We were interested to read the update from the World Economic Forum in their August 2017 publication “Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential In Financial Services”. The report forms the third phase of work, started in 2014, into understanding the potential impacts of transformative new entrants to financial services, which fintech innovations were most relevant, the implications on consumers, existing providers, regulatory impacts and the infrastructure underpinning the future of financial services (such as blockchain).

Specifically, it considers;

1. What are the innovations that have had the greatest impact since the report was commissioned?
2. How have they changed the structure of financial services and how they are consumed? and;
3. What are the broader implications for the sector?

At this point, it is important to note the contributors to the WEF report consist of a steering group and working group of senior leaders from mainly banks, insurers and payment providers, with some VC’s (largely at the working group level). That isn’t to detract at all from the findings, but is an important lens from which to consider the viewpoint (indeed, there are some points where the contributors are also presented as solutions to industry trend, such as “externalisation”).

So what are the conclusions? In a nutshell. whilst fintechs have so far failed to disrupt the status quo, they have “laid the foundation for future disruption”. In other words, we are still at the start of the beginning. No surprise really, given that whilst the barriers to entry in technology innovation have dramatically lowered, the implementation of there within the highly regulated, complex ecosystem of financial services has proved more challenging. Indeed, whilst changing the shape and approach to innovation has been a success, as well as raising the consumer expectation bar, the actual material changes have been largely periphery or improvements to existing infrastructures.

Whilst it is recognised that the incumbent players have responded to the pace of the fintech ecosystem, both by embracing startups and ideas, we don’t believe that this is as optimal as it could be. The report highlights that some firms have waited to see how new technology gain traction “before deploying their own solutions” is symptomatic of the issue. There is still an arms-length, protectionist attitude which pervades and is ultimately detrimental to the long-term business model of many financial institutions.

Of course, this is only human nature, and one might argue even more so in this particular sector.

The report cites 8 disruptive forces which have the potential to shift the landscape and competition in the coming years. Many of these are no surprise, from the power transferring to the customer interface (experience ownership) through to the reliance of financial institutions on large technology firms. The latter is something that we have written about a lot about over recent years, and we strongly believe that by accelerating technology partnerships and shifting delivery outside of the organisational boundaries, it would really benefit many financial services firms. Somebody will take the plunge and steal a march on the market…surely.

The report delves into the implications for different sectors (Insurance, Digital Banking, Lending, Crowdfunding etc.), what the end states might be and conclusions, such as in Investment Management the robo-advisors which are commoditsing the advisory value proposition whilst humans will still maintain a crucial role in products selection, particularly for high net worth individuals.

Let’s pick on Digital Banking though, just focus on a little. In this space the report highlights the importance of capabilities in customer-facing analytics and intelligence that are increasingly important from a competitive differential. Who are best at this, have a richness and, more importantly, a golden source, of data? The big four? The major insurance companies? Unlikely and, more importantly, the systems, people and processes are not going to change that in the short to medium term.

Given the conditions above, we are likely to see the usual technology companies that do excel in this space such as Google, Amazon, Facebook and the like (maybe Uber) chose to enter the market distribution of financial services products in the short term (see our prediction from 2011!). Whilst financial services firms establish technology partnerships with some of these tech firms, it is not a huge leap of thinking to have them pivot to providing competitive services very quickly. They have the data, the customer engagement, the brand, the scale and the capital to do this, plus the ecosystem of partners to plug any gaps.

Ah, but what about the regulators! From their perspective, we expect a softening of stance towards the distribution of products by tech firms, whilst having a close eye on the potential market dominance and systematic risk profile. In terms of the entrants, we already see technology easing the burden of regulation in the coming years, rather than employing an army of human beings, and the tech firms are again in the driving seat to benefit from this.

Maybe we are closer to “FaceBank” than ever.

The consignment to history of what were key jobs at the time is, of course, a natural consequence of technological advancement (see our previous article on the future resource market). Replaced by ‘new’ tech of the time, everything from switchboard and elevator operators to “ice cutters” have their place in the list of professions which have long since left our daily job boards.

Nevertheless, over the past few years there has been an increased amount of coverage given to the consequences of new tech and the 4^th Industrial Revolution (including by leaders at last month’s World Economic Forum), which is said to lead to jobs currently held by men and women becoming filled by machines in pretty much every sector and industry in the global economy.

Thomas Frey, Senior Futurist at the DaVinci Institute, and Google’s top rated Futurist Speaker, predicts that by 2030 a whopping 2 billion jobs will no longer exist (to put that in context… around half of all the jobs on the planet). Does this mean that we have a 50 per cent chance of becoming jobless within the next few decades, because of automation and other new technologies, such as robots being introduced?

Worry not!…apparently the answer is no.

According to Frey, what it means is that our jobs are transitioning, and it is happening “at a higher pace than ever before in history”. The futurist stresses that due to their catalytic nature, several innovations, including driver-less cars, teacher-less education and 3D-printable houses, are actually going to create completely new industries. This view is supported by a recent report, Fast Forward 2030: The Future of Work and the Workplace, which states that;

“Losing occupations does not necessarily mean losing jobs – just changing what people do”, and by Principal Researcher at Microsoft Research, Jonathan Grudin, who said that “Technology will continue to disrupt jobs, but more jobs seem likely to be created”

As an example, let’s take 3D printing, which Chris Anderson, Managing Editor of Wired Magazine believes to be even bigger than the Internet. Frey predicts, that as 3D printing matures, professions such as clothing manufacturing and retailing, as well as lumber, rock, drywall, shingle and concrete industries are going to disappear. However, new jobs will become available in the areas of 3D printer design, engineering and manufacturing (although, in one scenario a 3D printer can print a baby 3D printer); there will be a demand for 3D printer repairmen, product designers, stylists, engineers and ‘ink’ sellers.

While predicting that even though robots will fill some jobs, others will benefit from this productivity growth and subsequently will have more income and more disposable income. This in turn will increase the need for other jobs. Heidi Shierholz, Chief Economist at the U.S. Labor Department, implies that the pace of change might at times be exaggerated. During the Will your Job Disappear by 2024? Bloomberg Benchmark podcast she stated that actually we are not seeing a massive acceleration in productivity, which would signal that robots and automation have some way to go in removing the levels of workforce that some are predicting. Indeed, while historically productivity has grown around 2 per cent a year, over the last 10 years it has actually been a little bit slower.

Are we being over dramatic about the speed of the changes leading to an increased man vs machine conflict in the workplace? All we can say for certain is that whilst the more extreme scenarios are increasingly likely to make headlines and reach your feeds, it is certain that sooner or later technology will change your job and those of the next generation.