Having covered so many articles on 2024 predictions this week, I am struck by how nearly all of them are AI-focused. That was 2023 folks. 2024 will be far more about geopolitics, which is one of five megaforces identified by BlackRock in a major recent research report, as summarised by Satori News:
The world is at a pivotal juncture, with enormous forces at work that are set to redefine how we live, work, and interact within the global economy. BlackRock's recent research sheds light on these mega forces that will profoundly impact societies and markets alike. Here, we explore the nuances of these forces, their potential impact, and the implications for investors.
**Mega Force 1: AI - The Intelligence Revolution**
At the forefront of change is Artificial Intelligence (AI), which promises to drive a revolution in productivity and transform industries. AI's capacity for automating tasks, analyzing complex data, and fostering innovation is unparalleled. The evolution from OpenAI’s ChatGPT-1 to GPT-4 illustrates the rapid growth and complexity AI has reached, signaling profound changes ahead. The tech industry's focus is shifting heavily towards AI, with chipmakers enjoying a front-row seat. This revolution also spotlights the gravity of proprietary data, which can empower companies to craft distinctive models and exploit new prospects.
However, AI also invites challenges such as cybersecurity risks and generative AI reliability. The regulatory landscape is rapidly evolving, with governments striving to address ethical concerns and industry practices. Investors need to navigate this terrain meticulously, balancing the potential rewards against these emergent risks.
**Mega Force 2: The Future of Finance**
The financial arena is witnessing a sea change, affecting everything from consumer transactions to corporate borrowing and investments. One stark indicator is the contraction of deposits in US banks, forcing a shift towards more competitive deposit markets and yielding higher rates for consumers. Non-bank credit sources are flourishing, presenting a diverse swath of opportunities. The sector is caught in a whirlwind of technological innovation and regulatory adaptation—a transformative period likely to see the emergence of a more consolidated and resourceful banking system.
**Mega Force 3: Geopolitical Fragmentation**
The tapestry of globalisation is being redrawn as the world realigns into competitive blocs, with BlackRock's geopolitical risk framework highlighting several flashpoints. The ongoing US-China power struggle, disruptive cyberattacks, terror incidents, technology decoupling, Russia-NATO conflicts, and Middle Eastern tensions are some of the elements redrawing the world’s geopolitical map. These shifts underscore the necessity for investors to remain vigilant, factoring geopolitical stability into their strategic forecasts.
**Mega Force 4: Transition to a Low-Carbon Economy**
Climate change and environmental concerns are accelerating the transition to a low-carbon economy. This shift, led by policies, technological advancements, and consumer tastes, is propelling significant capital reallocations. Developed nations are assumed to transition more quickly than others. We're already seeing the rise in electric vehicle sales outpacing projections, indicative of broader trends. Investment portfolios that adjust timely could reap rewards from clean energy,
**Mega Force 5: Demographic Divergence**
Lastly, demographic shifts are redefining economic outputs and societal needs. Aging populations in developed nations contrast starkly with burgeoning younger demographics in emerging markets. The contrasts promise a blend of challenges and opportunities, particularly in healthcare, real estate, and lifestyle sectors that cater to diverse age groups.
The cumulative effect of these mega forces is significant, urging investors and policymakers to adopt a farsighted, nuanced approach. It's essential to critically evaluate trends to discern genuine opportunities from overhyped or transient phenomena. As investment landscapes evolve, sustainable profits will rely on recognising and preserving competitive advantages within industry barriers. The future beckons, marked by innovation and adaptation, and our response to these forces will shape the decades to come.
Bringing this back to what it means for banks and banking, Samlink published a nice update with their views, along with other top influencers, on the banking trends for 2024. These include, as summarised by Richard Turrin:
Business Model Innovation: Banks can no longer rely on traditional business models. The integration of advanced technologies, especially AI, is pivotal in transforming these models for increased efficiency and enhanced customer value.
Ecosystem Platforms: Ecosystem platforms create value by facilitating collaboration with partners sharing data insights, and capabilities, thus multiplying potential value and enhancing the ability to anticipate and meet client expectations.
Partnerships: Banks are aiming to modernize their outdated systems by integrating modern, cloud-native core providers and a network. Partners facilitate quicker market entry and better investment returns while minimizing risks and complexities.
Cost Management and Operational Efficiency: This is ongoing, but it’s different now in amid a digital skills gap and business model innovations.
Reimagining Business Architectures: In response to digitalization banks are shifting from traditional back-office-focused operations to more client-centric models, leveraging technologies like cloud, AI, and automation.
Emphasis on Digital Innovation and Customer Experience: Banks are intensively focusing on digital innovation and enhancing customer experience as key drivers of competitiveness and growth.
Finally, if you’re a leader of a company, here are the 50 books you should read this year, according to Thinkers360.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...