Edition: August 21st, 2021
Curated by the Knowledge Team of ICS Career GPS
Excerpts from article by Stephan Sigrist, published on the World Economic Forum website (weforum.org)
- The foundation of tomorrow’s financial industry is based on data and algorithms.
- But digitalisation is not an end in itself.
- Long-term innovation will be marked by the linking of economic and social progress.
- The first step, therefore, is to understand the opportunities and limitations of digital solutions.
The diagnosis is clear. After the pandemic, the world has irrevocably arrived in the digital age. With regard to the financial industry, it has become clear to the last doubters that data, algorithms and virtual communication will be at the foundation of business models and customer interactions.
Digitalisation of the financial industry is taking place with the disruption caused by blockchain solutions and AI-based applications. However, there’s also the increasing realisation that technology alone is not a strategy. It is only a means to an end.
For instance, sending financial market movements to private customers or small savers in real time on their smartphones helps little in increasing their returns.
Also, without the trust of the general public, neither cryptocurrencies nor algorithm-based investment recommendations will be successful in the long term. Moreover, when it comes to complex issues, direct contact between people is key.
So, it is becoming clear that long-term solutions must be based on the future needs of users — such as enabling effective risk assessment and robust financial planning.
Keeping all this in perspective, three fields of action can be derived for future-oriented and resilient financial service providers:
1. Early recognition of tech possibilities by companies and financial regulators
- Companies and financial regulators have to deal with new technical possibilities in a forward-looking manner.
- This will enable them to translate the opportunities and challenges to business that is in tune with the social framework conditions.
- The consequence will be a better ability to face the future, one not characterised by the constant pursuit of the latest trends but by long-term thinking.
2. Aligning business models with future demands of users and society
- The core of resilience lies not only in restoring the status quo, but in aligning with the future demands of the market.
- This also requires defining what that core will be in the future.
- Looking ahead, it is obvious that the transition to a data-based and sustainable economy requires forward-looking investments.
- For financial service providers as “true transformers”, this requires the forward-looking identification of societal demands and the linking of market-based progress and societal progress.
- This lays the foundation for trust.
3. Development of strong partnerships to ensure ‘digital wellbeing’ of customers
- To develop user-and-society-oriented offers, stable & efficient platforms with interfaces for integrating new innovative solutions are needed.
- This requires defining the binding standards at both the national and international levels.
- Additionally, to facilitate the ‘digital wellbeing’ of customers, new partnerships that go much further than traditional banking or insurance ecosystems are required.
- Companies also need to position themselves as organisations that understand and value the interconnection between economy and society, and accordingly offer truly innovative solutions.
(Disclaimer: The opinions expressed in the above mentioned article are those of the author(s). They do not purport to reflect the opinions or views of ICS Career GPS or its staff.)