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As we look towards 2024 the general mood is tentatively positive, with innovators are putting renewed focus on tech to transform the stickiest business challenges in finance. However, this recovery is threated by the destabilising effects of ongoing conflicts and geopolitical tensions. While many feel that a period of consolidation is right around the corner, how international events unfold will impact when that arrives. The investment environment will also be put on a firmer footing if and when valuations are rebalanced.
"Moving into 2024, many fundamental growth drivers for the continued digitalisation of financial products, services and market infrastructure present investment opportunity”
Niranjan Arasaratnam, Global Tech Sector Leader, Singapore
The hype around digital market infrastructure seems to come and go like the changing tides. Those on the side lines could be forgiven for thinking it’s all on a road to nowhere. In reality, innovation in digital market infrastructure is on a clear upward trajectory, while the outlook for decentralised “token” markets is more complex.
“We are witnessing a bit of an arms race as new entrants invest substantially in digital market infrastructure alongside existing FMIs ”
Richard Hay, UK Head of Fintech, London
The Crypto Winter has lingered, but some suggest a “Crypto Spring” could be on the horizon - spurred by renewed institutional investor interest in digital asset related projects. In 2023 as technology continues to develop, along with bespoke regulation in some key markets, the industry looks set to experience ongoing shifts in sentiment. Digital assets will continue to represent a volatile asset class - facing an increasingly complex regulatory matrix.
“Crypto is resilient. In 2024, we expect heightened government focus on national security, alongside increasing integration of AI and digital assets.”
Joshua Ashley Klayman, US Head of Fintech, New York
Increasing demand for frictionless payments and advances in technology continue to create opportunities for new players in the payments industry. Momentum is behind Big Tech whose gravitational pull is attracting more scrutiny from financial services regulators focused on consumer harm. Meanwhile work continues on developing, and preparing the legal framework for, blockchain-based payments, whether in the form of stablecoins or central bank digital currencies, with hopes of solving the enduring instant payments and cross-border payments challenge.
“Providers of payment services are being held to a higher standard than ever before”
Harry Eddis, Global Co-Head of Fintech, London
If data is the new oil, banks hold considerable reserves. In more places than ever banks are required to share the customer data they hold with other firms. While some jurisdictions are laying the foundations for open banking, others are looking to apply the model to a wider range of data. Open finance promises more benefits but also more complexity. It also invites more innovation around how this data is used.
“Open finance promises more benefits but also more complexity”
Florian Reul, Germany Head of Fintech, Frankfurt
The increasing adoption of AI in financial services will continue to raise unique and complex ethical and legal challenges. While machine learning is prevalent, the industry is still working on use cases for GenAI in finance. A dynamic and evolving regulatory landscape, and increasing regulatory focus means firms will need to actively address the challenge of AI risk management.
“One of the key challenges in 2024 for financial services firms will be the evolving and risk compliance environment for GenAI”
Julian Cunningham-Day, Global Co-Head of Fintech, London
The ongoing proliferation of new technologies brings with it new risks for financial institutions. Open banking, GenAI and the increase in partnerships with technology vendors expose firms’ infrastructure to new vulnerabilities and cyberattacks. Meanwhile, operational resilience requirements are expanding, presenting another compliance challenge for regulated firms.
“Maintaining customer trust in this fast-moving risk environment will be a key priority for all financial services providers”
Alex Roberts, TMT Partner, Shanghai