Emerging technologies such as artificial intelligence (AI), 5G, distributed ledger technologies and quantum are increasingly being used by financial services firms and forming clusters driving innovation throughout the sector. The World Economic Forum (WEF) announced that these advances can offer new services and savings to both consumers and financial institutions on 10 September. While financial executives recognise the promise of emerging technologies, many financial services firms are struggling to develop comprehensive innovation strategies given the number of technologies maturing in the industry. A new report titled Forging New Pathways: The next evolution of innovation in financial services, by the WEF, offers a framework for understanding how AI is combining with other emerging technologies and shaping the financial services industry. Drew Propson, head of technology and innovation in financial services at the WEF, says it is not sufficient to look at individual technology implementations. He says 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 see changes as new technologies lead to new financial services and products which include:
· Just-in-time lending: Tailored small to mid-sized business lending products and personalised advice provided proactively or in the moment as 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 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
“These are just a few of the new opportunities and these changes will shift current competitive dynamics and market trends. Strong organisational fluency across each of the technologies and a deep understanding of the impact of their combined capabilities will be a key differentiator of winning organisations and financial institutions will need to be fundamentally different to take full advantage of the opportunity technologies offer,” says Propson.
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.
Rob Galaski, vice-chair of Financial Services at Deloitte Canada, says access to the next wave of transformative capabilities will be increasingly controlled by service providers who sit outside the traditional boundaries of the industry and as industry lines blur, institutions will need to consider the importance of partnership. He says a well-defined ecosystem mindset is a priority for financial institutions and they will need to develop modern cross-industry security and liability frameworks, as well as adopt flexible connectivity and data processing architecture.
The Forging New Pathways: The next evolution of innovation in financial services report is the result of over 200 interviews and nine international workshops over the past year as part of the Forum’s AI in Financial Services project. Read the full report here: https://www.weforum.org/reports/forging-new-pathways-the-next-evolution-of-innovation-in-financial-services