How banks and fintechs can stay ahead of the curve

A rough economy. A tight labor market. The need for new revenue streams.

These trends will force financial institutions to innovate in ways they never have before. So how exactly do you get – and stay – ahead of the competition this year? These two predictions are a great start (If you missed our first two predictions, you can check them out here.)

Given the impending economic slowdown, financial institutions will increase and expand their customer self-service programs. According to a Gartner study from August 2022, conversational artificial intelligence will reduce contact center agent labor costs by $80 billion by 2026. In particular, we expect the use of intelligent voice and chatbots to increase. Some of these, such as Kore.ai and Uniphore, can send a link to a customer's mobile phone to walk them through the self-service workflow. At the same time, banks will redefine the self-service experience based on better utilization of data and analytics. As default rates increase, these same new and improved self-service models will also be deployed to help with collections.

In 2022, venture capital funding drove strong growth among emerging payments companies and fintechs alike. But many firms' operations grew inefficiently. Already, the market has upended. We expect to see market contraction and consolidation as well as banks acquiring fintech and payment portfolios.

Those nascent payments companies and fintechs that survive the reckoning will focus on profitable, sustainable growth. They'll work with external partners to improve operational efficiency and ensure that they can provide the seamless, automated customer experiences they're known for, even when things go wrong. For example, they'll look to business-process-as-a-service to allow a partner to execute certain processes end to end on their behalf, such as payroll management or accounting.

Process efficiency will also be one of the ways that banks increase their own resilience this year. The cost-of-living crisis combined with a tight labor market has led to increased costs for corporates; notably, fast-rising wages at banks. To deal with the problem, financial institutions will look to do more with less by streamlining and automating their existing processes. For example, Santander UK increased customer satisfaction by 5% and reduced its cost-to-income ratio by 10% by accelerating key business processes, such as its customer onboarding and corporate account closure processes, using automation and artificial intelligence.

If you missed our first two predictions, you can check them out here. Stay tuned for our next two predictions in this series.