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Financial Services Outlook for 2024

Financial services outlook
By SEC Newgate team
21 December 2023
Financial & Professional Services

A combination of high interest rates, greater regulatory pressure, and potentially moderating, but still troubling, inflation will remain a major issue over the coming months. Technological turbulence including generative AI, transition to the cloud, increased fraud and cyber risk, and the blurring of industry lines, such as the embedded finance trend will require companies to be more agile than ever.  

Alistair Kellie says: “Talking to investors and advisers, it’s likely that we’ll see a modest start to 2024 with growing momentum throughout the year and into 2025.  Whilst it’s clear that we’re in a new base rate paradigm, there are signs of corporate resilience and a marked difference to the jittery period post Global Finance Crisis.  

“From a communications perspective, companies will need to work even harder and be more focused in what they do and say. There will be a continued need for companies to demonstrate to investors, employees, and clients/customers that they have a clear and authentic purpose.  Those who can’t articulate one, will need to ask themselves why not.” 

Alice Cho says: “The financial services industry is set to face challenges in 2024 thanks to a sluggish economy, stringent regulations and increasing sustainability concerns. However, two significant forces are expected to shake things up in the industry – consolidation and innovation.

“Challenger banks will continue to keep an eye out for acquisition opportunities, driven by rising interest rates and the need to scale up. At the same time, the digitally focused banks are also pulling in larger players as they seek to enhance their digital capabilities and expand their customer base. The trend is likely to accelerate in 2024 as the sector faces increasing pressure to adapt to the changing customer needs.

“Alongside consolidation, innovation is another big theme. The industry is swiftly going digital, with more use of digital payments, open banking, and embedded finance. Generative AI, decarbonisation, and fraud also present opportunities for fintech companies to grow.”

Eva Rana on private markets:Private markets have arguably always been at the forefront of financial innovation. But for once, going into 2024, the name of the game seems to be dispersion not disruption

“Throughout 2023, we saw this in action as firms continued a big push on new strategies - most notably private credit and secondaries, which benefitted from macroeconomic tailwinds (higher interest rates) and served as a counterweight to this year's sluggish IPO/M&A market. 

“Driven in part by a strained fundraising environment, this was also a year in which the sector really embraced an imperative to expand its addressable market beyond institutional tickets and engage with new stakeholders - most notably private wealth investors. 

“For a sector known for being rather obscure, these developments have strengthened the case for robust investor education. I would anticipate more creative engagement campaigns (and I don't mean Blackstone's holiday video - though it certainly ticks a box!) as firms vie to demonstrate their credentials. Flexibility is the need of the hour, with investors demanding agile capital structures and better liquidity. 

“Needless to say, it also puts the age-old focus back on PE to justify its "value generation" role in society. Geopolitics will play heavily here. Big elections in the new year may have potential knock-on effects not only on commercial priorities, but also signal a shifting regulatory agenda and tax (think carried interest) regime. 

“If anything, the past year has shown that not all "private market" assets are created equal. In 2024, the burden of proof is greater than ever on firms to articulate their individual case and reassure increasingly selective investors.” 

Emily Church:2023 has felt like the UK investment industry was holding its breath, waiting for ‘something’ to happen. Investors across the spectrum have been adjusting to the new normal of higher for longer inflation and interest rates, with the knock-on effect to their spending and investing habits being felt at all levels by the industry. What 2024 presents is an opportunity for the investment and advice houses to do what they do best: make sense of the white noise and advise on a clear path forward for investors who don’t want to sit on their hands forever.

“It is crucial for investment managers to communicate with their customers during this transitional period, with reputable news outlets remaining the gold standard for impartial commentary on the financial landscape. The added question for financial marketers now is to think seriously about how they communicate. The financial services industry has been slow to adapt to recent innovations such as social media platforms and now, just as many financial companies finally emerge on the social media stage, AI has arrived to roll the dice again. Innovation in technology is accelerating at a rate of knots, changing how retail customers, particularly millennials and younger, investigate financial products, invest, and manage their money.

“2024 should be a year for companies to continue nurturing the ecosystem of reputable journalism which enables them to stand out from the crowd, whilst also laying the groundwork to ensure the media coverage they work so hard to earn can be discovered by their audience, no matter which buying route (search engine, social media, AI) they take.”

Cat Ommanney on sustainable investment: “Sustainable investment will continue to be a core focus across financial and professional services throughout 2024. With the FCA finally publishing its SDR and investment labels policy statement last month, introducing  new rules to tackle greenwashing, including investment product sustainability labels and restrictions on how terms like 'ESG', 'green' and 'sustainable' can be used, firms are now up against it to adhere to this new regulatory standard – with some aspects coming into force as early as May next year.

“The days of meaningless ESG assertions and promises are behind us, and with both the regulator and investors clamouring for clarity and transparency, 2024 looks set to be the year for those who really are focussed on investing sustainably to come to the fore.”

Ian Silvera on crypto: “The cryptoasset industry has benefited from much-needed tailwinds heading into 2024. With the FTX fraud case now behind it (at least to a significant extent), business and consumer confidence rebounded in the sector. This was seen most evidently from the end of year rally from the so-called major cryptocurrency coins, namely Bitcoin and Ethereum. 

“There was also some solid momentum in the regulatory space for the industry near the end of 2023, with the FCA, Treasury and the Bank of England all publishing consultations around the implementation of stablecoins following the roll-out of the FCA’s new advertising rules for the sector. 

“We also saw the appointment of a new pro-enterprise City Minister, Bim Afolami MP, and the industry in the UK generally benefited from the political stability Prime Minister Rishi Sunak’s administration has overseen. Considering the musical chairs in Westminster and Whitehall of recent years, it has been very much welcome.  

“But 2024 will put that stability in jeopardy. The UK is gearing up for a general election and with Labour still leading heavily in the polls, there’s still some uncertainty from Keir Starmer’s party as to what they think of the crypto industry and how they would regulate it. 

“The government is also yet to fulfil its promise of providing a full and clear regulatory landscape so the UK can truly become a global crypto hub.  

“Beyond politics, 2024 could see further advancements in the bridging between traditional and new finance and more blockchain technology is expected to be deployed into video games, now the leading entertainment industry and a sector which could further help the adoption of crypto more widely.”

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