The Future of Financial Services and How to Shape or Face Exponential Changes in Digital Banking and Fintech

By José Manuel de la Chica Rodriguez
Follow: @Delachica 


Don’t believe who says the financial world is changing… It has already changed. Society, economy, human relationships, including the concept of money and even how our brain works have already changed to a greater or lesser extent. We are facing a liquid age in which we need to coexist with uncertainty and working with hypotheses, assumptions and probabilities instead of facts and centainties. As the old proverb says: the only really permanent is change (still more in FinTech and WealthTech)


The financial and banking industry does not escape this reality that affects all sectors and markets globally. Technology (emerging, exponential or not) have changed the financial services landscape, has brought new challenges and opportunities based on open banking, crypto and data economy or artificial intelligence. But above all, it has brought a new type of evolved financial customer for which the interaction with the banking does not differ greatly from the interaction with another type of digital provider like Amazon, Venmo, Spotify or Netflix. This customer faces financial services providers in the same way she establish digital relationships, contracts and online conversations with a telco, an energetic, an ecommerce o a platform like AirBnb or Uber.


As I often say to my students at the University or to other banking executives, including those who are leading their own digital transformation (many companies are surprisingly still are working on it), the most important thing is not technological change “per se”, but the attitude we face the change with and the way we strategically decide to get involved in that change. And of course, this goes far beyond the classic and easy separation between “incumbents” and “challengers”.


Under the new digital financial paradigm, where a startup mindset is highly valuable, management and strategic positions cannot be further divided into “thinkers” and “doers”. Rather it’s necessary we all assume the new role of “shapers” (thinker and doer at the same time), since we are modeling, implementing and testing changes and innovations that can transform companies, products or whole. Best financial “shapers” (startups, internal ventures, innovation labs) are already changing the shape of the financial future with every decision they take based on the use and impact of emerging technologies: Artificial Intelligence, Blockchain and tokenization, IoT, Cloud / Edge, 5G, Biometry, Quantum Computing, Wearables, Cyber Security, etc.


In a time of exponential changes, to define and assume our company position – our attitude –  in the face of “change”, is definitely fundamental for our technological positioning inside a complex sector that is strongly impacted by technology, automation, data exploitation and decisions of the regulators about these topics. More even if we take into account that a big part of the sector can be potentially disrupted by the big pure players like Amazon, Google, Facebook, Alibaba, Apple, etc.


But top innovations always jump from the “change makers” workcenters to the rest of the world. When the change is mature enough and its impact or potentiality exceeds a first barrier in which only certain companies or startups (change-makers) evolve, it is the sector itself that changes, making a new paradigm become little by little standard and soon, it becomes the new normal within the financial industry. We have seen it with mobile applications, invisible payments, biometry applications, wallets, using of big-data to advise the client to make personal decisions, and now we see it with blockchain, deep predictive systems and recommendation engines based on machine learning. Change is finally consolidated and propagated.


So, our model of relationship with the “change” will determine our future position inside the global innovation and transformation landscape of the financial and banking sector. Do you want to generate this “change” and boosting the financial future or only experiment it and follow to the leader’s innovations?


When we face the exponential change, innovators, technologists and professionals of the financial sector can adopt four main positions respect the “technological change”:


  • “Change Makers”: companies, departments or people that generate substantial technological changes (evolutive or disruptive), paradigms, products or services, software, algorithms, experiences susceptible to change the model if they are used by a sufficient number of financial companies and / or technological For example, the first models of predictive software, risk detection and fraud based on machine learning and alternative scoring algorithms. Also new payment models, peer-to-peer payments, crowdlending or invisible payments.


  • “Change Propagators”: thanks to the seed planted by the “change makers”, they propose a richer model of implementation, integration, evolution, government, etc. They create networks, labs and working groups, improve the initial proposal, generate debate and make it grow by implanting it in their projects and companies and contributing knowledge and experience. They make the change grow: that it reaches further and with more force. For example, the blockchain working groups of Hyperledger, R3, EEA, Quorum, or Kinakuta. Through communities and networks of important players (banks, startups, universities and large corporations), it makes decisions and increases the impact of a technology in a specific sector such as finance.


  • “Change Supporters”: those who support and like a tech change but do not really contribute to its evolution, maturation or its actual application to the industry. Many times they talk about it, they debate, they even give talks and lectures, but they do not stop being fans of the change that simply helps to spread and to be known in second and third rows of actors. Many times, they are not “shapers”, but “speakers”, also needed to share the opportunity and knowledge.


  • “Change Users”: it’s perhaps the most widespread and probably the position we occupy in most changes that affect society and other industries. However, it is not a completely passive position, since through the use of technologies, as an end user or as an integrator of the technologies in our products or services, we are generating data and making decisions that will influence how that change evolves. To paraphrase Heisenberg, in a data-driven culture and where machine learning and behavioral analytics are widely extended, the user modifies the technology used (and measured) by the simple fact of using it.


When we decide if we are going to be active or passive agents respect to the technological change in the financial industry, we will choose to a large extent how our organization will be embrace the future. Probably we are living the most exciting age for technologists and financial professionals and it’s incredible important to decide which is going to be our role in this stirring period. The future of the financial sector has already begun (next banking generation is emerging) and we should decide what role we want to have within it. It will be plenty of challenges and opportunities. We must to decide, because to have a front row seat is interesting, but it is even more so to be involved in it and be part of a unique time for digital banking and FinTech.


As William Gibson said: “The future is already here. It’s just not evenly distributed yet”.