The global economy has entered a new era defined by volatility, uncertainty, complexity, and ambiguity (VUCA).
Tim Mahedy, Founder and Chief Economist at Access Macro and Chief Economist at Alloy Labs, explains why the 40-year period of moderate inflation and steady growth, known as the Great Moderation, has ended. Structural forces like climate change, migration, and geopolitical instability are reshaping economic cycles, creating more frequent and unpredictable shifts that challenge traditional banking models.
Mahedy highlights how the independence of the Federal Reserve is under political pressure, with potential consequences for interest rate policy and inflation expectations. Political influence over the Fed could accelerate inflation and destabilize markets, forcing financial institutions to plan for a wider range of scenarios.
He warns that this “new normal” is not temporary; banks must adapt to an economy where predictions are outdated almost as soon as they are made.
The traditional “3-6-3” banking model, pay 3% on deposits, lend at 6%, and golf by 3 p.m., is dead. Fintech competitors and megabanks now set the pace with higher deposit rates, lower operating costs, and customer-centric services.
Banks can no longer compete on rate alone; they must deliver non-rate value through advisory services, payments innovation, and embedded financial solutions that meet customers’ evolving needs.
Despite the challenges, Mahedy sees opportunities for community banks and forward-thinking financial institutions. By leveraging advisory expertise, scenario planning, and strategic partnerships with fintechs, banks can thrive in the VUCA era. Those that innovate and solve customer problems during periods of volatility will earn trust and strengthen their market position.
Meet the Expert
Tim Mahedy is the Founder and Chief Economist at Access Macro and Chief Economist at Alloy Labs. With experience at the IMF and the Federal Reserve, he brings a rare combination of policy insight and market strategy to his analysis of economic volatility. His expertise in forecasting and scenario planning provides bank leaders with actionable strategies to navigate structural change and political uncertainty.
The Big Idea
The core message is clear: the VUCA bazooka has permanently changed banking and the economy. The Great Moderation is over, and the new era demands agility, innovation, and strategic foresight.
Banks must rethink everything from deposit competition to customer relationships, focusing on jobs-to-be-done frameworks and embedded finance to remain relevant in a market where fintechs and tech giants are redefining financial services.
Key Takeaways
- Plan for structural volatility. Climate change, migration, and geopolitical conflicts will drive faster, more disruptive economic cycles.
- Protect against political risk. Fed independence is under threat, raising the likelihood of higher inflation and more volatile rate policies.
- Move beyond rate-based competition. Differentiate with advisory services, payments innovation, and personalized customer experiences.
- Leverage small business growth. New business formation, especially in tier-2 and tier-3 cities, creates opportunities for community banks to capture deposits and lending relationships.
- Increase optionality. Maintain strategic liquidity, develop multiple growth scenarios, and partner with fintechs to embed banking into customer workflows.
Tools, Strategies, or Frameworks Mentioned
- Scenario Planning: Develop multiple growth and risk strategies to prepare for unexpected economic shifts.
- Jobs-to-Be-Done Framework: Focus on customer outcomes rather than product features to design services that meet real needs.
- Strategic Liquidity: Keep financial and managerial “dry powder” to seize opportunities during market dislocations.
- Fintech Partnerships: Collaborate with digital platforms to provide embedded financial services and stay competitive.
Final Thoughts
“If you don’t like change, you’re going to hate irrelevance even more.” – JP Nichols
Economic uncertainty is no longer an occasional challenge, it is the defining feature of today’s market. Banks that embrace change, innovate beyond traditional models, and provide trusted advisory services will not only survive but thrive in the VUCA economy.
Full Transcript
https://transcripts/breaking-banks-ep610-vuca-bazooka-banking-strategy
Tim Mahedy and JP Nicols are offering an Executive Summary of their findings during an online event October 2nd, 2025. Register here: https://bit.ly/VUCABazooka
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