2023 has been yet another year filled with uncertainty and change. Global tensions have put further pressure on the world’s economy, with high interest rates plaguing many countries. In addition, organisations across all industries have been left scrambling to keep up with rapid technological advancement in the form of AI. In the face of such conditions, preparing for the future has become more difficult, and yet more crucial, than ever before.
With that in mind, we spoke to five experts to get their insights into what the next year will look like for the world of finance.
Uncertainty is the only certainty
Unfortunately, it’s fairly clear that many of the challenges of 2023 are likely to continue well into the new year. “Interest rates have come down slightly as we head into 2024, but pressures relating to the cost of doing business continue,” explains Hugh Scantlebury, CEO and Founder of Aqilla. “Energy prices, for example, remain high, and inflation is still twice as high as the government would like it to be. And there’s still uncertainty about any business tax breaks that the Chancellor might introduce before the next election — or how a Labour government might alter business taxation, minimum wages, or national insurance.
“For these reasons,” he continues, “financial planning, and meticulous record-keeping, which have always been important, take on an even greater significance. Doing so will help organisations maintain strong cashflows and resilience in the face of these and any other challenges that present themselves in the next 12 months.”
Gary Lynam, Managing Director, EMEA, Protecht, also believes that global uncertainty will be a key focus for many organisations. “Recent findings from Protecht research found that the current unsettled global operating environment is reflected in the top three critical risk areas identified by financial organisations as geopolitical uncertainty (26.2%), liquidity /access to capital (24.4%) and cyber threats / data breach (23.9%),” he outlines. “With voters in 40 countries heading to the polls, the results will have a significant impact on an already fragile geopolitical and economic environment,” he adds.
In such an unsettled environment, “the Chief Financial Officer is now the key buyer,” according to Rob Shaw, SVP and GM EMEA at Fluent Commerce. He argues that “there is now a huge emphasis around return on investment and business cases. That said, it’s important to remember that the business case for change isn’t just about savings, it’s also about growth.”
Adapting to new legislation
By necessity, a key focus over the next year for many organisations will be adapting to the new Pillar 2 legislation – which will establish a global minimum tax regime which will apply to multinational groups with consolidated revenue over €750m.
According to Russell Gammon, Chief Solutions Officer at Tax Systems, “2023 has been a surprising year for Pillar 2. The developments of the regulation haven’t gone as many expected, but for once, not in a bad way! Historically with legislation, we’ve seen plenty of delays and the compliance date gets pushed back. During this drawn-out process, we also typically see the initial requirements become watered down over time so that once businesses are required to adhere to the law, it is significantly less stringent. For example, with Making Tax Digital, the initial outlines banned Excel from being used in VAT processes, but this never made the final cut. With Pillar 2, there has been no material amendments and no delays announced in the UK, which has been particularly surprising considering the significant ramifications it will have on some organisations’ bottom line.”
He continues: “We are now 2.5 years away from the first Pillar 2 filings in the UK, with organisations having to do full calculations for the year from December 2023 – 2024. Over the next 12 months, we will see organisations going full steam ahead on preparations – a testament to how difficult this legislation will be to meet. We will likely see a huge peak in demand for software that handles Pillar 2 calculations, and it will be high on the agenda of tax departments across the world. The time for back-pedalling has passed, and 2024 needs to be the time for organisations to focus on Pillar 2 compliance to avoid significant errors and consequences in the future.”
Accelerating digital transformation
Even with the challenges posed by poor economic outlook and the complexities of new legislation, organisations cannot afford to neglect technological investment in 2024.
For example, Aqilla’s Scantlebury believes that organisations who don’t take advantage of new AI technologies will be left behind by their competitors. “Although AI has already brought significant changes to some parts of the finance sector, at a grass-roots level, and amongst many in-house finance teams, the technology is still far removed from everyday work,” he says. “This is a shame, as AI has the potential to deal with some of the most repetitive and time-consuming manual tasks — and create space and time for more high-value work. For this reason, 2024 needs to be about educating those parts of the finance sector who are wary or unsure of AI — perhaps starting by dispelling fears that it could replace them. Supporting colleagues who want external training, running company workshops, and building AI education into job success metrics are ways companies can help their finance teams embrace AI and use it to their — and their company’s — advantage.”
Continuous investment in technology is also vital for organisations to remain attractive to their customers, argues Olaf Baunack, SVP – Global Head Financial Services & Insurance Business at Intellias. He explains that: “Mobile payments are key to making banking services accessible, fast, safe, and reliable for everyone. This represents the direction for the future development of the banking industry in 2024 and as a whole. Millennials and Gen Zs are growing their disposable income and personal wealth. FinTech product adoption is surging. When you pair these facts together, it’s obvious that to stay competitive every bank will need to set a higher CX bar. In addition, the evolving needs of the current customer persona will require continuous investments in improving the latter.”
“Customer experience (CX) and Open Banking (seamless integration) are now a defining competitive differentiator in the banking sector, and we can expect to see a significant rise in the use in the adoption of digital wallets for mobile cashless payments in 2024,” he concludes.
