Fintech has long-since evolved from a trendy buzzword to a mainstay in modern banking’s vocabulary. Financial institutions are increasingly embracing disruptive technologies to satisfy changing consumer demands – relating to speed and convenience – and as part of a concerted effort to slash overhead costs. Our research indicates that 77 per cent of financial institutions will increase their own internal efforts to pursue innovation, and 82 per cent will foster partnerships with fintech firms in the next three to five years.
The staggering evolution of fintech has been onset from the early 1990s, and with the commercialisation of the internet, e-commerce models became more commonplace. This, in turn, paved the way for the introduction of brokerage websites targeting retail investors and driving out a wave of mobile-based products.
A major leap in the type of innovation fintech companies could offer came in the form of blockchain: a digital distributed ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.
To be able to provide secure and trusted transactions without the use of a third-party, was one of the most significant advancements in the fintech revolution. Through the use of this “trust” network, cryptocurrencies are traded around the world on various exchanges. As of January 2018, the total market cap of cryptocurrencies was $707bn.
A key player in the wider Fourth Industrial Revolution (4IR), fintech has also onset another avenue for artificial intelligence (AI). The use of AI in the form of robot advisers has already had a significant impact on how we invest and receive investment advice. With its market size growing exponentially year on year, it is expected that AI in fintech will reach a market value of $35.8bn by 2025. This will have implications for every industry and having skilled professionals with knowledge of how to navigate new technologies will be essential to managing the marketplace and workforce of the future.
Quantum computing is another technology set to have an impact on any areas where computing plays an important role, for example as in financial portfolio optimisation.
The industry is becoming increasingly specialised, with retail banks expected to evolve into a marketplace ecosystem with a variety of service providers, where the major players establish a base platform and infrastructure for a variety of services.
Consumers will be able to switch from bank to bank, depending on which one has the better fees structure to suit your unique profile. Fintech’s overarching contribution to the banking scene will be to make it increasingly efficient and cost-effective, by leveraging the power of advanced data analytics and AI.
Fintech’s evolution signals hugely profitable opportunities at the highest levels. There is increasing competition in the fintech marketplace, not only from start-ups but even more so recently from the financial incumbents themselves, who are exploring partnership programmes to stay abreast of modern demands.
Yet for all fintech’s success in improving efficiency and eradicating the clunky paper-based processes of yesteryear, it is worth noting that with new technology and trends, there is a risk to be borne in terms of training and education. The modern banker must be equipped with the ability to identify opportunities for disruption in the financial services sector.
Industry experts estimate that two and six million jobs could be lost over the next decade due to disruptive financial technologies like AI and blockchain. Illustrating the potential, digital challenger banks such as Starling and Monzo can operate with 90 per cent less headcount than traditional banks. Recognising this serious challenge facing the financial sector, then, Saïd Business School, University of Oxford has launched a new digital open enrolment programme on financial technology and innovation, called Oxford Fintech Programme.
The Oxford Fintech Programme is designed for business leaders, managers and financial executives alike. The programme comprises a comprehensive understanding of the multiple aspects of financial technology, including: regulatory technology (regtech), technology relating to the real estate industry (proptech) and other frontiers of financial innovation. Learning online, participants of the programme interact and collaborate with an international cohort of business leaders – expanding their global business network, and their perspective.
The £2,500 programme, which lasts ten weeks and is led by industrial and academic experts including David Shrier and Professor Nir Vulkan , enables its students to walk away with the expertise to draft, strategise and develop disruptive fintech innovations of their own, using various app tools and solutions. They will have the ability to hypothesise about the effect new regulations will have on future commerce products – an extremely pertinent awareness to have against the backdrop of the fintech sector’s evolving regulatory landscape. Data privacy directives PSD2 and GDP, for example, are being implemented this year.
Peter Tufano, the dean of Saïd Business School, said of the programme: “While we touch on current topics such as bitcoin or AI, we also delve into the structure of financial systems themselves to put the current wave of technology-driven disruption in a broader context. You can’t really understand the future directions that robo-advising or quantum computing will take the global financial system without appreciating the current state, the array of regulatory, business and technology architectures in place.”
Leila Davies is university marketing lead at GetSmarter.
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