From 1st to 4th November, I attended the Web Summit Conference in Lisbon with some of my BJSS colleagues. This was a hugely well-attended cross-industry event, with over 71,000 attendees and 1,050 speakers speaking across 17 stages.

My colleagues and I joined as part of the Women In Tech initiative, showing Web Summit’s commitment to change the gender ratio at their events and empowering women in the tech community through networking, mentoring, and representation on their stages. Female representation at this year’s event was 42%, beating the 40% target and up from last year.

Here are some of the key themes that I took away from the discussions I attended at the MoneyConf track of the forum, focusing on financial service-related technology trends:

1. Despite global crises putting pressure on the macroeconomic environment and challenging investment on new ventures, the longer-term outlook is bullish.
2. Collaboration is key to innovation – no one company or organisation can move the dial on large-scale global challenges such as climate change alone.
3. Privacy, security and control for users over their own data is a growing focus. Regulation is key to ensuring protection for both consumers and producers. Getting this right is crucial to avoid stifling innovation.

Investment trends through global crises/pressures

The world of tech innovation is by no means immune to the effects of conflict in Ukraine, the aftermath of the Covid pandemic, or the pressures of climate change.

We are at a time of extraordinary macroeconomic and geopolitical pressures on investment in tech innovation, from supply chain issues, rising energy costs, and increased costs of borrowing. This is reflected in a tightening on investment, increased competition for venture capital, and a delaying of IPOs.

Yet, despite the gloom around the plunge in digital asset prices (the so-called ‘crypto winter’), there is a prevailing positive outlook for the longer term. There are opportunities within the current environment that were called out.

The thinning out of the weaker players or propositions is seen as a time of strengthening in the market as the more robust, stable offerings remain. Solutions that have been ‘battle-tested’ and shown to be more resilient have edged out those with less long-term outlooks. Linked to this is a general consensus that consolidation is very likely, for example, across the fintech space, as more institutional investors or larger more established fintechs buy up smaller brands.

Whilst it may be harder to obtain funding as the price of credit rises, this means also a thinning in competition for funding as the ‘age of easy money’ is gone. Speakers also noted that whilst there was a trend to invest smaller amounts, the spread of this investment seems to be widening across different groups, hinting towards more diversity in the types of tech innovation being supported. Alongside this, the volume of user activity has remained high even if individual transaction amounts may have gone down (for example, a broader range of users exploring fintech retail investment platforms). The rise in interest rates presents a global challenge, although also opens areas of opportunity, such as the ability to leverage T-Bill or Treasury yields in financial portfolios or offerings to customers.

Collaboration and partnerships is crucial to unlocking innovation

There was broad recognition that the tech innovation space is an ecosystem where firms are evolving their strategies on how to position themselves across a landscape that sees incumbent, long-established players competing alongside newer challengers. On market-wide or cross-border issues, there is a continued trend towards collectively looking to solve big challenges through innovative technology.

The momentum continues towards a more open model where data is made more widely available and solutions are built to be interoperable to solve end-to-end user needs. This is evident in the strides made in the Open Banking space, particularly in the UK and Europe. The trend in market consolidation in the fintech space also signals more partnerships or acquisitions to come.

Another area where collaboration is key is in addressing large, global, common problems such as climate change. As businesses look to meet their net-zero targets, there is a growing shift towards working with ‘competi-partners’ – embracing collaboration with those who you might usually be in competition with. Technology is seen as the best lever for sustainability, from more efficient power usage, to measuring supply chain impacts, to exploring the use of AI to gain insights from data across industries to identify target areas for change. Digitisation is seen as an enabler for scaling decarbonisation efforts. One of the first steps here is to ensure that the sourcing, collating, and reporting of ESG data becomes more standardised and robust – an example of a problem that can be solved collaboratively toward mutual ends.

Privacy, regulation and control

As Elon Musk’s recent acquisition of Twitter has shown, the topic of Big Tech having undue control or influence that straddles geographies is a hot topic. Many of the talks explored how business models need to change to ensure users have more control and ownership of their own data, which will require changes to business models that we’ve seen become dominant through the social media age. Rather than assuming that giving up one’s data freely in exchange for free services will prevail as the norm, many are exploring ways to protect user identity and give transparency over how their data is used.

Whilst the blockchain is not a new concept, the growth in adoption of decentralised ledger technology (DLT), where transactions are recorded across a network rather than on a central data store owned by a single company or government, continues to gather pace. Despite the ‘crypto winter’, there is increasing investment at the enterprise and institutional level in blockchain-based technology (such as custodian services for digital assets or experiments in central bank digital currencies).

Interestingly, there was broad consensus that regulation is a must to ensure protection for both those consuming products and those building them. The current challenge is how to balance driving innovation (which is seen to provide more choice and lower cost to the consumer) with ensuring integrity and fairness.

There are varying degrees of maturity in regulatory approaches, with Europe and Asia seen as more progressive regions for encouraging innovation. For example, the joint European Markets in Crypto-assets Regulation (MiCA) proposal is seen as market-leading in laying out clarity on the proposed approach. The Monetary Authority of Singapore’s recent consultation papers on protecting consumers as part of the Payment Services Act was also called out as similarly helpful. The US’s stance, on the other hand, was seen as less clear, which was seen as hampering growth. Whatever the region, regulatory development remains a key watch area for fintech.

One trend that was clear was a move towards more proactive engagement of regulators with innovators and disrupters. The movement is towards regulators working to understand newer models rather than restricting or banning.

Whilst it was acknowledged that there tended to be a generational gap between regulators and innovators which can lead to lack of understanding, the flow of top talent from more traditional financial institutions to strengthen regulatory capabilities in start-up and scale-ups was pointed to as a sign of growing commoditisation in the fintech and digital asset space.

While it is tempting to disregard the hype around NFTs, exploration into the use of non-fungible tokens to represent assets which have a particular value for a particular purpose is increasing despite market headwinds. There is also an increase in more enterprise or institutional level applications of this technology. Examples include supply chain traceability, providing access to fractionalised real estate investment, and IP and patents, to name a few.

The nagging question of providing sovereign, secure identity that is interoperable across different platforms remains a key area of focus in the decentralised space.

What are the key trends for 2023?

• Consolidation as stronger players or incumbents snap up smaller propositions
• Reduction in investment capital but more targeted allocation
• Steady and more sustainable growth (lower amounts invested in assets but wider range of assets and users)
• Continued adoption of new tech (e.g. decentralised technology, the metaverse)
• Hyper-personalisation of customer offerings (shopping to investing to money management)

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