The industry is facing an unprecedented year but with new challenges come more opportunities. After a very turbulent year of economic and geopolitical disruption on a historical scale, predicting the future market became very challenging. We look at 2023 and what factors will influence technology investment over the coming year and beyond.
Digital transformation remains a prominent area, and with rising concerns about recession, many tech and finance leaders are looking to expand their focus on increasing investments in this space. According to a Gartner study, 78% of CFOs intend to continue or increase their digital investment over the next few years. The findings come at a time when most CFOs are planning to reduce expenditures in other business areas. Much of the investment is likely to focus on core areas such as cloud, cyber security and compliance. According to Pere Nebot, the CIO at CaixaBank, increased investment in automation, AI, ML and Cloud will prove critical to enhance the competitiveness of traditional banks over emerging fintech and transform how traditional finance interacts with customers. Studies emphasise that tech alone cannot tackle all of the challenges we face in finance. Nebot explains that the human factor is critical; financial businesses that incorporate automation, AI, ML and cloud technologies into their systems must first consider how these systems will enhance their employee skillset and improve the overall customer experience. Technical training on cloud, security, data, and AI should remain a priority in improving the progress of new technology developments.
In these particularly challenging times, finance businesses must be more strategic with their technology plans to achieve success. Securing the value and potential of technology and being part of the digital transition requires a planned and holistic approach, allowing a seamless transformation. Creating success involves businesses considering the challenge they intend to solve. A company must recognise why it selected this technology and what you are trying to achieve.
Rising focus on open banking and embedded finance
Open banking continued to dominate the UK market in 2022. According to the OBIE 2022 Open Banking Impact report, over 10% of digital customers regularly use one or more open banking services, an increase from 6% in 2021.
As a new year begins, the FCA introduced a joint regulatory oversight committee to manage the movement of the OBIE to a future entity. Regulators are also exploring the possibility of open banking beyond payments to incorporate open finance. Instant and real-time payments will also remain a critical part of the short-term plans.
Throughout this year, embedded finance will become a standard. This pattern will continue to shape the fintech industry, and this year will see a rise in companies from other markets looking toward integrating finance services as a new and innovative way of expanding their service offerings. Embedded finance solutions will become a competitive feature for organisations and a way to deliver new ways of generating revenue. With a rise in these new services, customer demand for a simple and seamless payment experience will only continue to increase.
As the next generation of financial customers becomes the dominant part of financial services, it will empower wealth managers to incorporate new digital solutions or face potentially losing out on a significantly high-value market. Last year we witnessed a continued consolidation of the wealth management sector, and additional economic disruption this year likely to place more pressure on smaller, less established businesses. Wealth managers will continue to become a top priority for the next generation. A rise in M&A and further consolidation in the sector will encourage companies to incorporate their services. Offering a personal service will be critical to many wealth advisors as customers want transparency with their investments and assurance their money aligns with their values like ESG and sustainability.
