A new SAS-sponsored study by Economist Impact predicts three potential futures for banking, examining the risks and opportunities ahead
CARY, NC, Oct. 5 2022 /PRNewswire/ — As disruptive forces hit the financial sector today, banking executives are examining the evolving role of banks in the most competitive market they’ve ever faced. What does the future hold? And how can they meet the challenges ahead to forge a brighter future – for the industry and the greater world? Such is the focus of the new future banking study, Banking in 2035: three possible futuresby Economist Impact and sponsored by AI and analytics leader SAS.
The first in a two-part study, the report presents three possible scenarios for the banking landscape of 2035. Through extensive desk research and expert interviews, Economist Impact’s analysis:
- A “megatrend” snapshot is poised to reshape the banking landscape over the next decade.
- Reveals the risks and opportunities presented in a combination of different trends.
- Highlighting specific ways banks can evolve to support a more equitable, ethical and sustainable future.
In the face of problems such as climate change, economic fragmentation, and widespread economic and social inequality, the study is clear: Banks face a defining moment.
“The rapid evolution of the sector amid the prevailing uncertainty raises a fundamental question: What is the purpose of banks?” said Yuxin Lin, Senior Manager of Policy and Insights at Economist Impact. “How banking leaders answer these questions – and the business decisions they make as a result – will redefine the entire industry.”
“Banks have the power to improve not only our global economy but the entire human race,” he said Alex Kwiatkowski, Director of Global Financial Services at SAS. “By embracing technology and innovation with intention, banks can pave a more purpose-driven path, where higher purpose and profitability go hand in hand. And if they don’t fully embrace this, a golden opportunity to make a genuine difference will be wasted, potentially with very serious consequences.”
Scenario 1: Can a transformed bank regain public trust?
Since the 2008 financial crisis, banks have faced reputational problems. In fact, financial services consistently ranks among the least trusted sectors, currently giving confidence to more than half (54%) of the public, according to the Edelman Trust Barometer 2022.
Moving forward to 2035, Scenario 1 envisions a world where banks use digital transformation to restore their image. Banks have strengthened data privacy and cyber fraud protections and championed consumer-focused regulations. Greater transparency and consumer protection supports public trust, fueling open banking and partnerships that spark profitable new deals. A frictionless digital platform brings together every aspect of a customer’s financial life in a personalized and tailored way.
“Consumer trust, built up over many years, can disappear overnight,” said Stu Bradley, Senior Vice President of Fraud and Security Intelligence at SAS. “As digitization accelerates, it is imperative that banks create hyper-personalized engagement as they address increasing risk. In balancing customer experience and risk, an enterprise decision-making approach – where fraud, risk and engagement decisions are holistically integrated across the customer journey – can reduce costs and streamline the bank’s IT infrastructure, while increasing revenue and customer retention.”
Scenario 2: Perhaps banks catalyze cross-industry climate action and drive the green transition
Tackling the climate crisis requires unprecedented global cooperation and collaboration. According to the United Nations, current government commitments to reduce greenhouse gas emissions fall short of what is needed to limit global warming to 1.5°C above pre-industrial levels. Avoiding the worst effects of climate change requires swift and decisive action.
Scenario 2 envisages a global community committed to climate action in 2035, where decarbonisation is a key consideration across energy, infrastructure and transport. Cities have been redesigned for energy efficiency and climate resilience. Cost-effective renewable energy sources and green technologies are commonplace.
“Climate leadership in the banking sector will drive greater cross-industry progress towards net zero emissions by 2050 – and it starts now with better climate risk analysis, modeling and management,” said Troy Haines, Senior Vice President and Head of Risk Research and Quantitative Solutions at SAS. “In improving their ability to model climate risk scenarios and understand the potential impact on their balance sheets and capital, banks can help drive the green transition and advance climate resilience around the world.”
Scenario 3: How will banks fare in a geopolitically fragmented world?
While the world tries to put the worst of COVID-19 in the rearview mirror, economic and market uncertainty abounds. The aftermath of the pandemic has increased tensions between the world’s economic superpowers while burdening developing countries, whose populations have suffered disproportionately.
Against this backdrop, it is not difficult to imagine Scenario 3, which depicts a geopolitically contentious world stage in 2035, colored by diverging interests and the retreat of multilateralism among the world’s economic giants. Bilateral and regional agreements have replaced the World Trade Organization. The global financial system has been fractured by competing alternative payment systems and the rise of digital currencies.
“Deglobalization, accelerated by recent global events, is likely to widen the staggering societal inequalities that plague us today,” said Theodora Lau, Founder of Unconventional Ventures. “Undeniably, banking and money are at the heart of it all. Each of us has a role to play in fighting for a more inclusive and sustainable future by our actions today.”
Reimagining banking for the 21stSt century – in Sibos and everywhere else
Lau, also a noted author, speaker and industry commentator, will join Kwiatkowski SAS on the Meet the Experts stage at next week’s Sibos conference in Amsterdam. Both will deepen the study in their joint session, Embedding Philanthropy into the Global Economyon Wednesday, Oct. 12on 12:30pm CEST.
Attendees can also engage with SAS throughout the conference at Sibos Booth B115.
SAS will debut part two of this future banking study in November. Banking in 2035: global banking survey report will explore the results of an international survey of banking industry professionals. In the meantime, find out how better insights lead to better banking SAS.com/betterbanking.
On the Economist Effect
Economist Impact combines the tenacity of think tanks with the creativity of media brands to engage globally influential audiences. We believe that evidence-based insights can open debate, broaden perspectives and catalyze progress. For more information, visit impact.economist.com.
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