Five influences on banking and payments for 2023

2022 was a very active year in the payments and financial services industry, and experts are now looking at key market trends that could impact 2023. When highly informed corporate leaders like Jamie Dimon and Jeff Bezos are waving red flags, it’s a good indication for credit unions to pay attention and plan accordingly.

Credit unions should keep an eye on these five major market trends that are likely to influence the year ahead.

1. The Economy: Most commercial and investment financial analysts predict a challenging economic environment for 2023. Expectations are largely in place for low economic growth, with high odds of a shallow – but possibly lengthy – recession. Inflation is expected to decline in 2023 as compared to 2022, but compounding effects and supply-driven components (like energy) will continue to impact members and small businesses. Interest rates should rise at a slower pace through late summer, when the federal funds rate is forecasted to peak around 5.00-5.50%, with the prime rate forecasted to peak around 8.00-8.50%. At that “terminal rate,” the Federal Reserve is expected to pause – and possibly lower – the federal funds rate by the end of the year.These events point to decreased levels of discretionary income available to your members and increased challenges for your small business partners. Lower savings rates, fewer loan pre-payments and selective borrowing for mortgage and commercial loans are expected to extend throughout the year. Raising deposits may be a critical mission for many credit unions looking to fight off outflows.

 

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