What does 2024 have in store for the UK’s financial situation?
Dr Hassaan Khan, Head of Digital Finance at Arden University
Dr Hassaan Khan
When comparing the UK with other global economies, alongside Germany, it was the only G7 nation to have a smaller economy at the start of 2023 than at the end of 2019. And despite recent stability in UK interest rates, the nation’s economy still remains vulnerable – with rising taxes, high mortgage rates, households struggling with savings and an increase in corporate insolvencies all creating uncertainty and growth challenges.
The current financial climate has undoubtedly tested the nation, and, despite its proven resilience, concerns remain that the UK’s mark on global finance is slowly fading. Dr Hassaan Khan, Head of School of Digital Finance at Arden University unpicks the UK’s 2023 financial trends and looks at what’s instore for 2024.
Rapid technological change
It’s no secret that digital transformation and AI are revolutionising the way we work and interact with the world around us. Globally, countries are rapidly adopting advanced technologies, and the race to get and stay up to speed is well and truly on. In fact, the pace of technological change is pitting different economies against one another; who will be the first to really transform? What nations will succeed in achieving better services for businesses and people, more refined compliance, stronger capital growth and more personalised forecasts?
When looking around the world, it’s clear how forward-thinking and responsive other global financial industries are. China, for example – which is arguably at the forefront – has the highest number of fintech users, as its responsiveness and rapid international expansion have paved the way for a distinctive finance industry that supports the nation’s growing economy.
Globally, there are also many background technological developments spurring further competition, including AI, cryptocurrency and blockchain, which all point towards a more advanced customer base that wants greater control, autonomy and a more personalised service.
Applying the benefits of such technological developments, such as blockchain, for example, can allow banks and businesses to unlock cheaper, more efficient transactions, while maintaining stringent security standards. As such, it’s predicted that blockchain will experience growth of up to $150 billion by 2025 – as it has the potential to revolutionise the way financial transactions in peer-to-peer lending occur. AI also has a critical role to play across a range of finance areas – from AI algorithms to enhance liquidity management to machine learning (ML) models to help understand underlying patterns in large datasets to better manage risks.
The technological potential for finance is well-recognised, with 72% of firms reportedly using ML applications, leaving the financial industry predicted to be the largest investor in AI throughout 2023. And research shows that the global race has already begun – with AI predicted to boost China’s GDP by 26% by 2030 and North America’s by 14.5%. But will the UK be responsive enough to catch up?
Can the UK catch up?
While the technological revolution is new and exciting, it also brings increased risks. Businesses and markets that race to the finish line too quickly are leaving themselves more vulnerable and less prepared to efficiently handle risks and increasingly sophisticated fraudsters.
Unsurprisingly, cybersecurity remains to be one of the biggest risks facing the financial services industry. The fintech space is already responding to this by creating tougher cryptography to keep hackers at bay, but one study revealed that the UK’s finance sector is struggling to keep up, with UK finance companies seeing an average of 60 cyberattacks in 2021.
There’s also growing concerns around how financial institutions can better protect consumers and investors, especially when it comes to data handling, as the volume of data used in AI raises questions about data privacy and protection. Of course, there’s a need for Governments to keep pace with new legislation and regulations to combat emerging risks, but there’s more to be done in the UK. Labelled the so-called ‘Fraud Capital of Europe’, people in the UK are nine times more likely to fall victim to fraud than those in Germany – highlighting how the UK has by-and-large been slow to react to the challenges faced. And while the Government launched a new strategy earlier this year, some argue it was a little behind other nations.
Overall, as we enter 2024, to remain competitive on the global stage, the UK’s financial system needs to transition away from being a slow-moving industry that relies on the bounds of insufficient regulation and adaptation. With technology transformation pushing ahead at a rapid pace, to avoid being left behind, the UK needs to focus on staying one step ahead to remain at the top.
Wanda Rich has been the Editor-in-Chief of Global Banking & Finance Review since 2011, playing a pivotal role in shaping the publication’s content and direction. Under her leadership, the magazine has expanded its global reach and established itself as a trusted source of information and analysis across various financial sectors. She is known for conducting exclusive interviews with industry leaders and oversees the Global Banking & Finance Awards, which recognize innovation and leadership in finance. In addition to Global Banking & Finance Review, Wanda also serves as editor for numerous other platforms, including Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.