What You Should Know About BFSI in 2023 and Beyond
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Very little is clear as we look at the economy in the coming year. Inflation is high, interest rates are heading north, and many fear a recession is coming in 2023. Amidst this uncertainty, there has also been a wave of innovation throughout the banking, financial services and insurance industry (BFSI) — a wave that has only been accelerated by the pandemic and expedited shift to digital and immersive customer solutions.
Where does the world of BFSI stand in 2023 after years of both tumult and change? We must first take stock of the BFSI landscape in order to decide the strategies and tactics we need to apply in 2023. I won’t pretend to have a crystal ball to tell the future, but after spending my entire career in the industry, I feel safe to make a few predictions about what the year might hold. These are the four trends all BFSI professionals need to be prepared to tackle in 2023:
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1. Collections are back
As the government-mandated moratoriums instated during the pandemic come to an end and we enter a recession, collections will be a huge element of our work in the BFSI sector in 2023. What can we do to prepare ourselves and our customers for this reality?
We do not want to come barging down doors, demanding collections. We must be mindful and acknowledge there is a journey to the process to avoid burning bridges with our customers. We should prepare for remediation and plan to create unique payment plans that are personalized to the customer. In doing so, we avoid breakage and keep our customers in our house. It’s like asking for couples therapy rather than an outright divorce — if we can figure out a plan together, we are much more likely to maintain our relationship and create loyalty through that remediation.
Acquisition is far more expensive than retention; if we lose customers left and right in collection, then we are setting ourselves up for much more work (and lost revenue) down the line. Fifty-two percent of consumers switched providers in the last year, largely due to poor customer service, and we do not want to add to that statistic in the collections process. If we can be creative in our remediation tactics, we can likely save the customer, which will not only save money but also create long-term loyalty.
2. Open banking is an essential tool
Open banking has been one of the most important changes to hit the world of BFSI since it came into play. It creates one home for all of our assets, offering greater mobility to the consumer and the opportunity for companies to innovate new and exciting financial services.
For example, customers can now apply for a mortgage without compiling a novel’s worth of paperwork; they can simply give their lender permission to access their accounts and look at their finances. Companies, on the other hand, can now assemble a clear financial picture of a customer’s assets and liabilities by tapping into data from multiple banks.
Open banking has created greater ease and portability for customers and bankers alike. But as new products, services and capabilities are created in response to this development, we will see an increasingly competitive marketplace. Customers can switch from bank to bank at any time with ease, and, as we know, they are not afraid to do so. This flexibility and access available to consumers both today and increasingly so tomorrow will challenge their existing institutions to provide best-in-class terms and experiences across a vast landscape of services and capabilities. Institutions that acquired and built their customer relationships with a wedge of limited but valuable products will be challenged as providers of a full suite of solutions vie for access to these customers whose asset portability has never been simpler.
To keep up, banks must prioritize satisfying customer demand to pay any way they want and transform how they engage with their customers to become more personalized. Furthermore, banks should work to align their strategies with the innovation, policies and regulatory changes coming our way. Open banking will be an essential tool for banks and customers alike, attracting customers seeking greater mobility and personalization in their financial services.
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3. Insurance will be digitized
Insurance has long been behind other industries when it comes to digitization, and though they began the process in 2020, it was quickly put on pause during the pandemic. Insurance companies need to have a radical leapfrog effect and paradigm shift in strategy, transforming their companies to become digital-first.
As it stands now, insurance companies have no streamlined customer view. I’ve had my home, auto and flood insurance, among others, with the same company for over ten years, and yet they do not have one unified customer view of my account, nor do they have the digital assets to engage with me. So much so, that when I tried to log onto my car insurance app, it said I was not a customer.
As we enter the new year, it will be essential for insurance companies to digitize their work and create more personalized engagement with their consumers. Consumers are more loyal when they have personalized services. If you don’t offer personalization, it will be very challenging to have any stickiness in the insurance vertical. Customers will be quick to try new companies because they have no relationship with their current provider, and thus it is no skin off their back to jump ship. This dynamic was played out in the mobile carrier market as it became easier to move providers and take your number with you.
4. Emerging payments must be reassessed
Many have said we’re in an emerging payments freeze with crypto, BNPL and P2P, but in reality, we’re merely in a consolidation. The leaves are starting to turn yellow and fall, but the trees are not barren. The world of emerging payments and crypto is on pause, which is not necessarily a bad thing. Now is our opportunity to look at emerging payments and ask, “What do we want to happen in this space? And how can we use the next year or two to build the right tools for emerging payments that the rest of the BFSI industry can leverage?”
It is an opportunity, just as the start of fall beckons a new school year with fresh notebooks and sharpened pencils, to hone our products, build the right capabilities and then get back out there. Real-world and practical solutions to consumers and institutions will emerge or wilt on the vine, based on applicability. Institutions that build frictionless, embedded and native solutions for their customers to interact with will see share gains coming out of this.
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We are financial partners
Now more than ever, the power is in the hands of the consumer. Banks can no longer coast by merely providing an account and a credit card. Consumers will be out the door before the end of the business day without personalized engagement to support their lifestyle and financial aspirations. A modern bank is a life and planning partner, and as we enter 2023 and all of the uncertainty it holds, our customers will expect to be supported via a wide array of financial services that take advantage of the data at our fingertips and the innovation banging down our doors.