Looking Back, Looking Ahead: Three Trends That Will Shape Finance in 2023

Introduction

2022. It was quite an eventful year. From the growth and fluctuation of funding and fintech startups to the flight of SBF and fall of FTX. From greater regulatory scrutiny on digital banking solutions to keeping pace with innovation, 2022 was both a time of continued growth and a reset of priorities for the entire financial community.

More than ever, financial institutions are implementing technology to increase efficiency and meet customer demands. This sets a positive outlook for several practice areas in finance – the technologies that drive efficiency and support safe growth in the markets will gain more momentum in 2023. What we’ll also see is the need for more compliance solutions to allow the industry to keep up with the rapid changes of technology.  

Trend 1: Strong & Efficient Compliance Operations are a Strategic Advantage 

Regulatory scrutiny is increasing across the financial industry. There is a need for robust and efficient compliance practices to help financial institutions navigate the evolving regulatory landscape. This has always been the case, but in late 2022 and into 2023, more institutions are realizing that investing in compliance can be a strategic advantage.

Fintechs, banks, online gambling, crypto, payments – you name it, the regulatory agencies have eyes on it. To play (and win) in finance, adding more people to address the problem won’t cut it. In fact, it’s a potential root cause of errors in the way compliance data and information is collected and analyzed. Instead, increasing efficiency requires organizations to equip themselves with well-designed compliance technology. In 2023, the best financial institutions will focus on these investments and optimize their tech stack to create a strategic defense for their growth.

Trend 2: Know Your Business (KYB) Market Accelerates 

The Paycheck Protection Program's aftermath highlighted the proliferation of shell companies, and the need for better diligence solutions in commercial finance. Know Your Business (KYB) practices identify and verify businesses that a company would like to work with. What does this mean? Financial organizations need to conduct KYB practices throughout a relationship. 

The KYB practice area has been somewhat overlooked and underserved by the vendor ecosystem in compliance. Many important diligence practices are left to manual workflows, and information about beneficial owners and other important corporate details can be very scarce. Compared to its sibling practice area, Know Your Customer (KYC), KYB can feel like very difficult and tedious – that spells opportunity for new solutions in the space.

We’re already seeing KYB-related workflows and needs accelerate on our platform, and we are expecting to see that trend continue in 2023.

Trend 3: ChatGPT & Related Models Improve Financial Literacy (and Knowledge-Seeking Queries in General)

The last 20 years of Googling have yielded a model where you:

1. Search.
2. Hunt through an infinite list of semi-related results.
3. Are left on your own to wade through SEO'd-out sites for answers.

In contrast, earlier experiments with ChatGPT show how it can directly answer questions like an advisor or knowledgeable friend would. No long list of websites to search through, just an answer to your question and follow-ups where needed.

ChatGPT is an open-source, end-to-end language model that allows developers to build and deploy conversational AI for applications such as chatbots, virtual assistants, and other interactive technology solutions. 

ChatGPT enables knowledge-oriented searches and promotes transparency and access to financial information. For banks and financial institutions specifically, ChatGPT can create high-level content, respond to customer inquiries, assist with research, and provide perspectives on current trends. Although the technology is in its infancy, we could rapidly see it improve transparency and access to knowledge about many topics, finance included.

Wrap Up

2022 was a zig zag road. It was tough for organizations and challenging for many industry professionals. Technology solutions that improve efficiencies and support safe growth will help prime the stage for success in 2023. 

Hummingbird is a team of creative problem solvers that focus on the needs of financial crime fighters. We have been through many challenges and market uncertainties in the past few years, but the spirit of learning and the commitment to experiencing and addressing the pain points that our customers are going through remains the same. As new technologies in finance mature, it gives us an opportunity to collaborate more closely across functions to bring innovative solutions to our customers. 

2023 will be a year to rebuild reputations, champion regulatory change, and promote strong and efficient compliance programs. I’m excited about what’s ahead.