The Tech Landscape in 2023: Key Trends to Watch

Many watching the news would know that three of the largest technology conglomerates in the world recently announced massive layoffs totaling more than 40,000 employees from Amazon, Microsoft and Google in January alone.

Amazon CEO Andy Jassy, Microsoft CEO Satya Nadella and Google CEO Sundar Pichai all blamed the massive layoffs on hiring too many people over the past several years as IT demand skyrocketed due to the COVID-19 pandemic, while citing a customer spending slowdown in the current market. “The reality is tech stalwarts over-hired at a pace that was unsustainable and now a darker macro is forcing these layoffs across the tech space,” he said. Pichai said that the cuts would “sharpen our focus” towards new priorities, pointing to the necessity of investing even more in artificial intelligence. Microsoft’s further investment into OpenAI speaks to this well.  

Here are some of the trends and insights that we have been keeping an eye on in our office’s as well as looking at the part we have to play in the changing environment:

Digital transformation: Financial institutions in South Africa are investing in digital technologies to improve customer experience, increase efficiency, and reduce costs. A key trend to watch for in financial services is a low-code or no-code approach to application development, which makes software development simpler for non tech professionals. Artificial intelligence (AI) has been able to enhance the ability for us to leverage a larger volume of data generated in everyday business activities, and the FinTech industry is no exception. The use of AI in FinTech can be used to optimise customer experiences, minimise risk and fraudulent transactions, and improve consumer credit decisions but it’s not without its growing pains. While some niche, industry specific AI models have been in place for decades, the financial services industry’s relentless drive for competitive advantage means that the product and data landscape is yet to hit a level of maturity where AI models can thrive. It is going to be very interesting to see how AI is introduced into the financial services industry responsibly.

Financial inclusion: There is a growing focus on financial inclusion initiatives in South Africa to help underserved populations access financial services. Financial products are often too expensive for less privileged individuals as well as lacking transparency and terms that are easily understood. This makes understanding the actual costs and risks of those products difficult. Technology such as artificial intelligence is the great enabler, helping the financial industry transform faster and in a more differentiated and democratising way allowing for overcoming or mitigating those shortcomings. Thus, AI can reduce financial service access disparities between the rich and the poor.

Compliance and regulation: Financial institutions in South Africa must comply with a range of regulations, including those related to data privacy, anti-money laundering, and counter-terrorist financing. Several new regulations are making their way into the fold, one of which is the The Anti-Money Laundering and Combating Terrorism Financing Amendment Act which saw its commencement on the 29th of December 2022.

Cybersecurity: The increase in cyber threats has led to a greater emphasis on cybersecurity measures for financial institutions to protect against potential attacks. One of the major ways AI has strengthened the financial industry is through improved fraud prevention. Fraud detection systems analyse a client’s behaviour, triggering a security mechanism when something seems different from their regular spending pattern. It is anticipated that the investment in cybersecurity will increase greatly this coming year as we see a continued growth in online transactions from both the retail and corporate segments of the market.

Fintech: The fintech industry is growing rapidly in South Africa, with new startups and companies entering the market and offering innovative solutions to traditional financial services.  While Africa is only a fraction of the world’s startup fundraising (1.2% in 2022) the silver lining is that Africa was the only region to record a positive YoY growth in start up funding in 2022 (+5% YoY)

With the majority of FinTechs serving the payments space, the launch of Payshap (South Africa’s first real-time, low value payments service) will certainly push the FinTechs into incorporating Payshap into their respective technology stacks. Payshap aims to address key goals set by the South African Reserve Banks’ Vision 2025. These are to reduce the dependency on cash and financial inclusion of the unbanked or underbanked. Initially consumers will be able to make or receive payments up to a maximum amount of R3000 either by using their account number or proxy (a unique identifier such as a cellphone number). Payshap will launch in March with Absa, Standard Bank, FNB and Nedbank after which additional banks will come on board later in 2023.

General economic instability brought on by high inflation and the forecast of recession in major economies is pushing banks to put a new focus on innovation as a means of improving returns. The prospects for overall revenue growth are receding in the medium term, so financial institutions are looking for savings from efficiency initiatives derived from advanced digital technology.