Unleashing Potential : A Strategic Blueprint for Financial Services Leaders

  • Nick Paulussen
  • Published: 29 April 2024

Bold and decisive actions are essential to uncover opportunity in an uncertain world; waiting for clarity will hand the opportunity to your competition and has never been an effective strategy. "Success is not final, failure is not fatal: It is the courage to continue that counts."1

In Ovid’s Metamorphoses, the inventor Daedalus and his son Icarus are held captive in a high tower by King Minos to prevent them from revealing the secrets of the Knossos labyrinth and the Minotaur imprisoned within. Every day Daedalus ponders their escape, and how they might conceive the inconceivable to break free.

Whilst this paper is not suggesting that the global financial services ecosystem is hiding a Minotaur, bear with the story and the relevance of this ancient Greek myth as an analogy to substantiate actions required in the current climate.

As central banks navigate the delicate balance of managing inflation – and a potential disruptive second wave – and economic growth, there are three potential outcomes from this economic balancing act: soft landing, hard landing or no landing. There is now a degree of clarity regarding the direction of interest rates, albeit there is still some uncertainty about the exact timing and pace of changes. This environment suggests action. Adopting a forward-thinking approach, focusing on innovation, and seizing the opportunity to make strategic investments early will create significant competitive advantage.

Is there such a thing as market consensus thinking in 2024?

The market entered 2023 anticipating an imminent recession but the markets defied the consensus and recorded growth across all major jurisdictions, notwithstanding growth challenges in the UK which recorded contraction of 0.4% of GDP in Q4 2023. The Eurozone economy grew by 0.5% and the US economy by 2.5% in 2023, above the 10-year trend of 2.3%.

Since the start of this year, the industry mindset has firmly shifted from a focus on tackling the highest levels of inflation since the 1980s and avoiding recession in 2023/2024 – the so-called hard landing – to anticipating imminent rate cuts and a strong belief in the possibility of a goldilocks scenario of avoiding recession and returning inflation to 2% target – in a soft landing

While central banks navigate the delicate balance of managing inflation and economic growth, all three ‘landing’ scenarios remain on the table with no consensus on which one it will be.

Andrew Bailey, Governor of the Bank of England told the FT after the March Monetary Policy Committee (MPC): “In recent weeks we’ve seen further encouraging signs that inflation is coming down. We’re not yet at the point where we can cut interest rates, but things are moving in the right direction.” 

The March Federal Open Market Committee (FOMC) press release reflected a similar sentiment: “The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance.”3

However, despite the dovish tones in the FOMC meeting, a third scenario has now gained traction; Central banks will not cut rates in 2024.4 In other words, there will not be a landing at all this year. According to a Chicago Booth poll amongst economists, 15% now believe it is likely that the first Fed rate cut will arrive in 2025 or later.5

Similarly, members of the Bank of England MPC, including Jonathan Haskel and Federal Reserve Officials, such as Christopher Waller have all indicated in recent weeks that rate cuts should be “a long way off” and that there is “no rush” to cut rates, supporting the notion of no rate cuts in 2024, and no landing.6, 7

Therefore, while central banks navigate the delicate balance of managing inflation (and the potential disruptive second wave) and economic growth, all three ‘landing’ scenarios (soft landing, hard landing, and no landing) remain on the table with no consensus on which one it will be.

Engineering a Soft Landing 

Daedalus famously cautioned Icarus about flying too close to the sun or the sea. Consider, however, a version of the myth of Icarus that speaks not of hubris and (fatal) over-confidence, but instead of finding the right landing path.

Rather than ignoring his father’s advice and perishing, in this revised telling Icarus instead obeys Daedalus and flies mid-way between sea and sun: not too low, where the sea spray might weigh down his wings, nor too high where the sun’s rays might melt them.

The target for central bankers across the US, UK and Europe is to achieve a soft landing in 2024, whereby inflation continues its decline and achieves its target of 2% without pushing the economy into recession.

If we are to experience the anticipated outcome of a soft landing in 2024, we need to achieve a balancing act between inflationary pressures (avoiding the ‘rays’ of high inflation), economic growth and unemployment (avoiding the sea spray of recession). 

In this scenario, inflation continues its downward trend, or central bankers accept inflation stickiness between 2% and 3% allowing central banks to start cutting interest rates by the summer of 2024, but do so gradually to avoid reigniting inflationary pressures. At the same time, central banks will continue to reduce their balance sheets at a pace that does not shock the markets, in an attempt at controlled liquidity reduction in the economy and thus avoiding a surge in inflation.

Figure 1: US, UK, and Eurozone Inflation Trajectory (Source: Bureau of Economic Analysis, Bank of England, Eurostat)

Reduced borrowing costs will allow pressures to ease on consumers (e.g. credit cards, mortgage rates, and house prices), business (e.g. debt servicing and re-financing, reduced customer demand, and investment viability) and governments (e.g. borrowing costs and related fiscal policy).

A soft landing will boost market and consumer confidence as well as bring a return of predictable policies and manageable borrowing costs (albeit not a return to near zero), allowing businesses to invest and set the foundation for sustainable economic expansion in a new growth cycle.

Avoiding A Hard Landing 

Reverting back to the original telling of the myth, there are a number of reasons why Icarus might fly too close to the sun and melt the beeswax in his wings (sticky inflation or a second wave) or fly too low to the sea such that the waves to take him down (recession).

The dreaded hard landing, whereby the lagged impact of monetary tightening and/or a delayed start of monetary easing causes recession – the much-debated Phillips Curve says that to get inflation down, unemployment must rise.8

The supply chain challenges driven by pandemic-era demand fueled by (excessive) stimulus are passed, and the soaring energy and food prices following Russia’s invasion of Ukraine are moderating. The situation in the Middle East including interference to shipping routes through the Red Sea or increased US-China tension doesn’t change the trajectory of goods prices. For example, the UK CPIH all goods index rose by 1.1% in the 12 months to February 2024, down from 1.8% in January, and the lowest rate since March 2021.

On the other hand, services inflation, which is domestically generated inflation,  remains uncomfortably above target (US: 5.0%, UK: 6.1%, EUR: 4.0%) primarily driven by rapid wage growth, and headline inflation reduction is slowing in 2024 (US: -0.2pp, UK: -0.5pp, EUR: -0.4pp) or even increasing on a 3-month (US & UK: +2.8pp, EUR: +3.9pp) or 6-months (US: +0.5pp, UK +0.7pp) annualized average.10, 11   

The dovish turn (or the markets interpretation thereof) that the Federal Reserve, Bank of England (BoE), and the European Central Bank (ECB) took at the end of 2023, as well as the large deficits advanced economies are running, has created significantly easier financial conditions and tailwinds for consumer spending and financial markets and therefore could keep inflation at above target levels for longer.

This will force the hand of central bankers to delay a return to neutral rates whereby there is no restriction nor stimulus to the economy, and it does not come for free.  Pressures will continue to build in the financial system, commercial real estate, and regional banks in particular, and increase the risk of rapid deterioration of the economic environment and therefore future rate cuts will prove too little too late.

Jacob Peter Gowy (c 1615-1661), The Fall of Icarus (1635-7), oil on canvas, 195 x 180 cm, Museo del Prado, Madrid

Potential For No Landing

In a further revision of the myth, Icarus and Daedalus avoid the dangers of the sun’s rays (high inflation) and contrived instead to quite comfortably ride the waves in a ship (continued economic growth).12

2024 might not see a landing at all. Central banks might not be able to cut interest rates at all this year. 

There has been much excitement and much debate about the potential productivity gains generative AI can bring. Largely on the back of this excitement the S&P500 has reached new heights notching up more than 10% this year alone, The Nikkei topped 40,000 for the first time in March, after it had already eclipsed its 1989 high of the Japanese Asset Price Bubble.  The Euro Stoxx 500 has also increased more than 12% this year, with investors pinning their hopes on an AI boom.

If significant productivity gains effectively come to bear, economic growth will no longer be restricted as the economy would be able to produce more goods and services at a lower cost per labor unit, therefore reducing inflationary pressures without having to compromise on unemployment as the Phillips Curve dictates.

Of course, in this scenario, there is always the risk that Icarus and Daedalus escape only for their ship to overturn.

Admittedly this ‘No Landing’ scenario is less likely in the UK and Europe where low productivity growth underpins persistent sluggish growth and stronger disinflation momentum will likely force (or allow) the BoE and the ECB to cut rates this year. European inflation is tantalizingly close to target at 2.4% and UK headline inflation stands at 3.4% with a forecast to hit 2% in the second quarter of 2024.13

Fed Chair Jerome Powell on the other hand said about recent US data: “Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”14

Five decisions that will determine tomorrow’s winners

Our current forecast is that BoE and ECB will start cutting rates gradually this summer on their path to a soft landing, while the FOMC will (must) push cuts to very late into 2024 or even into 2025. This means that monetary policy is likely to diverge and provide a boost for the dollar, therefore creating downward pressure on inflation by lowering the cost of imported goods but making US exports more expensive creating a drag on growth, potentially opening the door to growth stimulating rate cuts.

Rather than debate the impact or likelihood of these three scenarios across the various markets, it is important to note that there is now a degree of clarity regarding the direction of interest rates albeit there is still some uncertainty about the exact timing and pace of changes. 

The possibility, timing and impact of rate cuts should not be underestimated but it should also no longer drive business decision making or the lack thereof. We have entered a new era of higher neutral rates and although low productivity growth is still weighing the neutral rate down, higher investment to tackle climate change, increased defense spending, tension and protectionist tendencies in the global trading system, and higher government debt are pushing the neutral rate up.15, 16 Therefore, a higher neutral rate of interest means the way down for policy rates is less steep.

This environment suggests action – in terms of prioritizing strategies that can adapt to shifts in monetary policy and the broader economic landscape – however cautious the approach to investment.

As emphasized at the beginning of this document, adopting a stance of inaction has historically not served as an effective strategy. This holds particularly true in the current context, where the prospect of gaining clarity in the foreseeable future reinforces the imperative for decisive action.

Just as escaping from King Minos’ tower was not an option for Daedalus and Icarus, so too is indecisiveness not an option for financial services institutions that are such an integral part of today’s economic ‘flight path’.
Adopting a forward-thinking approach, focusing on innovation, and seizing the opportunity to make strategic investments early creates a significant competitive advantage.
Executives need to be bold and decisive in identifying opportunities and prioritizing the strategies for their organization. During the aftermath of the financial crisis in 2009, while many companies were cutting costs, it was those that saw the downturn as an opportunity who tended to excel. Companies that maintained or increased their budgets, focusing on longer-term, higher-risk projects, were more likely to use the crisis to extend their competitive advantage. 

This implies that continuing to invest in innovation and development, even during tough economic times, can position companies for greater growth and success as the economy recovers. The survey underscored that high-performing companies viewed the downturn as an opportunity to bolster their investment efforts, which contributed to sustained advantage and growth.

These findings demonstrate that while the economic environment can pose challenges, it also offers a strategic window for companies to invest wisely and position themselves for competitive advantage. Adopting a forward-thinking approach, focusing on innovation and clarity of differentiation in the market, and seizing the opportunity to make strategic investments early creates a significant competitive advantage.

For bankers, insurers, investment managers or any financial services professionals and executives there are five strategic themes to explore.


Today’s consumer expectations create competition as fierce as ever, requiring businesses to find new ways of identifying growth opportunities. A consumer-centric approach is not just beneficial; it's imperative for sustained growth and competitiveness. For financial services executives, this means prioritizing the development of products and services that align closely with consumer needs and preferences, fostering a culture of innovation that can adapt to the shifting sands of technological advancements and regulatory changes. 

The key to unlocking this potential lies in leveraging data and analytics and artificial intelligence to gain deep insights into consumer behavior. By understanding the nuances of customer needs, financial institutions can tailor their offerings, creating personalized experiences that not only attract new customers but also enhance loyalty among existing ones. 

The opportunities that arise from focusing on the consumer extend beyond product development and customer satisfaction to reimagining the entire business model to better meet the needs of the consumer. They encompass the potential for redefining the market landscape through the introduction of innovative financial products and services that address untapped needs or enhance the convenience and accessibility of financial transactions. 

Executives who recognize and act on these consumer-driven trends can spearhead the transformation of their institutions, moving from traditional banking paradigms to becoming holistic financial solutions providers. This not only opens new revenue streams but also strengthens the competitive edge of financial services firms in a market that increasingly values customization, efficiency, and user experience. By placing the consumer at the heart of their strategy, financial services leaders can navigate the complexities of the modern financial ecosystem, driving innovation and achieving sustained success.


The concept of productivity and efficiency within the financial services sector is undergoing a profound transformation. Forward-thinking executives recognize that the workforce of the future is a pivotal element in this equation, where harnessing the potential of both human and digital labor becomes a strategic imperative. 

The emphasis on building a more adaptable, skilled, and technologically savvy workforce with joined-up multi-functional teams, cannot be understated. By investing in continuous learning and development programs, financial institutions can ensure their employees are equipped with the latest digital tools and analytical skills, enabling them to deliver innovative solutions that meet evolving consumer expectations, and foster a culture of innovation and agility that is crucial for sustaining competitive advantage.

The integration of advanced technologies such as generative AI into the workforce frees up human capital to focus on more strategic, value-adding activities, while also providing deeper insights into customer behavior, risk assessment, and market trends. 

Executives should thus focus on harmonizing the strengths of their workforce with the capabilities of emerging technologies to create a symbiotic ecosystem that promotes efficiency and productivity. By strategically developing the workforce of the future, financial services leaders can drive their organizations towards enhanced productivity, efficiency, and sustained growth.


If we can believe stock markets, we stand on the cusp of a technological revolution, making the strategic embrace of emerging technologies a necessity for executives aiming to secure their firms' positions. The advent of generative artificial intelligence, spatial and quantum computing presents unprecedented opportunities for innovation, efficiency, and competitive differentiation. 
Executives who prioritize the integration of these technologies into their strategies can unlock new dimensions of customer service, risk management, and operational efficiency. By leveraging GenAI for predictive analytics, financial institutions can offer more personalized customer experiences (in the metaverse), enhance their decision-making processes, and identify market trends and risks with greater accuracy. Quantum computing holds the potential to introduce speed, from optimizing investment portfolios to encrypting data against future threats.

A successful journey towards harnessing these emerging technologies requires a clear vision, and a commitment to innovate now, building a culture that values agility, continuous learning, and collaboration across all levels of the organization by fostering innovation from within the workforce. 

By strategically investing in emerging technologies, financial services leaders can redefine the art of the possible, offering superior services, securing customer loyalty, and establishing a strong foundation for future growth.


The financial services industry is a dynamic arena and M&A presents a unique opportunity to rapidly scale, diversify, and find new capabilities that can bring competitive advantage quickly. This approach demands a keen eye for identifying potential targets that align with the company’s strategic goals, as well as the agility to navigate the complexities of deal-making in an environment where timing can be as crucial as financials. 

The benefits of a robust M&A strategy extend beyond immediate growth and market expansion; they include the potential for technological acquisition and the integration of innovative practices that can redefine a firm's  In today’s financial services industry, where digital transformation is a key priority to staying relevant, acquiring fintech startups or tech-forward companies can catapult a traditional player into the digital age, enhancing its appeal to a tech-savvy consumer base. 

For executives, this means leading their firms not just in expanding their footprint but in cultivating a diverse and innovative corporate culture that leverages the strengths of acquired entities. By strategically focusing on M&A, leaders in the financial services industry can navigate the challenges of the digital era, leveraging consolidation as a tool for innovation, growth, and enduring competitiveness.


Resilience has emerged as a cornerstone for enduring success and stability. Cultivating resilience extends beyond mere risk management, it is about embedding adaptability and robustness into the very fabric of business operations and culture. By developing comprehensive strategies, financial institutions can ensure they remain agile and responsive in the face of unforeseen challenges, whether they stem from economic downturns, cyber threats, regulatory changes, or global crises. 

Fostering a resilient organizational culture is key to navigating the uncertainties that remain. This involves nurturing a mindset among employees that values flexibility, continuous learning, and innovation. Leaders must champion this ethos, promoting collaboration and empowering teams to think creatively in solving complex problems. 

Culture supports the investment in technology infrastructure, building diversified and ethical supply chains, alongside strategic partnerships, to enhance operational resilience. By placing resilience at the core, financial services executives can not only safeguard their institutions against the shocks of today but also position to seize the opportunities of tomorrow.

Capco is a different choice in the marketplace, distinguished by our commitment to partnership and strategic innovation. We actively challenge conventional thinking to identify opportunities within every scenario presented, always aiming to guide our clients through uncharted waters towards innovative outcomes. Our philosophy centers on a collaborative approach; we pride ourselves on offering tailored advice, fostering a collaborative environment, and supporting our clients' vision. 

If you are interested in gaining more insights into our views for the financial services landscape in 2024 and beyond, including the strategic focus areas we believe will define the next phase of financial services, we invite you to reach out to us. We are eager to discuss how our forward-thinking approach can align with your strategic goals, driving meaningful growth and resilience in the evolving market landscape.


1 Winston Churchill emphasizing the importance of perseverance and action over waiting for the perfect moment.
2 https://www.ft.com/content/481466a3-56b1-4c11-aea5-cc855b80c613
3 https://www.federalreserve.gov/newsevents/pressreleases/monetary20240320a.html
4 Language that suggests a preference for looser, more accommodative monetary policy measures to stimulate economic growth.
5 https://www.kentclarkcenter.org/wp-content/uploads/2023/12/RESULTS-2023-12-01-Survey-11.pdf
6 https://www.ft.com/content/4c74176d-af57-4fd5-a3c5-c757b6da53cd
7 https://www.ft.com/content/bdd03df6-e31e-4e6d-84c2-d634c2e14f53
8 https://www.imf.org/en/Publications/WP/Issues/2023/05/12/Has-the-Phillips-Curve-Become-Steeper-533315
10 https://tradingeconomics.com/
11 https://www.ft.com/content/420cfa7b-4530-4a38-b366-a16b73a83ab7?emailId=e8d5dff6-e498-42f5-b411-4d136c031ab2&segmentId=90274be8-2813-aad2-aeb9-8b458b2779e9
12 Inspired by Pieter Bruegel The Elder’s 1555 painting “Landscape with the Fall of Icarus”, depicting Icarus next to a ship.
13 https://www.ft.com/content/3ee9dcd2-1dfb-4e71-bbeb-f3929b93334a
14 https://www.federalreserve.gov/newsevents/speech/powell20240403a.htm
15 https://www.ft.com/content/e0f27da0-b735-4b73-b5a9-06dbc186842f
16 The Neutral Rate of Interest, also known as the long-run equilibrium interest rate or the natural rate and referred to among experts as r-star (r*), represents the short-term interest rate at which the economy operates under conditions of full employment and stable inflation. This rate signifies a balance where monetary policy is neither restrictive nor stimulative. It emerges from the economy's inherent traits rather than being determined by the central bank and is estimated rather than directly observed. The neutral rate is fundamentally shaped by the interplay of savings supply and demand. It underpins the economic principle that for new investments to occur, there must be a corresponding supply of capital from savers. Hence, the economy's total investment aligns with available savings, necessitating an interest rate that encourages saving yet remains attractive enough for borrowers. This equilibrium interest rate that achieves such a balance over the long term is the neutral rate of interest.