As the year comes to an end, in keeping with tradition, it's time to reflect on the predictions we made this time last year and to look at the key themes that will shape our industry in 2024 and beyond.
We hope you find the insights engaging and wish you a joyful and safe holiday season from everyone here at PEN.
A brief look back at 2023…
We did well on the predictions last year, which is great….but that puts the pressure on for this year! All our predictions hit the mark and we have provided a summary of this below:
- Macro-economic environment: We did not expect a deep recession or high unemployment, which is the case. The UK has not gone into recession and the unemployment rate is estimated to be 0.5 percentage points higher than last year.
- Market factors: Interest rates have remained higher than the historically low figures we have been used to.
- Housing Market: We expected a shaving on the value of people’s house prices, but not a significant level. Britain’s biggest mortgage lender forecasts a 5% drop over this year, which is clearly a decline but not significant.
- Customer movements: Whilst switching volumes have increased, customers have continued to collectively display a high degree of inertia.
- Big Bang 2.2 Proposals: We said that the reforms the government announced would have little impact on the sector in 2023. Large-scale structural changes often take time to manifest their full effects, and immediate impacts might be limited.
- Innovation spend and outsourcing: We saw innovation spend reduce to target cost saving, which included outsourcing non-core activities.
- Digital-first: Consumers continued to demand digitisation of services, and banks have definitely done the same with many of the big players significantly reducing their branch footprint.
- AI & Robotics: There has certainly been increased investment in robotics and AI, and trend that will no doubt continue.
- Regulating consumer tech: The move towards becoming a cashless society has continued as the volume of contactless payments has grown, along with talks of the Digital Pound. The FCA continued to monitor operational resilience in payments, retail services, and infrastructure, with ongoing concerns around Big Tech and AI, however, no significant new regulation has come in yet.
- Green products: The market for "green" products has grown, driven by more environmentally considerate behaviours.
- Consumer fairness: Consumer fairness has continued to drive change across financial services, with Consumer Duty being the main driver behind this. Through our conversations and work with clients all have found it a struggle to improve consumer fairness alongside delivering other change projects, regulatory change requirements, and ongoing additional Consumer Duty guidance being shared by the FCA.