Fintech. It’s a word that’s casually been thrown around in recent times, everyone wants to be associated with it, but does the word hold any gravitas anymore?
FinTech is not necessarily a new idea as such but rather one that has reinvented itself. Large traditional institutions did not get their methods and ideas of FinTech right, with complex and cumbersome technology that focused on back office efficiency rather than changing consumer trends. This allowed new slick startups to come in, innovate and challenge the conventional methods, but is this enough?
Fintech has become an umbrella term in next to no time, engulfing payments, P2P lending, big data, AI and robo-advice. After constantly evaluating the emergent technology that is continually reinventing the financial world, one can truly state that finally the fusion of technology and finance has started to bear fruit, but this is only the tip of the iceberg…
The primary interest of this article lies in the premise behind what people are calling robo-advice. Robo-advice can be described as a direct to consumer process that enables people who are looking to invest their money or get financial advice or planning services, to navigate an online process that assesses their risk appetite or investment goal(s), then creating a portfolio for them (usually using baskets of ETF’s). A user can open a brokerage account (online) and then continually monitor their accounts via an online dashboard. The technology as such can be fairly ‘straightforward’ and the technology does not change the type of advice given but rather the delivery or vehicle through which the advice (or services) is provided. With that in mind, keep reading…
The premise…
While many believe that D2C ‘robo-advisers’ may find it hard to survive, what they stand for will live on. Democratisation of financial advice, planning and education. Solutions such as this are opening up these essential services to the masses and providing these services in the way that the consumers want them.
Many people say it can only be ‘roboservices’ or human services, but as their blinders slowly start widening, they are fast realising that in actual fact, the most powerful solution is a combination of the two. It is not necessarily the changing technology (albeit playing a part) that is recreating this world, rather changing consumer attitudes and behaviour that are now able to manifest themselves as we move further into the digital age.
What it means… Today, robos do investing, but tomorrow who knows?
The concept of having an all-data inclusive system to help manage our lives may sound quite tasty to some. We can make better financial decisions and better health decisions as our unique avatar of, ourselves, is continually processing our growing bank of data. People will feel better and more in control of their personal finances and lives. These all-data inclusive systems will be provided to the masses by the forward thinking group of financial services ‘humans.’
In what may be described as an ‘old school’ industry, fintech adopters who are able to see ahead for not only the good of themselves or firms, but, for their clients too, will be able to reap the rewards as they ride the wave of positive digital disruption.
So the question remains…. Have we foreseen what is yet to come?
Although fintech was initially born in the US, it is and will continue to develop differently in the UK and Europe. Spawned from vast financial crises that left the everyday man and many professionals disillusioned with the incumbents, it was time for ‘techies’ to step in and make a stand. Gordon Moore spoke, and so it was true, the power of computing has doubled year on year, enabling theory around artificial intelligence, machine learning and big data analytics to be put into practice and used in real life. Some key developments to come…
Robo-Tech 3.0
The upcoming B2B robo propositions will be focused on utilising more available data to provide a more holistic and personalised service. The technology is infused with the advisers thinking and can use this to determine what exactly a client seeks (advice, guidance, execution, direction) thereafter acting appropriately by providing the relevant service. Secondly, the opportunity for quantitative risk profiling over qualitative may become preferential as well as direct access to asset classes instead of through intermediaries. Finance and technology are fast learning from social media giants and this is enhancing the design and intuitive nature of new propositions as well as becoming increasingly inclusive of educational material that is embedded into client journeys in a seamless fashion.
A future of Cognition – Ease of use. Automation. Security.
With a world of abundantly growing data and information, it is crucial to be able to decipher or process what it all means as it’s fuelling decisions we make every day. This means new technology will make use of artificial intelligence and machine learning techniques that enable processing of data that is too big for ‘normal’ computers. Developers of new propositions should take into account how much of a system they can automate without losing the genuinely crucial human touch in what has become known as a ‘relationship business’. They will be created around the thought of, “Can anybody, regardless of knowledge of finance, use this technology?” And finally, when dealing with anything online security is paramount.
Decentralisation
Emergent themes appearing to be industry mainstays are transparency for clients, speed of service and empowerment. The ways in which finance companies currently operate will be changing with the advent of distributed ledger technology and what it stands for. The Blockchain Revolution (book) highlights 8 key areas where financial services will see tectonic shifts and within these 8, the 3 primary points above are covered. Empowerment may mean monetisation of data, thus transforming the way people manage their information. So, how does one not only state that their business follow the forward thinking path but believes in it too?
Doctors, they are here to serve the people… you can go see one whenever you are ill or in dire need of a day off work, but, you do not necessarily need to be a millionaire to get in the door. In a similar way, financial services firms should engage in client centric business thinking and using the work of Porter and Kramer, engage in the creation of shared value for their clients and themselves.
Not to mention that financial wellbeing directly correlates with physical health and wellbeing so why don’t we help people lead better financial lives and by doing so lead healthier happier lives in general. Financial advisers should ask themselves, what their clients want. Then they can ask the clients the same question.
Adoption of, and collaboration with, technology. Technology is not a tool to be bought but rather a strategic investment that is central to a business achieving its objectives in the 21st century. Problems have been identified in financial services, and solutions must be found. It has become clear that the use of technology can ease many of the industry’s pains (lack of young advisers, UK advice gap, operational inefficiency and lack of transparency) yet the adoption and collaboration of new technology is slow. Finance must realise the sooner they embrace the ‘robots’, if you will, then the sooner they can satisfy more clients and solve problems. (UK advice gap can be solved, unbanked can become banked, mis selling can be mitigated, speed of operations can be increased).
A merge into the future
People tell me that, people are working on it, and company X is doing this with Dr. so and so. But, I am yet to hear anyone tell me that the industry as a whole has found a solution, that there is a majority in favour of one panacea. This means (to me anyway) that more needs to be done.
The ability to speak to a life like ‘bot’ online who can ‘understand’ and evaluate clients current lives and risk through a system which monitors their data proves that the future holds vast potential and the basics of machine learning, artificial intelligence and big data have just started peaking the surface and the real transformation is yet to come.
In a dynamic and rapidly growing world of people, information, ideas and technology, to hear the phrase, ‘The disruptors are being disrupted…’ illustrates the seismic shifts occurring in this industry and reconfirms that we have arrived at a new age of attitudes into financial services.
By Byron Levin, CEO, Future Start Technology
