Predicting the future

Predicting the future

by Martin Brock,

2016 was a year of shock and surprises. From the “Out” vote in the EU referendum, through to Donald Trump winning the US election, from Leicester City winning the Premiership to the deaths of the likes of David Bowie, Leonard Cohen, Prince and George Michael.

If I had been told at the beginning of the year that all of these events would’ve taken place, I wouldn’t have believed it. Some of them, I scarcely still can. So, what can we expect in 2017…?

Cyber-security and the future of major banks

US elections are still under scrutiny with allegations of cyber-attacks from overseas to influence the result. Tesco was hit at the end of 2016 with £2.5 million stolen from the accounts of 9,000 customers, and Prof Richard Benham, chairman of the National Cyber Management Centre, has predicted that due to the sophistication of hackers and the prevalence of connectivity, both in and out of the home, this will have a major effect on the banking industry with one bank expected to fail due to a cyber-attack, leading to a loss of confidence and a run on that bank.

Lloyds Bank has recently had positive news that the government is no longer its major shareholder, but with other banks facing more uncertain futures and with the changing trend in banking with a move away from the traditional model (HSBC, for example, has closed 27% of branches in the past two years), the face of high street banking may well continue to change in 2017.

At Gusto, we have seen digital security emerging as progressively more important year on year. We treat it with the upmost importance and have stringent security policies in place if research requires us to handle customer information from financial providers.

Financial Technology

Consumers have become used to using virtual platforms such as Google Cloud and similar developments are expected in the financial world with an appetite to have all banking products in one place. To meet these customer demands, and with PSD2 legislation currently ongoing for 2018, financial services organisations have started to embrace the cloud.

Here at Gusto, we have seen a sharp increase in the amount of research conducted in this field within the past 12 months, having conducted several research pieces focused on open banking and PSD2. We would expect an increase in usage of technology both this year and beyond.

With around 10-12% of bank revenue currently spent on IT according to Simon Parkes, President of financial services software provider Misys, this will also be beneficial for financial providers to reduce spiralling banking costs with a shift away from physical banking to virtual technology.

The effect of the Brexit vote

At time of writing, the FTSE 100 has crossed the 7300 line due to a poor exchange rate and after Mark Carney indicated that Brexit is no longer the single-most significant domestic risk to the UK’s financial stability. This is on the back of several supermarkets reporting record Christmas sales, including Sainsbury’s which saw more than £1 billion across the Group during the festive period.

However, this positivity is not shared by all, for research by the Financial Times found that according to the majority of economists in an annual Financial Times survey, growth will slow markedly in 2017, household incomes will be squeezed by higher inflation and businesses will hold back on investment decisions because of unknown factors about Brexit.

It may be that people will be a little more conservative this year. Some prices of consumer goods will have been held down as stock had already been purchased but will now start to rise, as is currently being seen at the petrol pumps due to the increase in the price of oil.

The slump in the value of the pound against major currencies may also encourage even more consumers to holiday at home, providing a further boost to the domestic tourism industry which saw growth of 7% in from 2015 to 2016.

Future developments and events may arise without any warning of course, so I think that the only thing that we can predict with any certainty is that we can expect an interesting 12 months ahead, both in the financial world and beyond.

By Martin Brock

Martin Brock