The future of finance: Predictions for 2023

Change has been the one constant of the last few years, with 2022 proving no different. Organisations across the financial sector have had to weather the storm fuelled by the sustained impact of a global pandemic, geopolitical tensions and the looming recession. However, for many firms across the industry, uncertainty became resilience and agility, as they used this time to advance digital capabilities and ecosystems.

As 2022 comes to an end and we again look ahead to the new year, we spoke to five industry experts to learn their predictions for 2023 and what organisations can do to stay one step ahead of the tide.

1. Inflationary pressures will continue

Hugh Scantlebury, CEO and Founder of Aqilla

A serious problem for next year comes from inflationary pressures, causing rises in food, fuel, energy, and resources. For businesses and individuals, the cost of living and operating will go up. Although salaries will rise accordingly, Hugh Scantlebury, CEO and Founder of Aqilla, urges that “all those things must be accounted for, so we will need to keep a much closer eye on what’s coming in, and what’s going out.

“Looking at the accounting space, it’s imperative that systems can cope with those changes, and monitor gross margins, month-on-month profitability costs and overheads. Having a decent analytical reporting system is essential in identifying heat graphs to show where changes are happening and make early interventions when necessary.

“The management of all this will, unfortunately, lead to an increase in workloads, but it’s imperative that it is done. We have seen the consequences if you don’t: things can get out of control very quickly — just look at Stripe, Amazon, Meta, and Twitter. It’s not just important to have a good business, you’ve got to run a good business. And that’s all down to accounting and finance – it’s tracking all the different activities, so you don’t suddenly discover big holes in your finances.”

2. Europe will need to step up data sharing

Eyal Sivan, Head of Open Banking at Axway

With the financial world set to evolve further as we embark on the new year, pressure for regulatory changes that keep pace is expected. Eyal Sivan, Head of Open Banking at Axway, explains how Europe will need to play catchup to the rest of the world where data sharing is concerned in 2023. “Although Europe pioneered open banking with their PSD2 regulations, their efforts have been considered by many to be lacklustre at best and an outright failure at worst.

“Balkanization of standards, inconsistent implementations, and tepid enthusiasm on the part of incumbent banks have led them into Gartner’s Trough of Disillusionment. However, as the Europeans observed the successes of those that followed, notably in Brazil and the Middle East, they started to revisit their approaches.

“While PSD2 was centred around payments with data sharing added afterwards, the impending updates to legislation (by the name PSD3 or otherwise) will more than likely have a broader focus on generalised data sharing, open finance, and even open data, as Europe catches up to its peers.”

3. Tax will require a culture change

Russell Gammon, Chief Solutions Officer at Tax Systems

Making Tax Digital (MTD) has also taken the tax industry by storm over the last few years, and this is likely to prevail into 2023. Russell Gammon, Chief Solutions Officer at Tax Systems, explains: “HMRC and tax professionals will have learnt from MTD for VAT which has now become largely “BAU” for businesses, and are now dealing with the next wave as MTD for ITSA takes centre stage for the next 18 months or so.

“MTD for Corporation Tax is set to pilot in 2024, yet there has been continued silence from HMRC for over a year now. This leaves many uncertain about whether they’ll expect to find out more about this legislation in 2023, or not until the year after. For many, this will be very important – even with the best tech in the world, the implementation will involve culture and a process change.”

Gammon adds, “One thing for certain is a need for clarity on the reporting timetables and schedule – will HMRC press forward with quarterly reporting? This will be the cornerstone of the legislation and will drive the technology that is needed for compliance. A formal line in the sand from HMRC is needed in 2023.”

“With the importance that this strategy will have in many UK organisations, my advice is don’t wait for the legislation. Take what we have learnt from MTD so far and use it for CT returns so that you are prepared for what’s to come, when it eventually arrives. Learning from previous mistakes is key – there was so much urgency before MTD for VAT when that rush wasn’t necessary. Being prepared is essential in staying ahead of the game in 2023.”

Andrew Doukanaris, Business Director Fintech Europe at Intellias

4. ESG will remain important

Ever-increasing environmental, social, and governance (ESG) pressures will also drive financial institutions, like most other large businesses, to introduce net zero policies in 2023.

“Faced with the very real threat of climate crisis and plastic pollution, emissions will be minimised and the use of plastic reduced,” Andrew Doukanaris, Business Director Fintech Europe at Intellias, explains. “In 2023, consumers will be encouraged to replace traditional plastic cards with e-wallets and mobile contactless apps instead. The environmentally conscious Gen Zs and Millennials will wholeheartedly embrace these changes, but other older generations will in time follow suit. Plastic cards will not be eliminated completely in 2023, but in around 10 years from now I predict there will be no plastic cards in circulation.”

Galen Chui, SVP of engineering and products, at Cubic Transportation Systems

5. Transport will embrace open-payment systems

In the transportation industry, it has become increasingly common to use a range of tokens besides traditional paper tickets to pay for travel. Take London as an example, where travellers can use a wide variety of available payment tokens, from Oyster cards to mobile barcodes. One of the innovations growing is open payment, which allows pay-as-you-go travellers to use any contactless credit or debit card to pay for transportation services.

“In 2023, we will notice a continued shift to open payment systems,” notes Galen Chui, SVP of engineering and products, Cubic Transportation Systems. “As currency becomes increasingly decentralised, it is cheaper, more transparent and reliable to pay for transit usage. Having an open payment ecosystem could shift the accessibility of transit systems and bring transit services to millions of people in developing nations or to those who are unbanked.”

He adds, “capitalising on tap & go with fare capping, and accepting payment methods that are seamless across multiple service providers and in travellers’ hands (BYOD), will become the new new.”

As the finance industry looks ahead to 2023, Aqilla’s Scantlebury reminds us that any attempt to predict the future is futile. He concludes by questioning: “Who knows what will happen next year?! We didn’t know there was going to be a war in Ukraine, and we didn’t see the energy crisis coming. So, there are a lot of unknowns as we head into 2023…”