This time it’s different.

Typically, macroeconomic predictions are prefaced with a caveat: “This time is different; uncertainty looms large, but we’ll do our best…”. However, 2024 is different!
From the macroeconomic perspective, uncertainty is as low as it can be. It doesn’t mean all is well, but it does tell us we know more about how to guide ourselves through the next 12- 24 months. Most importantly, we know the macro winds that blow into the fintech spinnaker.

Inflation: Inflation tends to decrease at a slower pace than it rises. In the current scenario, the slowdown in inflation is compounded by the effects of de-globalization, which re-engineers new bottlenecks in supply chains. Consequently, the decline in inflation is expected to be gradual. While inflation is indeed decreasing, by the end of 2024, it is projected to remain above pre-COVID levels.

Interest rates: Interest rates in the US and Europe are expected to decrease, but not as rapidly as many hoped. This is primarily due to two key factors:(1) The legacy of Paul Volcker, famously known as “The Terminator” for his role in combatting inflation, serves as a cautionary tale. Despite his success, Volcker’s decision to lower rates too swiftly in 1980, only to sharply increase them in 1981, highlights the risks of abrupt adjustments. The Federal Reserve (FED), mindful of this history, opts for a cautious approach, preferring gradual changes to prevent market destabilization. (2) The deceleration of inflation is anticipated to be gradual, influenced by the complexities of de-globalization. As economic supply chains are restructured, inflation’s descent is further prolonged, impacting the pace at which interest rates can be adjusted.

Technology: Technology brings promising developments through the latest wave of innovation, driven by new developments in AI. Technologies such as LLM, generative models, and integrative systems are all becoming increasingly ingrained into our daily lives. Critically, these technological advancements do not currently pose negative implications for employment; instead, they stimulate further growth and productivity.

As a relatively young industry, Fintech faces challenges stemming from new technologies and persistently higher interest rates where increased operational costs due to inflation and de-globalization present both a challenge and an opportunity for those quickest to adapt.