The year 2024 is poised to be a transformative period for the finance industry. What are some of the key finance trends that are expected in 2024?
“The financial industry has come a long way after a series of crises and technological changes that transformed both the operational landscape and the regulatory framework. Perhaps one of the biggest achievements in European integration after the creation of the monetary union, has been in the banking sector. Banks, especially systemic, are now stronger in terms of their capital ratios, liquidity positions and overall balance sheet health.
“However, banks’ operating environment is changing. We are facing a new and highly complex geopolitical environment, and we are dealing with strong and persistent inflationary pressures. Monetary conditions have tightened significantly. Banks are facing new risks related with new technologies such as artificial intelligence, climate and cyber risks and will have to upgrade their understanding and competence in dealing with them.
“In this fast-changing landscape, the focus will be on resilience. Banks will continue to invest in technology and digitisation. This may come at a cost in the short-term, but it entails significant cost efficiencies, and will eventually have a positive effect on banks’ price-to-book value over the long term.”
With growing concerns over climate change and social responsibility, sustainable investing will continue to gain momentum in 2024 and beyond. What environmental social and governance (ESG) factors will financial institutions incorporate into their investment strategies, emphasising long-term value creation and risk management?
“Sustainable investment procedures take to account ESG matters when making investment decisions. Investors may have various objectives in terms of sustainable investing. Some focus exclusively on financial returns and consider ESG matters that could impact these. Others aim to generate financial returns and to achieve positive outcomes for people and the planet, while avoiding negative ones.
“Bank of Cyprus explicitly and systematically takes into account ESG ratings in its investment analysis and decision-making process. Currently, we are in the process to establish a procedure to assess, review and consider ESG matters in its existing investment practises. The Bank is expected to screen issuers and sectors based on the Climate related and Environmental Risk appetite and ESG ratings to decide whether to consider them for investment. Furthermore, the Bank of Cyprus is in the process of estimating the Financed Scope 3 GHG emissions associated with Investment portfolios and develop an investment strategy to align its investment portfolio with the commitment to become Net Zero by 2050.”
How will the expansion of digital financial services drive financial inclusion in underserved regions?
“The expansion of digital financial services has the potential to significantly enhance financial inclusion in underserved regions by addressing many of the traditional barriers. This can be achieved by:
Increased Accessibility: Digital financial services, such as mobile banking and wallets, can be accessed by a customer anywhere, anytime, making financial services available to a wider population.
Lower Costs: Digital transactions have lower or even zero cost compared to traditional banking services, such as in-person visits to a bank branch. Lower transaction costs can incentivise more people to engage with financial services.
Financial Literacy: Digital platforms can provide educational resources and tools to help users understand financial concepts and make informed decisions. Bank of Cyprus’ MoneyFit tool is a great example of capabilities that can empower individuals to manage their finances more effectively.
Small daily banking transactions: Digital platforms allow for smaller, more flexible transactions, making it easier for people to transfer money (QuickPay), to save (QuickAccount), and access credit (QuickLoans).”
What other trends will drive innovation and reshape traditional finance in 2024?
“The Republic of Cyprus has launched an initiative to establish a national eID scheme and electronic signature solution, known as eIDs. This initiative aims to streamline and secure digital identities for citizens, facilitating easy and safe access to public services and transactions.
“In response to the global shift to remote work and digital interactions hastened by the Covid-19 pandemic, there has been a significant acceleration in the adoption of digital banking and online financial services. As a result, banks will continue developing new and innovative digital products and services to meet the changing needs and behaviors of their customers with the Bank of Cyprus spearheading this effort.
“Sustainability and Environmental, Social, and Governance (ESG) considerations are becoming paramount in the realm of finance. Looking ahead to 2024, the finance industry is anticipated to introduce more financial products that support sustainable development and meet ESG criteria, reflecting a growing trend of socially responsible investing.”
How will financial institutions create a more inclusive, transparent, and sustainable financial ecosystem that empowers individuals, businesses, and economies worldwide in 2024?
“The Bank of Cyprus already plays a pivotal role in creating a more transparent, inclusive, and sustainable financial ecosystem, in alignment with the evolving landscape of societal expectations and technological advancements.
“Bank of Cyprus is playing a leading role in the wider efforts to digitise and technologically upgrade the Cypriot economy and entrepreneurship. The bank has also introduced a Digital Economy Platform (Jinius) to optimise processes within the economy, bringing stakeholders together, and connecting businesses with each other and with potential customers.
“In addition, the Bank is in the process to become more customer centric and inclusive with a targeted transformation programme, with the goal of facilitating the shift to a more modern way of conducting banking business, enhancing the digitisation of services provided to our clients, as well as the digitisation of our internal operations.
“The Bank is committed to lead by example, by minimising its environmental footprint and advancing the green economy. The Bank is committed to reduce GHG emissions from own operations by 42 per cent by 2030 and become net zero by 2050. The Bank is in the process to set decarbonisation targets in its lending portfolio which will effectively drive the new lending strategy of the Bank in the future and support the development of a sustainable ecosystem.
“The Bank is also in the process of establishing ESG questionnaires in the loan origination process, which will effectively score the customers based on their performance against ESG criteria and matters. The ESG score will eventually be reflected in the fundamental elements of creditworthiness and potentially impact loan pricing. The ESG scoring process of customers is expected to be a driving force for a more transparent, inclusive, and sustainable ecosystem.
“The Bank aims to increase lending in renewable energy projects and is in the process of setting lending targets on environmentally friendly products to help drive the green transition of Cyprus.”
Is customer-centricity a strategic necessity or challenge for financial institutions in 2024? Please elaborate.
“Over the last few years, we have come to be continually bombarded with various terminologies around how customers feel, how satisfied they are, what was their experience and how loyal they are. It’s easy to get caught up with all the lingo that has been amplified with the rise in the usage of digital channels and eventually lose sight on what organisations have strived to accomplish for years, which is: High Satisfaction leads to Higher Loyalty, which ultimately leads to a Higher Bottom Line.
“When asked to define Customer Centricity, ChatGPT states: “customer centricity refers to a business approach that focuses on meeting and exceeding the needs and expectations of customers.” It goes on to say: “customer centric organisations prioritise customer satisfaction and loyalty by understanding their preferences, gathering feedback, and continuously improving the customer experience.”
“But haven’t we been doing this for years? The answer is yes but there is now a greater challenge but also a greater opportunity. The challenge is the increased number of channels and the opportunity comes with better data analytics. Organisations who prioritise gathering feedback, combined with other data can build a competitive advantage by improving their service/delivery model, improving campaign outcomes, and enriching their product portfolio with better features.”
In your opinion, what are the local and global economic prospects for 2024?
“The IMF released its October World Economic Outlook and expects global economic growth in 2024 to be roughly unchanged from the previous year at near 3 per cent. In the EU, growth will accelerate from 0.7 per cent to 1.5 per cent in 2024. Inflation is slowing and will be near 2 per cent by 2025.For Cyprus the IMF predicts growth of 2.2 per cent this year and 2.7 per cent in 2024 with inflation falling to 2.4 per cent.
“There are of course downside risks that emanate from current geopolitical tensions. The war between Israel and Hamas constitutes a new threat, at a time of continuing war in Europe over Ukraine and persistent tensions between China and the United States. If the war in the Middle East escalates, there is danger of oil prices rising higher than expected and this will slow economic activity.”
The Bank of Cyprus Group is the leading banking and financial services group in Cyprus, providing a wide range of financial products and services which include retail and commercial banking, finance, factoring, investment banking, brokerage, fund management, private banking, life, and general insurance. On September 30, 2023, the Bank of Cyprus Group operated through a total of 64 branches in Cyprus, of which 4 operated as cash offices. The Bank of Cyprus Group employs 2,913 staff worldwide. As of September 30, 2023, the Group’s Total Assets amounted to €26.4 billion, and Total Equity was €2.4 billion. The Bank of Cyprus Group comprises Bank of Cyprus Holdings Public Limited Company, its subsidiary Bank of Cyprus Public Company Limited, and its subsidiaries.