Why Fintech Should Embrace The Fourth Industrial Revolution
A recent report from the World Economic Forum highlighted why financial services should welcome what has been dubbed the “fourth industrial revolution” after the impact it has had on a range of sectors such as healthcare, retail and agriculture.
With the development of digital technology, automation and personalization have been put on a pedestal in these industries and propelled them further than first envisioned after upgrading infrastructure to truly benefit consumers.
The report stated: “For an industry that has developed over arguably thousands of years, and which has strong economic incentives to modernize and optimize its performance, it is somewhat dumbfounding that the financial services sector hasn’t been more tech-enabled. Why does this matter?
“Because having easy access to capital systems across demographics is the heart of what moves societies forwards – and until financial technology (fintech) fully embraces the Fourth Industrial Revolution, we simply won’t get there.”
Enabling technology for the customer
This subject will be discussed at Innovate Finance’s Global Summit held on 29th-30th April at The Guildhall in London and ahead of their panel session, I spoke to Kirsty Roth, Global Head of Operations at HSBC and Louise Brett, Head of Fintech at Deloitte, about the pace of change in financial services.
While some believe that the deployment of technology creates a barrier to establishing efficient tech-enabled financial services because finance remains a foreign industry for most people – and technology is not helping citizens become literate – the potential of digital transformation must be considered.
Brett picked up on this point and said that the financial industry is still a foreign space because “some countries are yet to put the right infrastructure in place to nurture and grow the startup community. For fintech specifically, this means consumers have had limited access to the latest innovation in financial services and consumer uptake is very low as a result.
“That said, greater investment is being made to create the right infrastructure and mechanisms for success. Examples include open-banking initiatives and the creation of regulatory sandboxes.”
The report continued: “Encouragingly, however, we seem to be on the cusp of this change. The process of sparking the Fourth Industrial Revolution for industries involves familiarity, then commoditization, followed by developing best practices.
“Fortunately, we are in the familiarity phase. Almost half of the population around the globe uses mobile technology for some sort of banking. That figure is increasing dramatically each year; but what is more encouraging is that it is growing in developing countries as well, which have relied on communications technology to create new banking systems.
“This will hopefully spark companies and entrepreneurs to create new tools that give greater access to financial systems and tools. And as more users adopt these tools, this should create greater efficiencies in this market.”
Pace of change
Alongside discussing the pace of change broadly, the panel session at Innovate Finance will also focus on how embracing technology in financial services may force banks to reimagine work, workforce and the workplace.
Roth detailed how the pace of change that HSBC is seeing is significant. “This is driving a changing workforce as new roles, such as robot configuring and chatbot enabling are created. This is a positive story for our staff, as they take the opportunity to upskill and migrate from more manual work to higher value activities such as analysis, investigations, problem-solving and developing and managing robots.”
Roth added that at HSBC, they have developed an in-house automation capability, and give existing employees the opportunity to get involved and develop their skillsets. “So far we have about 120 trained Robotic Process Automation (RPA) configured and four Digital Operations Centres around the world at HSBC.”
In the mission to ensure that all customers are financially literate and keeping with mainstream technology trends such as the use of mobile phones, the talk of the fintech town today is that partnerships between banks and fintech firms are the best way to do this.
However, Brett highlighted how while mobile banking is an important entry point, it is not the only one. “The financial services sector has been quick to recognize both the rapid pace of growth in mobile technology usage and consumer expectation for more initiative and seamless interaction with their bank or insurer, for example.
“For financial institutions themselves, launching a fintech solution that addresses consumer problems simply, is often far quicker and a more cost-effective alternative to the traditional product launch.”
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