Eyal Sivan

  Andrew Doukanaris

    Russell Gammon

  Hugh Scantlebury

  Galen Chui

2022 has been an exciting yet terrifying year for the finance industry with rising interest rates, HMRC’s introduction of ‘Making Tax Digital’ (MTD) and the constant struggle against fraud and cyber-attacks.

Innovative technologies, such as Buy Now, Pay Later, open banking, cloud-native systems, AI and ML, have also been defining the sector and shaping the future. As we reach the end of this year, the question is, what next? 

Several factors are contributing to the economic uncertainty, including high inflation and concerns about energy supply, making the recessionary fog an almost certainty. Below, our selection of finance ‘meteorologist’ experts discuss their forecast for the industry in 2023, and whether there will be clear or stormy skies. 

Winds will carry PSD2 north up into Europe 

In 2018, we were presented with the revised Payment Services Directive 2 (PSD2) which aimed to align payment regulations with the market and technology’s current state, introducing security requirements for the initiation and processing of eletronic payments and the protection of consumer’s financial data.

Eyal Sivan, Head of Open Banking, Axway, argues that although Europe pioneered open banking with their PSD2 regulations, their efforts have been considered “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 afterward, 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.”

Automation and AI

Updated legislation isn’t the only change the finance industry has to contend with. The constant innovations of tax and accounting technology has been a force to be reckoned with in 2022 and strong winds will prevail in 2023. Further advancements will be essential, ensuring that processes are efficient as possible whilst lowering employees’ workloads. 

Hugh Scantlebury, CEO and Founder of Aqilla, explains, “automation, artificial intelligence, and machine learning within finance functions can help accounting teams considerably. They can do the heavy lifting, the time-consuming data entry tasks and the repetitive work that can fill up so much of the working day. They also remove much of the grind and monotony — freeing up the time of skilled professionals to add value to the business.”

Aqilla’s Scantlebury argues that whilst the finance sector is currently behind the curve in adopting these technologies, 2023 will be the year that ”businesses push and transform the industry once and for all.”

Tax flying sky high: From desktop to the cloud

Over the last three years, tax professionals have gone from being largely reliant on standalone desktop-based software solutions,  incapable of supporting collaborative working between departments, office locations or external organisations, using paper-based compliance processes, to slowly accepting a cloud-based approach. 

Covid-19 had a significant impact on this shift, with work-from-home restrictions leading many to embrace cloud-based accounting solutions so that they could work more efficiently from anywhere. In 2022, the Making Tax Digital (MTD) for VAT initiative propel this move to the cloud further, elevating tax processes and helping to ensure compliance.

Russell Gammon, Chief Solutions Officer at Tax Systems, elaborates, “technology is constantly improving and, therefore, the ways in which it can aid businesses is continuously increasing and diversifying. 2023 will be a defining year for the tax industry as departments plan to spend more on cloud technology as opposed to desktop technology for the very first time.”

Co-sourcing – you can’t have a perfect storm without both thunder and lightning

Technology will provide lightning-fast solutions for tax professionals in 2023, easing workloads and ensuring improved accuracy. However alone it won’t be enough to make the thundering change needed to weather the 2023 storm. Tax System’s Gammon argues that there also needs to be a change in processes and behaviour to get through the next year, especially with the recession causing the future to become “more uncertain and unclear”.

He continues: “This may well lead to businesses cutting their budgets, reducing the available funds for recruitment and training. With this in mind, we can expect to see a rise in the adoption of co-sourcing; allowing advisors to use a company’s technology to enable them to work together, rather than a full outsourcing service, which can be expensive. This provides businesses with the ability to work differently. Rather than the ‘us’ and ‘them’ mentality that often comes with outsourcing, it adopts a collaborative approach.”

This co-sourcing approach will be vital for those finance departments wishing to continue to be agile, especially with the current climate. However, those still planning on continuing their investment in recruitment will need to ensure that they continuously push to improve their businesses’ ESG strategy. 

ESG

Top Gen-Z talent are increasingly making career decisions depending on a company’s ESG-informed business practices and policies: 70% are more likely to work for a company with a strong green footprint, 86% prefer to work for companies that care about the same issues as they do and 30% have left a business due to its lack of corporate sustainability agenda. 

Andrew Doukanaris, Business Director Fintech Europe at Intellias, explains “ever-increasing environmental, social, and governance pressures will drive financial institutions, like most other large businesses, to introduce net zero policies. Faced with the very real threat of climate crisis and plastic pollution, emissions will be minimised and the use of plastic reduced. In 2023 consumers will be encouraged to replace traditional plastic cards with e-wallets and mobile contactless apps instead.”

Although younger generations are keen to embrace these types of changes, it will likely take a while for these to take place, with older generations slowing the process. Intellias’s Doukanaris contended that it will take around 10 years for plastic cards to be completely phased out but monetary notes will send a significant decline in circulation as early as 2023. 

Buy Now, Pay Later

Another monetary trend which has seen growing traction in 2023 is Buy Now, Pay Later. The adoption of this payment process has been widespread across retail and even the food industry, with ​​Martin Lewis criticising Deliveroo for allowing customers to buy now, and pay later for takeaways.

Intellias’ Doukanaris added: “Buy-Now-Pay-Later (BNPL) schemes have become a practically overnight sensation. And in 2023 they are set to continue their ascent. One recent study, conducted in 2021, found the market is set to reach a value of $3.98 trillion by 2030. That’s a huge increase from only $90.69 billion in 2020. And Gen Z’s use of such services grew six-fold in 2021 so it is likely that it will inform consumer behaviour far into the future.”

Clear skies for open payment systems in transport

In contrast, in the transport industry, pay-per-use will become even more relevant in 2023 as the fog clears on open payment systems. 

Galen Chui, SVP of engineering and products at Cubic Transportation Systems, notes: “The dream pipe of Netflix-like subscriptions will leave space for forward-thinking yet sustainable mobility business rules and call for more real-time data and transaction processing. 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.”

“In 2023, we will notice a continued shift to open payment systems,” he adds. “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.”

Ensure you are prepared for the new climate of 2023

Ensuring your processes are reviewed and technology updated will be essential for your finance teams’ agility in the year ahead. Tax System’s Gammon concludes that while behavioural change is massive in light of the upcoming climate, “ultimately 2023 will be a year of digital revolution expected to drive and change processes, with data underpinning it all”. 

Get your umbrella ready, there’s going to be a huge storm for finance professionals ahead.