2023 need not be about a global recession taking its toll on businesses big and small
Financial services industry still has lots more growth to explore on payments side
With a global recession risk increasingly likely, it is easy to assume 2023 will not be the most prosperous of years. A sharp decline in worldwide growth of only 2.1 per cent is anticipated for the next year and beyond, and a steep rise of inflation across the majority of the world is seeing international banks trying their best to stabilize their economies by bracing for tougher economic conditions.
The IMF has even gone as far as forewarning that ‘the worst is yet to come’. They also predict the lowest economic growth since the financial crash due to the energy crisis, high inflation, the steep rise in bank interest rates and the situation in Ukraine.
Even with economies across the world historically frail and 77 per cent of fund managers believing a recession is imminent, 2023 is not to be windswept. I think there are aspects, including stability and inclusion, that we can certainly focus on and look forward to for the next 12 months.
AI is only getting started
First off, AI will improve financial services. A study carried out in 2020 by McKinsey underlined the importance of banks requiring a ‘holistic transformation spanning multiple layers of the organization’ in addition to establishing AI technologies at scale to thrive, remain relevant, and succeed.
The report also refers to the ‘potential of trillion dollars of additional value for banks’ each year as a result of the successful delivery of AI technologies. The successful delivery of AI technologies could prove to be a great asset as it could assist with decision-making on detecting fraud, delivering improved customer service experiences, issuing loans, and negotiating insurance products.
Many technology giants who built market advantages are entering ‘financial services as the next adjacency to their core business models’. Financial services better be ready, as this will change everything.
We will also see 2023 being an important one for the intensification of global financial inclusion to ensure that the remaining 1.4 billion unbanked adults of 2022 join the global race to modernity. Financial services have seen great innovative technologies over the last decade. The reality of 2023 may not be as positive as that envisaged in a 2020 article that described it as the year to ‘fix the global economy’.
But there is no reason to despair yet. As a result of the financial inclusion we've seen so far, 1.2 billion individuals, mainly from developing and underdeveloped regions, have already joined the modern-day economy.
Financial services turn all-inclusive
With more effort and assistance, 2023 can undoubtedly be the year for enhancing global financial inclusion.
It will see contactless transactions continuing to grow, with innovations winning over region after region. We are seeing a push toward cashless societies, and putting it simply: cash is no longer superior. According to a recent Juniper Research report, 2023 and the years to follow will be critical for the value of contactless payments as they envisaged an increase of $5.4 trillion globally from the current $4.6 this year.
The following 12 months will see the continuation of the big push towards all types of contactless payments, including mobile and wearable devices which will undoubtedly make it much more convenient and straightforward to access financial services for both unbanked and underbanked across all nations. The research published by Juniper also identified a key driver for this growth: the increase and investment of ‘PoS terminals capable of accepting contactless payments’ and the investment and acquisition of contactless ecosystems.
Lastly, 2023 will see the need for a new wave of regulations heading our way, which are evident in relation to fundamental challenges such as consumer duty, more prominent regulatory frameworks following up on the developments seen in 2022, and the sustainability of ESG investing, environmental, governance and social.
The new regulations will focus on financial conduct and user satisfaction by ensuring the due diligence of financial services and its products and concentrating on fair value, safe and easily accessible payments, and consumer credit.