New York, USA, September 14, 2020 / TRAVELINDEX / Emerging technologies such as artificial intelligence (AI), 5G, distributed ledger technologies and quantum are increasingly being used by financial services firms and forming clusters that are driving innovation throughout the sector. These advances can offer new services and savings to both consumers and financial institutions. While financial executives largely recognize the promise of emerging technologies, many financial services firms are struggling to develop comprehensive innovation strategies given the sheer number of technologies maturing in the industry.
Forging New Pathways: The next evolution of innovation in financial services offers a framework for understanding how AI is combining with other emerging technologies and shaping the financial services industry.
“It is not sufficient to look at individual technology implementations,” said Drew Propson, Head of Technology and Innovation in Financial Services, World Economic Forum. “Financial services firms must consider the benefits derived from the coordinated deployment of emerging technologies to unlock the full potential of these technologies.”
Customers will also see changes as new technologies lead to new financial services and products. These could include:
- “Just-in-Time” lending:Tailored small to mid-sized (SME) business lending products and personalized advice provided proactively or in the moment that unexpected needs arise
- Outcomes-based investment products: Customers are offered the opportunity to purchase investment products that guarantee specific life experiences (outcomes) structured as tokens that can also be traded on a secondary market
- Data-linked green bonds: These bonds could be issued to fund sustainable projects and linked to trusted sources of data that help measure and monitor sustainable outcomes
As new technologies continue to be used together in financial services, a range of use cases, including those highlighted above, can become a reality. However, these uses will also require certain conditions that will need to be met for the use cases to be deployed at scale. Financial institutions will need to be fundamentally different in order to take full advantage of the opportunity technologies offer.
“Access to the next wave of transformative capabilities will be increasingly controlled by services providers who sit outside the traditional boundaries of the industry. As industry lines blur, institutions will need to consider the new strategic importance of the partnership function, develop modern, cross-industry security and liability frameworks, and focus on adopting flexible connectivity and data processing architecture” said Rob Galaski, Vice-Chair and Managing Partner, Financial Services, Deloitte Canada. “Far from being a nice-to-have, a well-defined ecosystem mindset has become a strategic priority for financial institutions.”
The report highlights four innovation pathways that financial institutions can explore as they seek to build emerging technology capabilities into core strategies. These pathways will require establishing ecosystems beyond finance, integrating physical and digital processes, reorienting transaction flows, and reimagining core functions.
These are just a few of the new opportunities as technology continues to expand innovation in the financial services sector. These changes will also shift current competitive dynamics and market trends. Strong organizational fluency across each of the technologies and a deep understanding of the impact of their combined capabilities will be a key differentiator of winning organizations.
The report is the result of more than 200 interviews and nine international workshops over the past year as part of the Forum’s AI in Financial Services project.
Harnessing the power of technology is also one of the key pillars at the World Economic Forum’s upcoming 2020 Sustainable Development Impact Summit. The summit focuses on innovation, sustainability and entrepreneurship.