How financial services will change in the next era of human-machine partnerships
By Mark Baunach, global financial services consulting industry leader, Dell EMC
At 17, Vitalik Buterin, a math and programming prodigy, started to uncover the vast potential of blockchain. He saw a prodigious opportunity to circumvent intermediaries in the exchange of assets and make transactions dramatically quicker, cheaper, simpler and more transparent. Buterin went on to develop Ethereum, an open-source, public, blockchain-based distributed computing platform for developers that went live in July 2015.
Just two years later, Calastone, a financial technology company, announced it is actively involved in testing the feasibility of blockchain to develop a common global marketplace for the frictionless trading and settlement of mutual funds. Today, 30 big banks have joined an alliance to develop a private Ethereum blockchain - recognizing, they need to make blockchain work for them (as opposed to bury them).
Such is the momentum behind blockchain and adoption of other emerging technologies. But new technologies like blockchain are also opening the door to new commercial opportunities and revenue streams that will reshape today's financial services.
A new dawn in financial services
The Institute for the Future (IFTF) believes we're entering the next era of human-machine partnerships. We've lived and worked alongside machines for centuries but by 2030, these partnerships will be more interwoven and immersive than ever before. Technology will work as an extension of people, turning humans into digital conductors.
Fifty percent of FS businesses said they worry about becoming obsolete within 3-5 years (5 percent higher than the global average). As a result, emerging technologies - defined by IFTF as artificial intelligence (AI), robotics, Augmented Reality and Virtual Reality (AR/VR) and cloud technologies - twinned with human genius, are transforming financial services by reducing costs, automating mundane tasks, mitigating risk and creating opportunities to reach out to new customers.
For example, by 2030, with cognitive computing at the helm (intelligent, self-learning technology platforms that mimic human behavior) most people will have a virtual personal assistant to service their everyday banking needs. They'll go beyond what human personal bankers do today by suggesting highly customized opportunities in real-time to reduce debt or save money.
Open sourcing financial services
Banks were once, and in many respects, still are the leviathans of the FS industry, but a different generation of competitors - led by millennials - is turning the industry on its head.
Patrick Collison is one such millennial. Presiding over billion-dollar company, Stripe, Collinson is “solving [problems] through technology and…empowering other developers and builders.” He's disrupted the payments industry with coding and flexible application programming interfaces (APIs).
More than likely, the advent of open banking APIs, will create more disruptors of Collinson's ilk. With open APIs, new players won't have to breach the walls - they'll just saunter in. While the emergence of non-traditional banking ecosystems will make the customer experience far more seamless. Traditional banking services will mesh with non-traditional banking services, pulling in data from a plethora of Internet of Things (IoT) devices. Customers will instigate a transaction using an authenticated body part (voice, face) and a whole cascade of appropriate actions will be triggered. Highly complex and powerful algorithms will do the heavy lifting in the background while the customer experience in the foreground will seem almost inconsequential. And if they have any questions – a hologram will be at their disposal.
Asia-Pacific will take the lead
IFTF's forecasts for the future pivot on emerging technologies' seemingly limitless potential redraws our world. New power brokers will enter the fray, incumbents will fall away. We're seeing this on the global stage. Large parts of Asia-Pacific are undergoing rapid growth and industrialization while enjoying the benefits of being, relatively-speaking, legacy free.
This freedom is encouraging region-wide innovation. For instance, Woori Bank in South Korea is test piloting robot financial services. China has embraced tax and advisory robots at scale. Several Indian banks are using blockchain to carry out international trade transactions and overseas remittances and Indian startup, Primechain Technologies, is creating blockchain solutions in anti-money laundering, cross border payments, asset registry and syndication of loans.
A place for humans
While the world economy is clearly embracing emerging technologies, the authentic human element is still important. Betterment, the poster child of robo-advice recently announced a new hybrid service that pairs human help with computerized financial advice.
This resonates strongly with IFTF's position. Rather than seeing the future as one of two conflicting realities: the blindingly pessimistic view that AI spells mass unemployment and the overly optimistic assumption that technology equals panaceas for all social and environmental ills, we need to prepare for a future in which people forge meaningful partnerships with machines. How do we equip the workforce with computational skills so they can communicate with and trouble-shoot their automated team members? What checks and balances should we put in place to ensure we don't become subservient to the ways machines pre-empt our needs?
In the words of Andres Wolberg-Stok, Global Head of Emerging Platforms and Services at Citi, "API sharing…may enable smart aggregators to pick apart the value chain but the pieces will be assembled elsewhere." It's our job to ensure the technology is reassembled in ways that continue to support vast amounts of human labor through mutually affirming, symbiotic partnerships with powerful, intelligent systems.
Emerging technologies and stronger human-machine partnerships continue to change the way FS organizations operate and do business in the future. In order to not being left behind strong, innovative players, FS institutions of all types and sizes need to adjust legacy systems and work with legislators to test and implement these new technologies – from smart uses of AI and robotics to open banking APIs and blockchain – to be ready for the future.