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Banks are bracing for tougher economic conditions and a possible global recession in 2023. As with past recessions, they will look to batten down the hatches and keep costs down while the storm passes. But the smart firms will ensure that the investments they do make will put them in a strong position for the subsequent economic upturn.

In 2023, we predict that:

  • Process miners will be the heroes as banks redirect innovation spend. Banks will ignore the allure of the metaverse and prioritize operational efficiency and cost control, aligning innovation around the sweet spot of automation, efficiency, and headcount reduction. Process miners will be the heroes of the economic downturn, helping banks to innovate their way out of, and through, the recession while rampantly cutting costs. But firms must be careful not to digitize blindly and eliminate all human intervention in their quest for savings, because customers prefer hybrid experiences over purely digital or physical experiences.
  • Banks that fail to tackle their technical debt will lose out to agile competitors. Banks have accumulated an enormous application backlog due to cyclical budget cuts associated with the Y2K bug, the financial crisis, and large-scale acquisitions. Ambitions to reduce technical debt are being derailed again; cost-cutting has become a priority for 73% of financial services firms. Some will move tech budgets away from transforming core systems toward digital engagement solutions — which may prove to be a mistake. The longer that banks take to shift to modern cores, the higher the risk of losing business to agile competitors that can provide information in real time and configure products and services flexibly or rapidly.
  • Green finance’s value will reach $1.2 trillion after a year of stagnation. The global green finance market will recover from 2022 as governments and financial corporations ramp up green financing activities to facilitate economic recovery and meet climate goals. Green bonds will take the lion’s share and represent 75% of the green finance market. Green loans will double from 2021 to reach $270 billion, supported by governments’ provisioning of low-cost financing for green technology and emission reduction projects such as the Inflation Reduction Act in the US.

The coming year will challenge the banking sector on multiple fronts, but wise investments will position firms to succeed longer-term.

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To learn more, explore the Predictions hub here.

This post was written by Alyson Clarke and it originally appeared here.

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