Published on 2 July 2020
Little did we know 20 years ago that the emergence of the internet will have so much impact to our life today. Based on the International Telecommunication Union, around 47% and 87% of the households in the developing and developed countries have accessed to internet, respectively.
With the introduction of the internet, the world has become much closer, and sharing of information and knowledge has become much easier. Today, one just needs to log on to Wikipedia, YouTube, and Google to pick up the latest news, information, skill, and knowledge. There is plenty of information in the internet that can fill in the information gap as and when one needs.
At the same time, an increasing number of people today have given up the asset owned philosophy. They would rather spend their money and resources to gain new experience and convenience. The shifting of mindset from the procession of assets to acquiring services, owning to leasing have led to the new demand and industries, many co-sharing companies like Mobike, Uber, Airbnb, WeWork have sprung out in the last decade.
With the promotion of the digitisation, increasing computer processing power, rapid artificial intelligence (AI) development, advanced nano technology, wider adoption of 5G transmission and lower IT cost, the world has finally got all the ingredients it needs to enter the fourth industrial revolution.
Like the past, the fourth industrial revolution spells the beginning of the end in many industries. All the sudden, the traditional biggest companies, which are built to last are required to change their business models drastically to withstand the rapid and radical changes in the society. The unicorn companies, once the stuff of myth, are seemingly everywhere, competing with the traditional companies which take decades to reach the same status.
So, will traditional financial industry survive in the fourth industrial revolution?
What can be quite sure is that the market is going through the consolidation phase, and the financial companies have to become stronger to survive. Just like the quartz revolution, while everyone thinks that the mechanical watch will disappear after the introduction of the digital watch, history has shown us that few high end quality mechanical watch companies have survived and created a smaller but premium market segment, to reflect the product and individual differentiation.
- Financial institutions need to change their business models to survive,
- Customised personal services will only be available to the premium customer,
- Financial institutions are becoming the platform service providers and co-live with other industries that provide similar or complementary services,
- Tradition financial services will be continued to support those less developed countries, and
- Gig working will become a norm in the financial industry.
With the industrial revolution, more financial institutions will likely be consolidated. The mass market will be served by self-service banking, chatbot and robotic advisory. AI will be widely used with a fraction of cost. On the other hand, customised services which are relying on advance technology will be provided by the personal consultant to the premier customer.
Telecommunications companies will become the main cybersecurity and cloud storage providers. Payment will be digitalised, either through cryptocurrency, digital money, or eWallets. Banks may no longer be the main payment intermediates and providers in the remittance business, instead, the market will be shared with utilities, credit cards and ecommerce companies that have wide customer base. These companies will offer interest or loyal points to the customer for their deposit maintained with them while charging small fees to the B2C companies, fund management and insurance companies for the advertisement, referral and using the customer profiling information.
While said, it does not mean that all traditional financial services will be disappeared. The less developed countries will still need the support of traditional services until the IT infrastructure, internet and digitalisation become widely available in the countries. Until then, we will likely see multiple banking models in the world.
In term of workforce in the financial industry, the promotion of freelance work and pay-as-you-work may become a growing trend. It is estimated that over 36% of workers in United States participate in the gig economy today, either through their primary or secondary jobs. The demand for the specific knowledge to support the shift of paradigm will be required.