Demonstrating fintech resilience in 2023
Melba Montague, Head of Financial Services, Genpact
Despite ongoing economic turmoil and a slowdown in investment, the UK has managed to retain the top spot as Europe’s financial centre, and London, as the Silicon Valley for fintechs. While 2023 looks uncertain still, fintechs are known for swift innovation and reinvention. UK fintechs in particular, will ride this wave, capitalising on the $28.2 million in capital invested in the industry in H2 2022.
However, the fintechs that come out on top will be those that focus on, and demonstrate to investors, one word: resilience.
To do this fintechs must remain laser-focused on operational basics to prove their worth. This is even more vital as the world watched the collapse of cryptocurrency exchange FTX and lender BlockFi in 2022. And with growing industry concerns around alternative finance, there is also no doubt that regulatory complexities will increase in the coming year, especially with a greater presence of Buy Now, Pay Later (BNPL) products on the market.
Access to capital will diminish sooner than you think
According to the latest Innovate Finance report, global fintech investment reached £75.6bn ($92bn) in 2022, a decrease of 30% from the previous year. The drop is the result of the macroeconomic and geopolitical disruption, but despite this, the UK fintech industry received £10.5bn ($12.5bn) in investment – only an 8% drop from a record-high 2021. This demonstrates great resilience in this space. Further, the report shows that the UK is still receiving more fintech investment than all the next 10 European countries combined and remains second in the world only to the US.
That said, for rapidly evolving fintechs looking to continue their scaling journeys across the UK and beyond, access to capital and a global slowdown in venture capital (VC) investment will test their durability in the market. Even as the cost-of-living crisis drives demand, inflation has hit BNPL companies, bringing down valuation as Klarna announced that it had closed its major financing round with an 85% decrease of its valuation, down to $6.5bn in the latter half of 2022.
This year, investors will want to see fintechs lower their reputational risks, follow regulatory advice to maintain compliance, keep customers well-protected, and make use of innovative technology to accelerate and scale their processes.
Regulatory complexities will increase
While the UK government cultivates a strong culture of innovation and boasts a strong reputation for financial services, it needs to be more proactive in its regulatory stance. This is especially true for areas of alternative finance, such as BNPL.
BNPL’s resurgence in recent years has made it an attractive alternative to traditional spending, but not without major risks. At present, BNPL is an unregulated, decentralised industry, and presents major risk to consumers borrowing beyond their means without adequate financial advice or safety nets. Arguably, BNPL has made it easier to create debt, with figures showing that 4 in 10 people will even use additional lending to pay off their BNPL debts.
With urgent calls for the FCA to advocate for new government regulations from the UK Treasury and consumer champions alike, this will begin to establish concrete guardrails for both fintechs and for shoppers looking to manage their finances. While waiting, providers must step up and protect customers as more structured regulatory models are finalised.
BNPL providers have also made growth commitments to investors. They will be expected to keep those promises this year, as well as maintain operational stability, all the while customer experience is not adversely impacted. It will be crucial for fintechs to take the high ground and look for innovative ways to both educate and protect their customers whilst preparing for regulations recommended by the FCA come into play this year.
Resilience will be critical
The FCA is expected to introduce new requirements to perform credit checks this year, fintechs, neo banks, and BNPL companies now hold a greater responsibility to identify those at risk and support them with appropriate measures.
This presents growing opportunity for fintechs to promote financial resilience to improve their valued customers’ financial health. For example, with open banking-enabled solutions, they can provide insight to customers looking to monitor and consolidate spending.
As the industry awaits these incoming regulations, the onus will remain with fintechs to ensure their products are not at risk of endangering consumer debts. As such, it is critical that a proactive approach to educate the consumer is taken to avoid exacerbating an already fragile cost-of-living crisis. This could be done in many ways, from improving financial education in schools and boosting financial literacy across the board, to turning the onus of accessibility on banks to ensure that customers can receive tailored, personal support and counsel on their finances.
BNPL providers must also ensure their collection process engages empathetically with its customers navigating through financial hardship. Providers should leverage data-driven insights and segmentation from data, technology, and AI (artificial intelligence) to align with BNPL users’ specific communication preferences and chosen payment methods.
In addition, machine learning, AI, and automation of complex manual processes will enable secure operations with consistent quality and controls, while finding new ways to pre-empt risk and meet compliance and reporting obligations.
Persevering in today’s financial landscape
Not only do fintechs need to demonstrate resilience to their investors this year, but they must encourage and enable financial resilience amongst their customers. Fintechs participating in BNPL schemes must be made aware of the potential pitfalls that come with unregulated short-term lending, as practice shows that it increases individual risk as consumers borrow beyond their means without sufficient financial advice and regulation.
Implementing advanced technologies, such as AI/ML and data analysis into fintech operations also improves efficiency, enhances the user experience, and saves cost, particularly vital during a time when companies are confronted with record-high inflation and a volatile stock market.
Efficient Ways Construction Firms Can Bring Down Costs In 2023
Consistent, high-quality construction projects being underway is often a sign of a thriving economy. The future of the US is assured when new infrastructure and homes are under constant development.
As has been well-documented already, construction isn’t as productive as it could be in the US today. Numerous factors are causing these types of projects to be stalled and subsequent price hikes to occur. Economic and sector-wide conditions could be far better.
That said, it’s important for construction firms to feel like they have some say in their future. While things aren’t ideal, there’s plenty these entities can be doing that can bring down costs for the remainder of the year.
We’re a good way into 2023 now, but bringing down costs is not work that can be postponed to 2024. So, here are some efficient ways construction firms can do just that in 2023.
Review Fleet Logistics
It might seem like a curious place to start, but it’s a good idea to review how you utilize your fleet if you have one. The operational costs can sometimes be underestimated, and mismanagement in this area can be more costly today for firms in any sector.
Some companies bring their fleet management costs down by optimizing the routes they travel. Others will run tighter maintenance programs to avoid damaging repair costs in future. Some firms will rent out their vehicles, too, rather than purchasing them outright. Drivers may be subject to refresher training courses, ensuring they adhere to their employer’s money-saving policies.
Then there’s the matter of going green, which more companies are turning their attention to. For example, PepsiCo Vice President, Mike O’Connell, stated at the end of last year that, despite hefty costs around the infrastructural changes, his company believed that “the operating costs over time will pay back” to make the arrangement worthwhile in the long run. That sentiment applies to construction firms as well.
There’s also fleet management software to consider. These digital tools can be encrypted on a cloud server and give all users insights into things like fuel usage, the condition of the cars, and the routes travelled. More intricate oversights can be gleaned from fleet usage, and associated costs can be tallied up instantly. Consequently, construction firms would do well to get that installed.
Install Management Software for Construction
Sticking with software ideas for a while longer, construction management software can come with an onslaught of cost-saving advantages for a construction firm. It’s a principle similar to fleet management software in that more detailed real-time analytics can lead to strategy adjustments.
Cost change management can be streamlined with the use of these tools. Project team communication can also be simplified, which leads to time and money being saved all the more. There’s often a modern and intuitive AI to make these systems operational in days, too, which means construction firms can quickly adapt.
Firms like Kahua are often the obvious choice for these solutions. Their cloud-based project management software in construction has been fine-tuned to be tailored perfectly to a firm’s needs. A flexible approach can be undertaken when utilizing it, and firms can be confident that both their present and future business processes can be more carefully managed.
Create Stronger Supplier Links
Suppliers are the lifeblood of any construction business. It’s possible to work more closely with them.
At the end of 2022, Forbes reported that inflation and supply chain disruptions made getting the necessary construction materials more costly and time and consuming today. Their recommended solutions included rather expected budget control measures, but more notably, fostering stronger supplier relations. That way, construction firms can better understand the factors leading to surging material costs.
It may also be better for construction firms to work with local suppliers where possible. That way, they have a better chance of establishing common ground, supporting the local economy and perhaps having more mutual connections in the industry. Delivery costs can also be slashed along with emissions, which are factors that also contribute to a more robust working relationship.
Outsource Where Possible
Construction firms can depend on more than their suppliers to bring costs down. Further help is available.
Such support is usually accessed via outsourcing. Opportunities to do this may involve:
- Outsourcing waste management – some of these firms may pay closer attention to the potential of recycling and reusing materials, creating further cost savings.
- Outsourcing IT infrastructure – Construction firms have sensitive data they need to protect like any other company and are becoming more digitized like their peers too.
- Outsourcing to off-site construction firms – These entities will design and assemble building components away from the area they’ll be used. They’re often pitted against onsite firms, but both can be required for large-scale development projects.
Outsourcing can reduce costs in the long run, but it isn’t an answer to every struggle. Construction firms must continue doing many things for themselves – even monitoring the weather to ensure potential storms won’t cause hazardous work conditions or delays. That self-starter spirit that often drives construction firms should never be lost.
Top banking trends of 2023 and global outlook of banking and fintech for the year ahead
Author: Professor Marco Mongiello, Pro Vice-Chancellor, The University of Law Business School
You’d be forgiven for assuming that the global outlook for banking and fintech will be dominated by the usual suspects:
Artificial Intelligence – AI plays an increasingly prominent role in banking and fintech by enabling personalised services, fraud detection, predictive analytics, use of chatbots and robo-advisors.
Blockchain and Cryptocurrency – the secure, decentralised and swift system for financial transactions that blockchain has brought to the fore a few years ago, is now becoming ubiquitous. An increasing number of transactions are recorded through blockchains technology, primarily in the cryptocurrency market.
Digital Banking and fintech – accelerated by COVID-19 pandemic, the adoption of digital banking is a trend that will persist as customers have become accustomed to the convenience and efficiency of digital banking. Moreover, fintech enables access to financial services for previously underserved populations in developing countries or less affluent social groups in more affluent societies. This includes mobile banking services, peer-to-peer lending platforms, and microfinance solutions.
Open Banking – another global trend is the use of open APIs (Application Programming Interfaces) that allow third-party developers to build apps to facilitate customers’ access to financial data and services from banks.
Nonetheless, the challenges posed by these rapid changes are reminders that banking, an industry that by its very nature needs to be conservative, risk averse and solid, wobbles on the unchartered grounds of fast and turbulent innovation, where entrepreneurship instead thrives. The underlying rationales of banking and fast digital innovation are not incompatible but do need solid operations and thought-through decision-making to avoid causing catastrophic collapses.
The recent examples of Silicon Valley Bank, Silvergate, FTX and Wirecard are stark reminders that digital entrepreneurship applied to banking doesn’t just bring to customers the visible transformation of valuable new services, but also dents (perhaps as an unexpected consequence) the rationale itself of the role of banks in the global economy. Moreover, the central banks’ ability to contain the effects of single banks’ defaults is no longer a certainty, as experienced just over a decade ago and more recently. The markets’ sentiments are hardly reassured by the commitments of even the most coveted players, such as the European Central Bank, the Federal Reserve, and the President of the United States himself.
Regulators are lagging behind and their attempts to catch up may cause further seismic shocks to the global banking system. For example, another trend that is emerging is one of artificial intelligence decision-centres (i.e., decentralised offices of banks which take autonomous decisions on behalf of investors) outside the most stringent regulatory environments, enabling banks to operate globally more efficiently and more competitively. And we can expect that regulators will close the gap either abruptly, as it is currently happening in China, where private banks are subject to an escalation of regulatory and monitoring restrictions, or more gradually as it is happening in Europe and in the US.
The questions we face, as individual or trade customers of our high street banks, as direct investors or clients of managed funds, are whether banking will become more user-friendly yet, for our daily use but riskier, too, or is it simply becoming more efficient, transparent and also safer.
I’m afraid that the answer is by no means an obvious one. Therefore, caution, level-headed decision- making and critical thinking have never been as important as these days. Whether you are looking after your family savings or growing your pension reserve, the imperative is that you keep updated about the providers of the financial services you rely upon as well as about the general regulations that apply to your financial transactions. This is where, for example, you need to be familiar with your rights in case of cyber fraud, as well as learning how to minimise the risk of becoming a victim thereof. Also, taking additional steps to evaluate the credibility, solidity and reliability of the online provider of that app that was recommended by a trusted friend, may prove a very good move.
Similarly, whether you are the CFO of a medium or large company, or are a sole trader wrestling with your own business’s finances, you need to reflect on what you really want from your bank in the first place. That is before you started to be swayed by the whirlpool of offers of ‘opportunities’ to multiply your financial investments. Chances are that your initial approach to your bank was dictated by either a need for financing your working capital, as per your budget and strategic plans, or to find a safe place for your temporarily idle liquidity. Perhaps you were also after some basic treasury services such as swift payments and debt collection. Maybe some other financial services closely related to your business operations, e.g. factoring. The advice is to give very careful consideration to services that are more remote from your business, because the trend for the next years is that more and more of those will be offered to you. But many new services will disappoint those who, sadly, cannot afford financial mishaps as they look to run and grow their business.
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