Calie Pistorius/DeltaHedron/November 2018 – Disruptive technological innovations not only spawn new companies and industries, but also render laggard companies and entire industries obsolete. A range of emerging technologies continue to impact on a number of sectors in the financial industry, including banking, insurance, risk management, investment, payments and asset management. The dynamics of technological change present strategic risks to companies in this sector, in that they create new opportunities for those that seize them but also threats for those that don’t.
Recent reports highlight the impact of analytics and big data, artificial intelligence (AI) and machine learning, in particular, in the financial industry. Blockchain, robotics, the internet of things (IoT), augmented reality (AR), virtual reality (VR) and other emerging technologies are also contributing to the disruption of the sector. Typically, the disruption results from one or more technologies interacting with one another, creating new business models. New fintech and insurtech companies typically exploit emerging technologies to gain competitive edges. It is also interesting to note the number of business incubators which are particularly focused on the financial industry; as is the interest of companies from other sectors, specifically global tech companies.
Blockchain technologies underpin cryptocurrencies, but are increasingly also being used in other trust-related application such as smart contracts, authentication and identification – the latter in conjunction with developments in biometrics. Together with advances in mobile technologies, blockchain is also fuelling innovations in electronic and cashless payments.
This trend is also manifested in changing customer demands and experience. It is often linked to generational (Baby boomers, Gen X, Millennial and Gen Z) preferences, such as a tendency (if not demand for) a “mobile-first service, real-time on demand” service. There is an increasing use of virtual customer interfaces, such as chatbots. This in return requires more sophisticated artificial intelligence, authentication, voice recognition, biometrics as well as robotics.
Cybersecurity is a high priority for all business, but particularly so for financial institutions. The rapid evolvement of digital customer engagement is putting significant pressure on institutions’ ability to protect customer data and privacy and the prevention of cyber fraud and identity theft.
In addition to recognising the shifts in customer demands, it also important to note the changes in the world of work that emerging technologies will bring – including in the financial sector. Institutions need to account for this in the assessment of their future skills requirements, recruitment and training; as well as their organisational structures and management models.