The financial industry is Manchester’s biggest – the city accounts for 7% of all UK financial services output and one in ten people working in the British financial sector will work in Manchester, whether that’s in banking, finance or insurance.
The finance sector in Manchester is the third largest in the UK, but as the whole country prepares for challenges relating to Brexit, as well as coping with economic turbulence, which problems will be a tick on the side of Manchester’s finance industry?
Fintech’s Potential Doom
Fintech is an exciting new branch of financial services, marked by unicorn giants including Revolut and Monzo. However, economic issues that have been caused by lockdowns and so on are set to produce fintech-specific challenges. A possibly existential challenge will come if the central bank moves to a negative interest rate, as has been discussed as being a distinct possibility. This will cause companies such as Monzo to burn money, having to lay off many staff as their unique value proposition (low-cost, easy banking) is destroyed by elements outside of their control.
Hacking and Data Breaches
Financial companies are massive targets for cybercriminals because of the extremely valuable data they have nestled away. It’s for this reason that financial service firms are hit over 30,000% more than the average business. Threats such as phishing emails have increased massively over the past year, and though there will probably be a stagnation of threat growth, these huge levels are unlikely to change any time soon; visit this website to find out more about phishing. As long as financial institutions hold valuable data, they will have to constantly ward off cyberattacks.
Regulatory Issues
Regulations are set to get even stricter by 2021, with challenges rising for many different reasons, including:
- Geopolitical change
- Different regulations for different locations (e.g. UK and the EU post-Brexit)
- Data protection laws
- Capital shifts
- Ethical conduct
With many different regulatory challenges in many different areas, Manchester’s financial lawyers are guaranteed to face an increase in business.
Even Fiercer Competition
In some ways, economic crises are good for strong banks as they can kill the competition – just look at Lehman Brothers in 2008 and possibly Monzo in the near future if the central bank interest rate turns negative. That being said, however, economic crises tend to be breeding grounds for future unicorns and the fintech industry’s growth is only just beginning. Established players will have to invest heavily into driving innovation in order to maintain their foothold.
Keeping Up with AI
A report by Deloitte has found that the front runners in the financial sector tend to be better at making use of AI. It might cost a bit to integrate artificial intelligence into a business (in fact, 45% of front runners are investing at least $5 million (£3.8 million) into AI), but it looks like it will be essential for financial services to even compete in the near future. With late adopters being 12 times less likely to recognise the importance of AI, the failure to adopt this relatively new and ground-breaking tool will lead to severe difficulties competing later down the line.
