The global economy is facing remarkable challenges. High inflation has hit virtually every corner of the globe, proving tireless and seeming determined to wreak more havoc before it finally lefts up. Post-pandemic growth has slowed down significantly, and both the war in Ukraine and tensions between China and Taiwan add to the growing list of global risk and danger.
The outlook for 2023 is not a particularly rosy one, with the world economy expected to experience “notably below-trend growth of 2.1%,” a sharp decline even if it manages to avoid the global recession that many are forecasting for the next twelve months.
Major central banks all over the world are trying their best to bring some stability to their economies, and deflate prices to the best of their ability. Reuters reports that “central banks in the 10 most-developed economies have raised interest rates by a combined 2,040 basis points in this cycle to date” in an effort to clamp down on red-hot inflation hikes.
Starting there, we might see AI be used both for commercial and retail banking and virtually every sector of the financial services industry to facilitate issuing loans, negotiating insurance packages, and detecting fraud. This is because artificial technology can provide enhanced customer experience, but most importantly, reduce bank operating costs and help protect institutions from cyber crime and hacking risks. AI enables banks to perform regulatory checks such as Know Your Customer (KYC), in real-time, on every transaction as it speeds through the system. This helps reduce the probability of human error, which in turn stays on top of budgetary needs and helps avoid wasting such a large percentage of it on fixing unnecessary human mistakes.
2023 will also be a critical year when it comes to enhancing global financial inclusion and ensuring we bring the unbanked and underbanked into the economy of the future. Figures from the World Bank from July 2022 show how more than 1.4 billion adults worldwide still have no access to traditional financial services, including payments, credit, debit, savings, insurance and much more. The World Economic Forum, on the other hand, points to digital technology as responsible for “spurring financial inclusion around the world, enabling millions more people and businesses to join the global economy for the first time.” Looking at more specific figures, digital finance can directly enable financial inclusion and is responsible for “boosting the annual GDP of all emerging economies by $3.7 trillion”.
In fighting the fight against financial exclusion and slowing global growth, contactless payments will continue to play a central role. As an increasingly social and mobile-connected society, we have seen an overall clear trend of region after region shifting away from using cash and turning to digital solutions such as cards, apps, QR codes, and so on. While the Covid-19 pandemic played a big part in forcing physical retailers and brick and mortar stores to adopt online payments and shift their entire business models, the trend doesn’t show any sign of slowing down now that pandemic restrictions are largely behind us. Data from a Juniper Research report shows how “transaction volumes for mobile payments will grow from 26 billion in 2021 to 49 billion in 2023, representing a growth of 92%.” According to the same report, mobile transactions will continue to play a key role, too, as their collective volume will “significantly exceed” that of contactless card volumes by next year. Mobile contactless transactions actually grow “twice as fast” as their contactless card counterparts, and their volume combined is staggering. This indicates that contactless transactions as a whole will continue to grow, which, in turn, will make it easier and more convenient for people everywhere to access financial services and assume a greater role in the functioning of the global economy.
Lastly, we can predict a new wave of regulations incoming, and we can expect them to largely and mostly focus on financial services as they relate to consumer choice and consumer satisfaction. Consumer protection has always been top of mind for regulators all over the world, and the regulatory landscape for financial services for 2023 will reflect this continued priority with a particular focus on the ever-changing landscape of new technologies and innovative ways to deliver a better customer experience. It’s estimated that the latter is “the most important component of long-term competitive and financial success,” and the one factor leading to financial brands receiving “twice as many recommendations” as their competitors.
It’s easy to see how all these elements factor together in a larger outlook on the world awaiting us in 2023: one that’s slowed down by factors such as risk, high prices, and widespread uncertainty, in other words, a world which needs to do everything it can to encourage spending, enhance consumer confidence, and promote inclusion.