The fintech industry is poised for significant advancements in 2024 that are expected to revolutionise how businesses and consumers manage their finances. Experts predict that open banking will enable faster, more convenient, and highly secure payment processes in the upcoming year. However, stricter regulations will also be necessary to protect consumer data and promote fair market competition.
To meet the increasing demands of users, fintech innovations in 2024 will prioritise improving accessibility, transparency, and democratisation of financial services. Key trends to watch include further integration of artificial intelligence and machine learning to extract insights from financial data, a rise in decentralised finance (DeFi) and blockchain technology to decentralise global financial markets, and an enhanced use of biometric authentication to boost security. As these new technologies emerge, the transition of financial services to fintech will become increasingly embedded across business operations, which will present new challenges for CFOs of companies both large and small.
As these innovations emerge to streamline financial processes and provide greater insights, CFOs must adapt to stay competitive. “The global high-interest rate environment and various geopolitical tensions are directly correlated to the accounting volatility my company smooths for our clients,” says Kevin Mitchell, Managing Director of Hedge Effective Advisory, a specialist hedge accounting advisory firm based in Sydney. “Many CFOs have highly volatile derivative positions negatively distorting their reporting financial performance with unwanted consequences.”
Mitchell highlights the increasing complexity that CFOs face today in managing financial risk across global markets. New fintech solutions are needed to help provide stability amidst the turbulence.
Fintech has substantially evolved over the past decade, with solutions moving beyond core banking and payments into more sophisticated areas like data analytics, financial planning, and regtech. The COVID-19 pandemic also accelerated digitisation, as virtual collaboration and remote work highlighted the need for digital tools and online processes.
“Instead of hiring accountants internally and buying expensive systems to support them, we can provide expert outsourced solutions that over-deliver at a fraction of the cost,” says Mitchell. As a specialist provider in hedge accounting services, his firm fills a critical niche for companies seeking to smooth earnings volatility from hedging activities.
The outsourcing trend has enabled greater innovation and customisation of fintech across different functions of the finance organisation. CFOs can now tap into cutting-edge capabilities that may have been too expensive or complex to build internally.
While new technologies provide solutions, they also pose new management challenges. CFOs are key in assessing how to leverage fintech innovation best to create value.
As the chief stewards of data, CFOs must determine how to integrate new innovations with legacy accounting systems. With data analytics now embedded across organisations, improving data quality and financial controls is also paramount.
CFOs additionally serve as strategic advisors, identifying how new technologies can impact business models, processes, and opportunities. They must balance day-to-day responsibilities while also staying abreast of emerging fintech developments that may yield competitive advantages.
While exciting, the rapid pace of fintech advancement also raises some concerns. Cybersecurity threats are growing more sophisticated. Disruptive technologies like blockchain and cryptocurrencies remain unregulated. Tools leveraging artificial intelligence and machine learning also suffer from issues like bias and transparency.
There are also talent gap challenges. As routine reporting and analytical tasks become more automated, finance teams will need personnel skilled in areas like data science and analytics. However, competition is fierce for these scarce specialists.
As fintech aimed at CFOs proliferates, niche solutions are emerging to streamline complex financial processes. Mitchell’s firm, Hedge Effective Advisory, is launching a new platform called Hedgehog to simplify hedge accounting for clients. With development complete and launch slated for early 2024, Hedgehog will integrate directly with clients’ existing treasury data to smooth earnings volatility from hedging activities. “CFOs are getting used to utilising different apps and having a tech stack that supports their finance teams,” Mitchell states. “Hedgehog is our next step in providing targeted solutions to eliminate accounting headaches for our clients.”
The Hedgehog platform is designed as a white-glove service offering due to the advisory-level support at hand. This Done-For-You bureau service means clients’ don’t require any hedge accounting experience to use the system, sidestepping the risks of using traditional SaaS systems in this niche and complex area of accounting. Hedgehog will provide transparent, automated, hedge accounting treatment and reporting. Mitchell sees it as a natural extension of his advisory services as clients increasingly seek specialised fintech tools. “We remove hundreds of millions of unwanted profit or loss volatility from our clients’ reported results by obtaining preferential hedging accounting treatment,” he notes. “We do this for approximately 10% of the costs if you build that capability internally.” Hedgehog aims to further improve this value proposition through technology with improved user experience and metric reporting. “Through speaking to our clients we can incorporate their needs directly into our product roadmap.”
Though uncertainties exist, the promise of enhanced efficiency, insights, and innovation keeps fintech moving rapidly ahead. CFOs play an integral role in harnessing this potential to create value while also managing any emerging risks. By combining stewardship responsibilities with strategic vision, CFOs can guide their organisations to capitalise on the evolving fintech landscape.
Hedge Effective Advisory Pty Ltd specialises in providing expert guidance on Hedge Accounting to ensure regulatory and financial compliance. With a unique approach, the HEDGEHOG Method, and extensive advisory experience, they offer comprehensive services to manage financial derivatives and mitigate risks, aiming to reduce earnings volatility and ensure optimal reported results for businesses. Based in Sydney, they are committed to helping clients navigate the complexities of hedge accounting effectively.
