Internet of finance to disrupt 2021 with new business models
In 1943, the president of IBM, Tom Watson, famously remarked that he saw a worldwide market for “maybe five computers”. Bringing that forecast up to date, IDC, a global technology research firm, predicts that by the time we reach 2025 the planet will host 56 billion connected devices.
The internet of things (IoT) is not a new concept. But growing numbers of internet-capable devices and sensors, available at cheaper prices, will increasingly connect to faster networks with more capacity – particularly as 5G mobile networks are rolled out. The resulting wave of innovation will spawn new business models and further reshape financial services.
As we see the future, this is a world where financial management is effortless – where savings and investments are automated, optimised and personalised based on someone’s unique preferences and behaviour. In many of the trends already in motion across the industry right now, we begin to get a sense of how this future will come to be – or, to put it another way, we see the emergence of an Internet of Finance.
Much of the change we see in the financial sector comes in response to customer expectations. Across all industries, people demonstrate in the services they favour their desire for experiences that are faster, simpler, or better value – benefits that technology makes possible.
Globally and across Asia, over the last decade we have seen a surge of innovation in the traditionally conservative finance sector. Challenger banks have emerged to take on established providers. They have embraced an intuitive, mobile-first experience. Impressive rates of customer acquisition – with some new banks now serving millions of customers – indicates that they are fulfilling genuine customer needs. Traditional providers are rising to the challenge with their own digitally native offerings.
As more connected devices come online, they too will drive improvements in the customer experience. Already we have smart watches and health trackers that give clues on a person’s lifestyle and financial behaviour. As humanity connects other items, the depth of this information, and the quality of the advice we can provide based on it, will continue to grow.
Regulators too are playing their part in driving a more dynamic environment. Many of Asia Pacific’s significant financial centres – including Hong Kong, Singapore, Tokyo and Sydney – have introduced open banking initiatives. Open banking’s standardised Application Programming Interfaces (APIs) facilitate the smooth exchange of account, payment, and transaction information between service providers. They provide pathways for innovation and collaboration and enable services to be combined in novel ways. For traditional financial institutions, open banking provides a useful route for harnessing the energy and creativity prevalent in the fintech space.
So called ‘regulatory sandboxes’ are another area where monetary authorities across Asia are seeking to foster innovation. The more relaxed regulatory framework of a sandbox allows service providers to explore new approaches without the heavy and premature burden of full compliance.
Of course, in finance perhaps more than in any other sector, the overarching context for all these developments is how to balance a desire for speed and convenience against privacy, security and trust considerations. The careful management of these factors will mean that progress will be incremental.
But these steps take us closer to a world of highly personalised financial services that reflect and adapt to the full range of financial and life circumstances. We’re at very early stages right now but this process will see triggers and resulting actions become ever more finely grained – as providers incorporate more and more micro-signals for wealthcare technology to refine investment decisions.
This process also implies a greater convergence of financial worlds – for instance between sectors such as insurance, banking and wealth management, where an individual’s requirements, and the funds they have for each, are interlinked.
At Quantifeed, we aim to play our part in helping financial services institutions prepare for this coming world. We are increasing levels of automation and introducing straight-through processing to new operational areas. Using our comprehensive set of APIs, banks, insurance companies and wealth management firms can plug new capabilities into existing infrastructure – to manage asset allocations, automate trades, rebalance model portfolios and generate notification events at scale.
With such actions, the industry is laying down the guide rails for the Internet of Finance to gradually take shape.
By Ross Milward, CTO and Co-founder, Quantifeed