3 Technologies Disrupting Finance
Artificial intelligence, blockchain, and the Internet of Things have brought major, sometimes unwelcome shifts within the finance industry.
- By Michael Volkmann
- November 17, 2017
Finance is constantly undergoing change. Recent changes, however, have proved especially interesting. The emerging world of fintech is changing the way stockbrokers trade, businesses transact, and consumers purchase.
Buying stock in a company can be done with a phone app, stock trading can be done by smart software, and personalized financial advice can be generated with a few lines of code. The technologies and platforms underlying these inventions have dramatically shifted the industry as a whole. In fact, they are disrupting finance entirely.
Citigroup recently predicted 1.7 million jobs will be lost as banks move to digitize operations in the decade to come. Others predict new jobs will be created and the change brought by fintech could be for the better.
Below are three technologies driving change:
1. Artificial Intelligence
Artificial intelligence is already making us more efficient. We can manufacture items more cheaply, organize more effectively, and work more productively with the help of automation. AI isn't without its drawbacks, however. Automation is responsible for the loss of millions of manufacturing jobs. In finance, the automation of trading has resulted in thousands of stockbrokers losing their jobs.
As AI becomes more advanced, its uses within finance become more nuanced. Banks are building virtual financial advisors through smart software. Although this software is on the rise, it's still far from replacing advisors.
At present, AI is redefining how we relate to work. The quick rise of quant firms may well be in for a fall due to AI's predictive ability.
2. Blockchain
Bitcoin was unveiled to the public to little fanfare nearly a decade ago. Cryptography fanatics seemed to be the only ones to take notice in its first years. Over time, Bitcoin has become a rather gigantic platform, one that continues to fuel raucous debate among financial experts. The technology behind Bitcoin, blockchain, has been accepted in a more unanimous fashion, however.
Blockchain has ushered in a new way to transact: a peer-to-peer network that does not need an intermediary entity to authorize payments. Transactions are faster and safer than traditional online payments and cut out banking institutions; this is radically changing finance from top to bottom.
"In capital markets, Blockchain technology has the potential to radically transform the industry landscape," according to a recent Accenture report. "[It] offers the potential to revolutionize the way assets move and counterparties share information through financial markets. And its implications for a wide range of current market intermediaries will require them to redefine their business models in order to capture the opportunities that Blockchain technology provides as well as to remain relevant and competitive."
3. The Internet of Things
Billions of devices are connected all over the world. Smart objects, from coffee makers to light switches, are constantly connected to the Internet, communicating with other smart objects, and producing data. This is generating an unprecedented amount of data.
According to a survey conducted by PwC, 63 percent of CEOs in the insurance industry believe that the Internet of Things will be strategically important to their organization. Why? The data produced by connected devices could help assess risk, personalize insurance policies, and analyze insurance claims.
For example, data collected from wearable devices could allow insurers to offer special promotions for pursuing a healthier lifestyle, more restful sleep, and adequate exercise.
Looking Forward
Artificial intelligence, blockchain, and the Internet of Things have brought major, sometimes unwelcome shifts within the finance industry.
Largely, they've increased productivity and put pressure on established institutions to modernize and create leaner, more efficient organizations. By the same token, they have eliminated jobs and driven down the costs of some financial services. Whether the long-term effects of these emerging technologies will breed monumental shifts is difficult, if not impossible, to predict. In the short term, we can assume that these technologies will cause established companies to adapt.
As new technologies become more infused with our everyday financial activities, the industry will grow and shift to accommodate the disruption they bring.
About the Author
Michael Volkmann is an entrepreneur with a focus on business operations and finance. He has worked with many small businesses helping them with their M&A for over six years. When not in front of the monitor, he spends his time snorkeling and traveling. You may sometimes catch him on Twitter.