Future of Financial Services - Five technological trends changing the banking, insurance, payments and wealth management industries
Future of Financial Services - Five technological trends changing the banking, insurance, payments and wealth management industries
SUMMARY
The world of financial services is changing. The recent introduction of FinTech innovations is beginning to shake up the market and improve and streamline financial services and disrupt the order of things. Furthermore, today’s generation of customers have very different habits and requirements and insurance companies, banks, currencies, payment services and financial advising will all have to change if they are to remain relevant to the coming generations. Incumbent players in the industry are listening however and many have implemented significant changes to their business models in order to adapt for the future. For instance; Block Chain technology has shown itself to have a great number of potential uses and banks want it for their own. Cashless societies are moving closer to reality and in certain countries, people are finding carrying cash increasingly irrelevant. Cybercrime is now big business and protecting customers from attack is now expensive and difficult. For its part, the stale insurance market has been using new technologies to break the mold and robo-advisors are becoming the norm in the wealth management industry.
KEY HIGHLIGHTS
The rise of cryptocurrencies is due in the main to the clever technology that allows it to function as a kind of distributed ledger system, called the Block Chain. Many in financial services have been skeptical of cryptocurrencies; seeing their trading volatility and resistance to normal financial regulation in a dim light. However, whilst spurning cryptocurrencies, the financial services industry has woken up to the potential of the Block Chain technology. The Block Chain is effectively a far superior and safe database to any current systems that can be altered in multiple places at once across country borders and markets and can work for many more things than just money alone.
The cashless economy has been a longstanding ambition of the financial services industry. Now changes in culture towards the use of digital money for everyday purposes, even tiny purchases, and innovative technology, have allowed countries such as Sweden to move very close to a cashless society. Innovation in transactions and banking has spread efforts to grow the cashless economy to the developing world, ensuring the move away from hard currency is likely to become a global affair. Problems, of course, remain and must be overcome to ensure concerns regarding change are addressed.
Robo-advisors are a new category of financial service product that can offer some unique benefits to those interested in wealth management services. From start-ups to the biggest incumbent players, most institutions in the wealth management industry have their own services. Companies offering these products are capturing the desire for cheaper monthly rates, advice more heavily based on mathematics and fully impartial advice. Essentially what these companies are trying to provide, or what is the long term aim of this type of product, is an AI wealth management service and the robo-advisor market today is a kind of halfway house between a traditional human advisor and what will eventually be the norm, when full AI tools role out in the future.
SCOPE
SUMMARY
The world of financial services is changing. The recent introduction of FinTech innovations is beginning to shake up the market and improve and streamline financial services and disrupt the order of things. Furthermore, today’s generation of customers have very different habits and requirements and insurance companies, banks, currencies, payment services and financial advising will all have to change if they are to remain relevant to the coming generations. Incumbent players in the industry are listening however and many have implemented significant changes to their business models in order to adapt for the future. For instance; Block Chain technology has shown itself to have a great number of potential uses and banks want it for their own. Cashless societies are moving closer to reality and in certain countries, people are finding carrying cash increasingly irrelevant. Cybercrime is now big business and protecting customers from attack is now expensive and difficult. For its part, the stale insurance market has been using new technologies to break the mold and robo-advisors are becoming the norm in the wealth management industry.
KEY HIGHLIGHTS
The rise of cryptocurrencies is due in the main to the clever technology that allows it to function as a kind of distributed ledger system, called the Block Chain. Many in financial services have been skeptical of cryptocurrencies; seeing their trading volatility and resistance to normal financial regulation in a dim light. However, whilst spurning cryptocurrencies, the financial services industry has woken up to the potential of the Block Chain technology. The Block Chain is effectively a far superior and safe database to any current systems that can be altered in multiple places at once across country borders and markets and can work for many more things than just money alone.
The cashless economy has been a longstanding ambition of the financial services industry. Now changes in culture towards the use of digital money for everyday purposes, even tiny purchases, and innovative technology, have allowed countries such as Sweden to move very close to a cashless society. Innovation in transactions and banking has spread efforts to grow the cashless economy to the developing world, ensuring the move away from hard currency is likely to become a global affair. Problems, of course, remain and must be overcome to ensure concerns regarding change are addressed.
Robo-advisors are a new category of financial service product that can offer some unique benefits to those interested in wealth management services. From start-ups to the biggest incumbent players, most institutions in the wealth management industry have their own services. Companies offering these products are capturing the desire for cheaper monthly rates, advice more heavily based on mathematics and fully impartial advice. Essentially what these companies are trying to provide, or what is the long term aim of this type of product, is an AI wealth management service and the robo-advisor market today is a kind of halfway house between a traditional human advisor and what will eventually be the norm, when full AI tools role out in the future.
SCOPE
- Examining the changing implications of new Fintech coming in to the FS market
- Looking at the disruptive forces in the payments, cryptocurrency, blockchain, cyber crime and insurance world
- Learn whether the hype surround these new innovations are justified and just what impact they might have
- What is cryptocurrency and why are banks spending so heavily in developing their own types of blockchains?
- Just how far has the idea of a cashless society spread and what the factors effecting its adoption?
- What is the financial services industry doing to counter the highly dangerous threat from cyber crime?
- Just how has new technology been able to revitalize certain areas of the insurance industry?
- What are robo advisors and how are they helping to shake up the wealth managment industry?
Executive Summary
Block Chain and Cryptocurrency: Financial markets racing to adopt tech
Cashless economy spreading as culture shifts and technology solves problems
Financial services developing to counter cyber-crime threats
Insurance market set for rapid change after embracing technology
Robo-Advisors: Complex algorithms and AI are proving popular in wealth management
Block Chain and Cryptocurrency: Financial markets racing to adopt the tech
Block Chain is the potential foundation of a more secure internet ledger system
Block Chain operates like a network file that everyone can access
Cryptocurrency mining is an entirely new industry that runs the Block Chain
Currency value allows it to escape all bank charges currently
Cryptocurrencies Bitcoin and Ethereum are very different enterprises
Banks have to solve a particular problem with Block Chain tech
R3 is one of the start-ups hoping to woo the big banks
IBM is building a Block Chain network for European banks
Cashless economy spreading as culture shifts and technology solves problems
World leader Sweden developing society around an absence of cash
Success of cashless systems in developing countries represents opportunity for financial services
Potential gains for banks from cashless transactions are substantial but questions remain on appetite from businesses
Transition to cashless society comes with problems and resistance from end-users
Financial services developing to counter cyber-crime threats
Companies must change to meet evolving cybersecurity environment
Regulatory authorities responding to criminality, forcing companies to act
Major banks are improving fraud detection, reducing risk to all concerned
Regulatory technology is changing how financial services combat criminal threats
Insurance market set for rapid change after embracing technology
InsurTech is changing the insurance market, allowing disruptors to impart much needed dynamism
Big data is changing how insurers do business, allowing better fraud detection and tailoring policies to individual consumers
Insurance protecting against cyber-attacks is a major growth area but uncertainty remains
Micro insurance opens up markets to new products created specifically for developing economies
Robo-Advisors: Complex algorithms and AI are proving popular in wealth management
Robo-advisor products are those which include some element of automation
Incumbents and startup players prefer different types of products
D2C advisory platforms are the main route that start-ups are using, but incumbents still dominate
Business-to-business advisory services act as a supplemental product
Hybrid advisory services are mainly run by the incumbent big players
Robo advisor products are currently flourishing in developed markets with the US leading the way
Much of the product offering is generally poor and lacking in depth
Restricted advice may mean that ultimately the service is worse
Robo advising may actually be a misnomer, customers are expecting an AI product
Robo advising and digital wealth can’t be ignored because some people prefer it
Points of interest
Appendix
Sources
Further Reading
Ask the analyst
About MarketLine
Disclaimer
Block Chain and Cryptocurrency: Financial markets racing to adopt tech
Cashless economy spreading as culture shifts and technology solves problems
Financial services developing to counter cyber-crime threats
Insurance market set for rapid change after embracing technology
Robo-Advisors: Complex algorithms and AI are proving popular in wealth management
Block Chain and Cryptocurrency: Financial markets racing to adopt the tech
Block Chain is the potential foundation of a more secure internet ledger system
Block Chain operates like a network file that everyone can access
Cryptocurrency mining is an entirely new industry that runs the Block Chain
Currency value allows it to escape all bank charges currently
Cryptocurrencies Bitcoin and Ethereum are very different enterprises
Banks have to solve a particular problem with Block Chain tech
R3 is one of the start-ups hoping to woo the big banks
IBM is building a Block Chain network for European banks
Cashless economy spreading as culture shifts and technology solves problems
World leader Sweden developing society around an absence of cash
Success of cashless systems in developing countries represents opportunity for financial services
Potential gains for banks from cashless transactions are substantial but questions remain on appetite from businesses
Transition to cashless society comes with problems and resistance from end-users
Financial services developing to counter cyber-crime threats
Companies must change to meet evolving cybersecurity environment
Regulatory authorities responding to criminality, forcing companies to act
Major banks are improving fraud detection, reducing risk to all concerned
Regulatory technology is changing how financial services combat criminal threats
Insurance market set for rapid change after embracing technology
InsurTech is changing the insurance market, allowing disruptors to impart much needed dynamism
Big data is changing how insurers do business, allowing better fraud detection and tailoring policies to individual consumers
Insurance protecting against cyber-attacks is a major growth area but uncertainty remains
Micro insurance opens up markets to new products created specifically for developing economies
Robo-Advisors: Complex algorithms and AI are proving popular in wealth management
Robo-advisor products are those which include some element of automation
Incumbents and startup players prefer different types of products
D2C advisory platforms are the main route that start-ups are using, but incumbents still dominate
Business-to-business advisory services act as a supplemental product
Hybrid advisory services are mainly run by the incumbent big players
Robo advisor products are currently flourishing in developed markets with the US leading the way
Much of the product offering is generally poor and lacking in depth
Restricted advice may mean that ultimately the service is worse
Robo advising may actually be a misnomer, customers are expecting an AI product
Robo advising and digital wealth can’t be ignored because some people prefer it
Points of interest
Appendix
Sources
Further Reading
Ask the analyst
About MarketLine
Disclaimer
LIST OF TABLES
Table 1: POS transactions per card at terminals provided by resident PSPs 2011-2016
Table 2: Main reasons and business benefits of using big data in OECD countries, 2015
Table 3: Types of investor reaction to robo investing
Table 1: POS transactions per card at terminals provided by resident PSPs 2011-2016
Table 2: Main reasons and business benefits of using big data in OECD countries, 2015
Table 3: Types of investor reaction to robo investing
LIST OF FIGURES
Figure 1: Ethereum uses a distributed shared network
Figure 2: Average number of daily bitcoin transactions 2009-2017
Figure 3: Types of Block Chain networks
Figure 4: IBM Block Chain features compared with Ethereum and Bitcoin
Figure 5: M-Pesa revenues 2012-2016 (KESbn)
Figure 6: M-Pesa outlet in Nairobi, Kenya
Figure 7: Number of credit cards in China, 2006-2014 (million)
Figure 8: Value of payment transactions per card, Germany 2011-2016 ($)
Figure 9: Value of banking market in Asia-Pacific ($tn) 2009-2016
Figure 10: Number of ‘card not present’ fraud in United Kingdom 2011-2016
Figure 11: Global willingness to use a digital only bank, 2016
Figure 12: Timeline of Regtech developments March 2015 to March 2016
Figure 13: Lemonade policies taken by age group September 212016 to January 18 2017
Figure 14: Value of global non-life insurance 2010-2016 ($tn)
Figure 15: Use of micro insurance by country in East Africa 2014 (% of population)
Figure 16: Robo-advisors are replacing the traditional advisor role
Figure 17: Top global Robo-advisor firms
Figure 18: Geographic distribution of robo-advisors and number in 2017
Figure 19: Mature investors preferred method of advisor versus that of millennials
Figure 1: Ethereum uses a distributed shared network
Figure 2: Average number of daily bitcoin transactions 2009-2017
Figure 3: Types of Block Chain networks
Figure 4: IBM Block Chain features compared with Ethereum and Bitcoin
Figure 5: M-Pesa revenues 2012-2016 (KESbn)
Figure 6: M-Pesa outlet in Nairobi, Kenya
Figure 7: Number of credit cards in China, 2006-2014 (million)
Figure 8: Value of payment transactions per card, Germany 2011-2016 ($)
Figure 9: Value of banking market in Asia-Pacific ($tn) 2009-2016
Figure 10: Number of ‘card not present’ fraud in United Kingdom 2011-2016
Figure 11: Global willingness to use a digital only bank, 2016
Figure 12: Timeline of Regtech developments March 2015 to March 2016
Figure 13: Lemonade policies taken by age group September 212016 to January 18 2017
Figure 14: Value of global non-life insurance 2010-2016 ($tn)
Figure 15: Use of micro insurance by country in East Africa 2014 (% of population)
Figure 16: Robo-advisors are replacing the traditional advisor role
Figure 17: Top global Robo-advisor firms
Figure 18: Geographic distribution of robo-advisors and number in 2017
Figure 19: Mature investors preferred method of advisor versus that of millennials
