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What to Expect from the Financial Services Industry in 2023

Here's what you can expect to see from the financial services industry in 2023 and beyond.
Notarize
January 19, 2023
4 mins

For decades, the financial services industry saw very few changes in its operational models. Today, digital transformation has completely revolutionized the industry from both the employee and customer perspective. While these dramatic shifts in processes and technology are starting to level out, newly emerging technology is likely to become more widespread over the next year.

Here are some trends to watch for in the upcoming year. 

1. ESG/Green Finance Initiatives Gain Importance

While green finance is not a new concept, customers are increasingly making banking decisions based on sustainability. According to Forrester, green finance’s value will reach $1.2 trillion in 2023, following its stagnation in 2022. By adding products such as green bonds and green loans, financial institutions can improve their sustainability and attract new customers. While many institutions are faced with mandatory ESG regulations, those that find opportunities above and beyond what’s required will likely gain market share from their efforts.

2. Self-Service Becomes the Norm

Banks have been adding more self-service options over the past few years. In the near future, those options will likely become the preferred way of banking for most customers. Banks that don’t offer these services should look to implement self-service options in as many ways as possible. Customers expect digital processes for transactions such as notarizing, signing documents and even applying for and closing loans. By providing self-service processes, banks can free up their representatives’ time to provide more personalized service to customers.

3. Digital Transformation Continues to Drive Competition

Finance services experts said the digital transformation would become a differentiator in the future — that prediction is now a reality. However, Forester recently pointed out that financial institutions should strive for hybrid experiences combining both digital and human interactions, instead of solely digital transactions. These organizations should also continue to look for ways to automate processes, such as proactively detecting fraud, using chatbots to provide personal service 24/7 and improving compliance.

4. Bank-Issued Digital Wallets Become Preferred

Digital wallets have been becoming increasingly popular and will likely become the standard for most people in the near future. According to McKinsey, more than two-thirds of Americans say they will have a digital wallet within the next two years. However, 54% of consumers said they would prefer to use a digital wallet from their own bank instead of other wallets, such as those offered by smartphone manufacturers, retailers and telecom service providers. Banks can increase customer loyalty and upselling opportunities by offering full-service digital wallets for customers who are fully integrated with accounts and digital platforms.

5. Embedded Finance Becomes More Pervasive

Embedded finance is when retailers offer their customers services or products from other vendors, such as using a third-party payment app to purchase an extended warranty, or opting to use an interest-free loan to complete their purchase. The retailer offers these options during the purchase process. However, when the customer takes advantage of these offers, they are usually doing business with another company. The vendor is simply embedded into the buying process.

While the use of embedded finance has increased in recent years, experts believe the practice will  become even more widespread. According to Accenture, embedded finance will handle $230 billion in revenue in 2025. Embedded finance is attractive to retailers, as it allows them to offer more options without having to manage the solutions. Financial institutions can increase their revenue by developing embedded finance tools for non-financial related businesses.

Summing up

The last few years have showcased new ways of banking from both the customer and financial institution perspectives. Now it’s time to explore the possibilities of these new technologies and processes to get the most benefits from each one. By working with customers and collecting feedback, banks can ensure they are offering the right technologies and products from emerging trends, and fully meeting their customers’ needs along with their own.

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