We cannot talk about the future of finance without mentioning technology. This is the 21st century, so it is safe to say that the future is here! This is because most aspects of the future already have their foundation known, or worked on.
From all indications, the future of finance is characterized by a major feature- convenience. Convenience in offers, in negotiations, in deals, and transactions in their entirety.
The era of physical banking services is fast becoming obsolete- even in developing societies. Just as physical, financial instruments are giving way to electronic instruments (e-instruments).
When you talk about finance and technology today, you will be talking about Cryptocurrencies, Decentralized finance (Defi), Non-fungible tokens (NFTs) and other digital assets.
Startups now consider budgeting for their digital processes; both to meet demands and receive remittances. This used to be a concern for big firms. Today, Small and Medium-scale enterprises are not left out. In fact, there is a digital product for all individuals and companies alike. What a time to be alive!
Governments are not left behind too as they don’t want to be left behind by the digitalized train. Countries like Denmark, France, Germany, Iceland, Japan, Mexico, Spain and the United Kingdom have recognized and adopted these digital assets.
Also, there is virtually no finance/business news around the world that does not have something to say about these assets. So, it is safe to say that the buzz about it across the global media is not unnoticed.
The Millennials and GenZ population of the world have also massively adopted this means of transacting. Thereby, the argument that it is not going away anytime soon. After all, they constitute the population of the future, and their love for innovation is unmatched and undeterred by distractions.
Bitcoin, which is the alpha cryptocurrency by market capitalization rose to ‘stardom’ amidst the global financial crisis of the year 2008. Some referred to it as a rebellion against a financial system that is broken. One that is not generally inclusive to all, designed to satisfy the needs of some selected few; especially when it’s doing well, but affects all negatively when distressed.
At its birth, traditional financial institutions called cryptocurrency fraud and said it’s worthless. Some are yet to have a change of opinion. But the handwriting on the wall is becoming clearer.
To be fair to these institutions, they have always been involved in technology even from the beginning. However, it is the evolution and innovation of new technologies which are constant that has made digital currencies seem like a threat to the traditional financial institutions. They also present users with diverse investment and savings options. Thereby, winning the people’s attention.
Fintech, which started as administrative support to companies has become a major player in the global financial industry. All thanks to its steady evolution and innovation through technology, people now invest in Fintech startups with confidence because they know that there is always a need for their services and all things being equal, there is a slim chance of losing their investments.
Regulating the finance market
The question of regulation has been a major concern to professionals in the finance sector. This is because aside from popular international financial policies, individual countries across the world have bodies that regulate the activities of financial institutions within their territories- both formal and informal.
In some instances, a country’s financial regulation within its borders affects its bilateral relationship with the international community.
Adequate regulation of the finance market also guarantees the proper functioning of the same for the safety of investors and consumers alike, combat inflation and stabilize the economy of the country.
These regulations have sure influenced how people handle their finances. For example, people were limited to cash transactions in the bank until Automated Teller Machines (ATMs) surfaced in the 1970s and 1980s.
Mobile banking became the go-to alternative for banking activities in the 2000s and there hasn’t been a look back in the evolution and innovation of financial activities.
There have then been concerns over the regulation of digital currencies, and if governments can oversee its activities like they have done in the case of traditional financial institutions since time immemorial.
People and Technology
We strongly believe that the continuous evolution and innovation of Fintech will not completely erase the input of humans in its activities. After all, technology was invented to serve humans.
The inclusion of in-memory computing, analytics, artificial intelligence (AI), blockchain, the cloud and robotic process automation (RPA) amongst other advancements in new technology is to improve the delivery of financial services to people. It is also meant for proper collaboration between them.
People will still be relevant in the formation because they are the brain behind these innovations. They have also realized this and have been upskilling to fit into the new normal.
While technology is great with artificial intelligence, the brains, interpersonal skills and emotional intelligence of smart people are necessary requirements for the sector to remain relevant to consumers and investors alike. Both combinations would be a great tag team in providing financial solutions.
It is, therefore, safe to say that the future of finance is the combination of new people and new technology. It is not one over the other. Fintech investors and stakeholders alike would therefore need to work towards striking a balance between people and technology. This is because technology will not take the people’s roles, but change them.
People changed too
It is imperative to state that all the changes we are talking about are a result of the fact that people changed, so also their preferences.
The same way financial service providers and investors in the industry changed in their mode of operation, so also did the consumers change. As a matter of fact, the change became a child of necessity, considering the fact that that was the only way to meet the people’s needs.
This forced the finance function to disrupt itself in order to meet the demands of customers, regulators, corporate bodies, advert practitioners, as well as internal and external auditors.
Top on the changes by these stakeholders and more is the ability to drive the most favorable business performance, as well as help, make their decision making in real-time.
Improving risk management
Risk management is the ability to forecast and evaluate financial risks as well as identify the processes and procedures necessary to avoid or minimize the impact of these risks.
It is characterized by 5 steps which are; identifying the risk, measuring the risk, evaluating the risk, implementing solutions and reviewing the results/outcome.
The ability to effectively manage risk is important for the safety of investors, consumers and necessary for the image and legacy of the organization/institution.
Before now, traditional financial institutions have their ways of ensuring the safety of stakeholders. They, in conjunction with regulating bodies always put all hands on deck to ensure that risks are averted to the barest minimum.
With the change in the mode of operation in the financial industry, the processes involved in combating risks need to change too, suitable for the current realities. For example, cyber theft has taken the place of bank robbery. This is just one of the numerous changes in risk occurrences.
While stakeholders work on delivering maximum value to investors, it has become mandatory for them to uncover new ways to be more efficient and reduce risks. This has led to the introduction of biometrics among other security features currently in the financial sector to secure assets.
The Prevalence of extreme automation
The future of finance is already characterized by extreme automation. Yes, the word ‘already’ was intention because the future is here.
Technologies are not new in executing financial transactions. The difference is that the new technologies are highly characterized by extreme automation, which requires lesser promptings to get jobs done.
This is made possible with en-masse data gathering and retention, connected sensors, and machine learning.
With artificial intelligence (AI), robots have improved in their accuracy as well as interactions with humans. Therefore, understanding human needs has become easier for them.
New talent strategies and structure
With these changes come new job roles. It is remote over physical contact. In the same way customers do not need to physically meet with the bank to transact, so also, the bank and other financial institutions need to improve on their skills to what is obtainable at the moment. It is no longer the era of cashier and over-the-counter teller banking.
Financial service providers are sacrificing the bureaucratic mode of operation for service-driven teams. They now adopt a new approach to attract, retain and develop talents that are necessary to step up and meet the new challenge.
They now invest more time and resources into their back-end development which translates to a more user-friendly experience with secured results. The changing demographics of the consumers also necessitate this as their preferences are different from those before them.
Data acquisition and retention
Once upon a time, vital information and data on papers and letter-headed memos are locked away in cabinets. Some of those cabinets were even fire-proof; to show seriousness in keeping these important documents safe.
Today, the process of acquiring and retaining data has become more seamless, and it would continue to break records to make it more seamless.
Customers are also more confident in the safety of their information. This is because they are sure that their data cannot just be stumbled upon by anybody without adequate clearance. This is unlike the hard papers and cabinet days where anyone that could find his/her way to the cabinet, have sensitive data at their disposal.
New technology for old challenges
Despite the changes in the finance industry, there is no denying the fact that some challenges are not new. So, while technology is improved, it must be able to solve old challenges, just as it solves new ones.
Customers still need professional financial advice on their savings and investments, just as they’d still appreciate financial assistance in form of loans to boost their businesses. They need to trust the institution to grant them listening ears and proffer working solutions to their financial challenges.
While technology innovations are introduced to cater for the needs of the younger demographics who are generally tech-savvy, the older ones around should not be pushed aside. Their concerns are as important as any others.
A Different approach to people management
The future of finance is also characterised by an entirely new approach to managing staff. This is on the part of senior officers and managers in financial institutions.
While the members’ staff are expected to be self-starters, they must be allowed and motivated to thrive and deliver with little or no interference. Their creativity must not be imprisoned.
Performance should be objectively measured and adequate rewards, recommendations or sanctions meted out with no grudge or malice.
Since we agreed that the future of finance is tech-driven, it is important to state that it doesn’t come cheap. As a matter of fact, it requires a big purse for proper delivery. From software to hardware, a huge budget needs to be set aside.
Start-ups, fintech and other businesses interested in using technology to solve human problems are not left out either. This is a reason such an investment is not for everybody. So, those going into a tech-driven industry like finance in this period and the future must be willing to invest a substantial amount into the venture. It doesn’t just cost a good amount of money to set up those technology solutions, they are also subjected to upgrades, and on some occasions, change.
This article is a reminder to all private, co-operate and government stakeholders in the financial sector of the inevitable. The space is changing at a fast pace. Those who can’t keep up may be left behind and cease to be relevant.
Even with the continuous innovation in technology solutions that don’t seem to slow down at any moment soon, it must be categorically stated that the future of finance will be built by people and technology. And, the journey has begun.