5 Top Challenges Facing the Finance Industry in 2023
Digital transformation has impacted industries worldwide, and the financial sector is no different. While the last few years have already been challenging, with financial companies embracing numerous changes, there are still more challenges to come. Let's see what the financial industry will have to face in 2023.
Changes throughout the latest years
Technological developments have changed not only the way companies do their business but also how customers want to interact with them and what their requirements are. Before we dive into the challenges the financial industry will face this year, let's see the progress it experienced in the last few years:
- Online and mobile banking
- Rise of the fintechs
- Innovation in payment services
As we can see from previous examples, customers no longer want traditional relationships with banks. They are jumping into the world of digital innovations, and any company that doesn't follow its lead will stay behind. This is why the financial industry must recognize the next challenges they will face and deal with them head-on.
Challenges the financial industry will face in 2023
The financial sector is constantly facing new challenges, but these are the ones that will have the most significant impact on the industry in 2023:
Financial service firms have always been targeted by cybercriminals, with 74% of respondents of new research from the Bank of England expecting cyberattacks to be the highest risk to the financial sector in both the short and long term, mentioned by Tech Monitor. The same study shows that the number of financial executives who believe their companies are at high risk of attack grew rapidly in 2022, from 31% in the first half of the year to 62% in the second. The year has already started turbulently for the financial industry, with PayPal still dealing with the aftermath of a data breach they experienced at the end of December in which the sensitive personal information of over 34,900 individuals was accessed.
Not only do these attacks cause significant financial damage to the business, but they will also most likely result in the loss of customers as they lose trust in the company. Embracing digital innovations and developing a proper security strategy is crucial for any financial institution that wants to stay ahead of cybercriminals.
Staying compliant with regulations
Regulations in the finance industry are constantly changing to keep up with the evolving nature of financial services. From introducing digital payments, forex trading and cryptocurrency being widely available to primarily online banks, the financial industry has experienced numerous changes through the years, making it harder for businesses to ensure they are staying compliant while causing minimum user friction. According to SEON's article on KYC banking, KYC is the key to knowing who your customers are and ensuring you stay compliant with regulations while protecting your business from money laundering, identity theft, and financial fraud.
Competition within the finance industry is getting stronger, with fintechs and banks competing for the same customers. Even the tech giants such as Google and Apple have thrown their hats in the ring. Any business that wants to stay competitive in the growing market needs to step up its game. Staying ahead of the competition has never been more important, especially with ever-changing customer desires. Customers are no longer willing to put up with companies that do not fulfill their requirements just out of loyalty. They know what they want and will gladly go to a company that can provide that for them.
With future technological developments, the issue of keeping up with the competition will only become more significant. Embrace the changes, tailor your service based on the customers' wishes, and dominate the market.
Embracing the new technological developments
Traditional financial services are slowly becoming obsolete due to all the changes technological development has brought to our lives. Customers have different requirements than before; they want faster, personalized, and more efficient service. Embracing technology will allow financial institutions to offer them this. Providing digital banking, shift to digital payments and a cashless society, implementation of modern cybersecurity solutions to different means of communication such as AI Chatbots, there are numerous technological solutions financial companies can embrace to improve their services and increase their chances of competing in an already crowded market.
The biggest issue with embracing the newest technological developments is deciding which one will be the best fit for your business and, more importantly, implementing it before your competition can do it.
Keeping up with customer expectations
Digital transformation of industries worldwide has resulted in a shift in the expectations and requirements customers demand from service providers, including financial services. They expect a lot from their financial institutions and are willing to shop around until they find the one that can meet their expectations. According to the Accenture Banking 2020 Report, 30% of customers changed their banking institutions last year due to better services, high-quality customer support, and competitive rates, as stated by Digipay.guru. With the growing competition in the financial market, keeping customers has never been more important, which is why keeping up with their expectations will be one of the biggest challenges financial industries will face in 2023.
The financial sector is constantly evolving, embracing the changes and challenges they face on the way. The five challenges listed above will impact the industry the most in 2023, but hopefully, they will result in significant improvements in the financial sector and the services they provide.