all on a single architecture, creating an exclusive customer experience that can set one apart from the competition. I predict that increasing fraud losses and a drive towards automation will motivate centralized governance over disparate solutions and consolidation of decisioning capabilities at onboarding and throughout the customer journey.”
- Stu Bradley, Senior Vice President of Fraud and Security Intelligence
‘Zombie firms,’ flash crashes force an economic reckoning
“Rising interest rates and the strengthening of the US dollar signal trouble in the face of historically high sovereign debt and ongoing geopolitical instability. 2023 could see a string of
sovereign defaults, while liquidity challenges in treasury markets have the potential to spark flash crashes, exacerbating market fragility.
“These factors combined will force an economic reckoning, particularly among so-called ‘zombie firms’ – companies that don’t turn enough profit to cover their debts – as borrowing becomes more expensive and less abundant. Companies that lack strong balance sheets and ability to generate cashflows will be at high risk of default, while those that survive are apt to prioritize the quality of earnings and cashflow sustainability over their growth rates.”
- Stas Melnikov, Head of Risk Portfolio
Banks double down on ESG progress for greater resiliency
“Amid ongoing economic turbulence, one might expect financial institutions to pull back on environmental, social and governance (ESG) initiatives – but signs point to most banks staying the course or doubling down. A recent survey of 500 banking executives revealed that three-quarters (76%) believe financial services has an obligation to address societal issues, and yet 64% of executives think banking lags behind other sectors in advancing ESG goals.
“Clearly, financial services leaders recognize the opportunity to shore up 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 that lead in the ESG revolution will no doubt reap the added reward of having furthered customer trust and loyalty in the process.”
- Alex Kwiatkowski, Director of Global Financial Services
Cryptocurrency drives the search for criminals
“While recent events will certainly drive increased regulatory scrutiny, cryptocurrency is not dead. Crooks will continue to use crypto to mask their nefarious activities and launder their ill-gotten gains. In turn, law enforcement and regulators will better hone their ability to understand the movement and exchange of illicit funds, improving the industry’s ability to triangulate human trafficking, drug dealing, money laundering and other criminal activities with speed and precision.”
- Dan Barta, Principal Enterprise Fraud and Financial Crimes Consultant
