A brief look at the other side of the card
Most of us have debit or credit cards in our possession. We become almost indignant when for some reason we cannot make a purchase or get cash from an ATM. It’s easy to forget that within the average age of a human, these modern pieces of “financial technology” didn’t even exist. The words to describe them didn’t exist. The technology necessary to make them work securely and safely didn’t exist. Quite often, this experience is demonstrative of how important technology in our lives presents itself. There is a transition from unknown to essential. The difference in modern times seems to be that the time between conception and ubiquity is so short that there are often unintended consequences. Sometimes, the pace causes us to leave opportunity on the table. At the worst, unintended consequences create problems that can only be solved with even more future technology. Thus the cycle continues at an ever-faster pace.
Deconstructing the term – What’s it all about
When I was growing up, there was a popular song, Quinn the Eskimo by Bob Dylan. I loved that song. There have since been many remakes of this song (the Manfred Mann version is my favorite), which tells the tale of how things will be different when Quinn the Eskimo arrives. Things might be slow, with “not much going on” right now, but when Quinn the Eskimo gets here, everything will be grand. I remember listening to that song and imagining meeting Quinn some day. What did he look like? Why was he so cool? How will we know when he gets here? At a later age, I remember wondering more generally, how do we know he isn’t already here? Why can’t this party get started without him? In many ways, I feel the same way about FinTech.
The “FinTech Revolution” has been around much longer than some people think: it has been inconspicuously unfolding since technology was integrated into financial decision-making. Evolutions, like revolving personal credit and microfinancing have been married with increasingly agile technology, like automated clearing infrastructures and encrypted transactions, to make the arena increasingly connected, transparent, and performant. At the same time, advances in artificial intelligence and big data analytics promise to help us make decisions in the future that are faster, using far more sources of data, and with a degree of precision and agility that is not possible today.
The term FinTech has multiple definitions today. It is broadly inclusive of a number of emerging technologies and use cases. It involves both business and consumer finance. The phenomenon is not new, but the pace of change is ever accelerating, as are the ways in which new technologies can be used to make new sorts of financial decisions.
Lots going on – Where are we, and how we know it?
Anyone in any industry impacting the space we call FinTech can point to massive disruption, and wonderful possibility. For example, in the B2B finance space, there are some fascinating tailwinds, like blockchain, cloud collaboration, and AI decision-making. Of course, none of these areas is “done cooking,” and there are many things that need to come to pass before full adoption in the space, but the pace of change favors the nimble. Most of the impact of these areas of innovation is beneficial to FinTech, at least in the short term, and will amplify the effectiveness of decision-making.
At the same time, there are areas of disruption which warrant careful attention lest excellent enablers become formidable problems for the industry. Cryptocurrency can be a wonderful thing, if we manage certain potential use cases that might enable malfeasance. Cyber-fraud threatens to allow bad actors to use the same massive panoply of information available to make financial decisions in an instant to commit fraud in an instant.
If we look at the building blocks of FinTech, including payments, financing, analytical methods, regulatory evolution, and collaborative technologies, we can see no corner where the groundswell of change is not evident.
FinTech’s Future – Where to go from here…
The leaders of today are right to consider evolution of FinTech in their corporate strategy. There is no doubt that FinTech will continue to disrupt. That disruption will bring both risk and opportunity. The journey to FinTech adoption in business systems and processes is not like other journeys, however. This journey has a “from” and a “to” that will change as we continue to evolve.
Consider the following drivers of disruption:
- From Emerging to Everywhere – A recent survey by LinkedIn clearly highlights the fact that FinTech is top of mind for the industry. Many opinions are focused on risk. For example, a quarter of industry professionals are concerned that automation will impact job security while nearly a third of financial advisors see FinTech as a threat due to reduced human-client relationships. These observations are the beginning of an important dialog.
- From Big Data to Big Insight – As knowledge becomes more assessable through the discovery and synthesis of new types of data, decisions can be made that are far more inclusive of the entire ecosystem. For example, financial decisions may transcend the behavior of the organization seeking credit to the factors that drive ongoing prosperity of that organization, including unprecedented events and changing social reaction. Industries such as Healthcare and Travel are good examples of dynamics where information has become far more accessible, resulting in dramatic shifts in the nature of the industry.
- From Connecting Things to Transforming Industry – There is no doubt that more things are connected with modern technology. Supply chain integration has been going on for decades with technologies like EDI, ERP, and process automation. But we are recently seeing massive integration of the demand side of the equation. Customers generate signals that impact suppliers’ decisions and strategies. The world of digital advertising, as an example, has massively embraced the concept of observing digital behavior to connect the right offer to the right person at the right time. As this concept of connecting things permeates the world of FinTech, we will see more agile decision-making, with offers going to multiple parties and demand balanced by willingness to collaborate according to much more complex dynamics. FinTech promises to connect buyers, sellers, and business counterparties in ways that have never before been possible.
- From Regression to Artificial Intelligence – Financial decision-makers have used information and analytical methods to make decisions for decades. As computing power has increased, and data has become more reliable, techniques such as machine learning and logistical modeling have delivered stable methodologies to make well-founded and defendable decisions. Analytical methods are being disrupted now, with new methods becoming available which were never before possible. Non-regressive, neuromorphic, and cognitive methods, methods that rely not only on observing past data but also on learning in the moment with goal modification, are now a reality. The implications of this shift in analytic methods portend massive disruption in the arena of financial decision-making.
Financial decision makers must focus attention on building skills that embrace emerging FinTech methods and technologies. The pace of evolution demands that we adopt new skills and new thinking to match the rapidly changing face of data and analytic evolution.