Having looked back at some of the big tech dramas of 2022, our EMEA Associate Bill Mew offers a few predictions for the year ahead.
As I outlined in my last blog, 2022 was a particularly volatile year for business and technology, exemplified by the Twitter and crypto sagas. The consequences of the crypto one in particular will be played out in court houses for some time to come, but they are already apparent in changing market attitudes.
What lays ahead in 2023
In 2023 we will see:
- An end to frothy valuations and a return to viable business models
- Ventures in areas like fintech or cloud computing which were once seen as guaranteed growth markets, will be reviewed with greater skepticism.
- Budgets and headcount that have been tight in many other sectors for some time have now become restrained across the tech sector as well, and will remain so for some time.
- The large numbers of people being laid off by tech firms of all sizes will not as much mark the end of careers, as it will the availability of people with valuable skills that have been in short supply.
- A return to responsibility
- Once blockchain and the secure distributed ledger technology that underpinned everything from DeFi and Web3 to cryptocurrencies was seen as a form of magic that defied traditional accounting measures. No longer.
- Once also the freedom from the regulatory burdens that DeFi enjoyed was seen as an advantage. Again, no longer.
- While cost cutting will be common in many areas, those that underpin trust and responsibility will buck the trend (see the examples that follow).
What will this focus on trust and a return to responsibility look like in 2023, specifically in relation to tech:
Example 1: Cybersecurity
In light of the increase in cyber threats, firms will need to re-assess their risk appetite and in all likelihood increase their spend on cybersecurity while also ensuring that they are crisis prepared and ready to respond in the increasingly likely event of a cyber incident. The World Economic Forum has recently stated that ‘fire drills’ are key for cybersecurity.
Such drills not only help organisations be crisis ready, but can earn them a reduction in their cyber insurance premium as well as reduce any regulatory fines where they can show that they took such responsible measures. Prevention and detection to thwart attackers will need to go hand in hand with preparation to deal with them in the event that they do get through.
Example 2: Effective Content Moderation
The digital advertising market may now have vast scale, but it also needs to be more trustworthy and responsible. As the Twitter debacle has shown, advertisers will rapidly abandon any platform that cannot moderate its content effectively – no responsible brand wants its ads to be shown alongside extremist content. Whether or not Twitter survives (at least in its current form), there is no going back.
Example 3: Compliance Systems in DeFi
In the current environment of rampant fraud, increasing cyber threats, and governments putting a big focus on drying up terrorist financing, anti-money laundering (AML) and know your customer (KYC) compliance is becoming an even bigger focus for the financial services industry.
In a market that once prided itself on its lack of regulatory controls, the only viable way for DeFi to recover and regain any credibility will be to demonstrate not only that it has such controls in place, but that they are also robust, effective and efficient.
Not only is DeFi regulation certainly not an oxymoron – the two things are far from incompatible, but regulation is coming – whether players like it or not. This can either be done at an individual company level, with FinTechs like Social Finance (SoFi) seeking to operate as an online only bank that offers FDIC-insured checking accounts and credit card products.
Or innovators can grasp the opportunity to reinvent compliance, harnessing the latest technologies to make it more efficient than ever before. For example, idclear is seeking to act as a specialist, trusted utility which conducts AML checks across the entire sector – rather expecting firms to each bear the duplicative cost of such operations separately.
The future therefore looks a lot less like a wild ride with SBF (the now ruined founder of FTX who is facing criminal charges for fraud) and a lot more like a considerably safer one with MC, TP and others (Michael Cagney and Targ Patience the CEOs of SoFi and idclear).
Footnote: And as for the Metaverse …. In my earlier articles I predicted that despite all the investment, we would have to wait some time before it became a reality. We will have to wait a while longer yet.