Key Points:
- The book “The Technological Revolution in Financial Services: How Banks, Fintechs, and Customers Win Together” provides insights into how traditional banks can partner with fintech companies to offer better and more innovative services at a lower cost.
- The financial industry is undergoing a transformation driven by heightened regulation, technological innovation, and demographic changes.
- Regulatory responses to the global financial crisis have facilitated a wave of innovation and technological disruption, leading to increased competition from non-regulated players.
- Business schools and banks are broadening the scope of financial teaching to include culture, ethics, and non-financial risks.
- New technologies, such as artificial intelligence and blockchain, present opportunities for commercialization and equipping start-ups with business judgment.
- Sustainable finance needs to move beyond its niche in financial markets to address climate-related risks.
- Gender diversity in the financial sector has been linked to improved financial performance and other benefits.
- Senior leaders in the financial sector can take concrete actions to increase gender diversity in their organizations.
- The technological revolution in banking will lead to an improved customer experience.
The book The Technological Revolution in Financial Services: How Banks, Fintechs, and Customers Win Together provides a roadmap for the evolving financial industry. It emphasizes that while traditional banks, asset managers, and insurers will continue to dominate the sector, the most successful firms will collaborate with fintech companies to offer better and more innovative services to retail customers and small businesses at a lower cost. This technological revolution will benefit customers and lead to a more inclusive financial system.
The book identifies three structural forces driving the transformation of financial services globally. These include heightened regulation in response to the global financial crisis, innovation fueled by new technologies like fintech 3.0, and demographic changes such as the professional advancement of millennials and the retirement of baby boomers.
One unforeseen consequence of regulatory responses to the global financial crisis was the wave of innovation and technological disruption within and outside the financial industry. While these regulatory reforms made the sector safer and more stable, they also made it less profitable, less liquid, and more fragmented. Competition from non-regulated players intensified, with industry insiders leaving incumbents to launch start-ups that drained industry profit pools.
As a result, business schools and banks have broadened the scope of financial teaching to include culture, ethics, and non-financial risks. Recognizing the importance of culture in creating social norms, market participants are considering “non-financial” risks such as employee conduct, technological disruption, and climate change.
New technologies such as artificial intelligence and blockchain present both opportunities and challenges. While they create new opportunities, there is a need to commercialize innovations and provide start-ups with the necessary business judgment to succeed. Initiatives like Rotman’s Creative Destruction Lab help science-based ventures raise capital, scale their businesses, and navigate market failures.
The book also highlights the importance of sustainable finance in addressing climate change risks. Climate-related events are generating more frequent extreme-loss events, and the financial sector plays a critical role in channeling savings to sustainable investments and helping manage new climate-related risks.
In addition, the book emphasizes the importance of gender diversity in the financial sector. Increased gender diversity has been linked to improved financial performance, talent attraction and retention, innovation, productivity, and customer engagement. To increase gender diversity, senior leaders can take concrete actions such as recognizing and addressing hidden biases, setting measurable targets, providing gender-neutral job descriptions, changing hiring practices, matching women with senior sponsors, and providing female role models.
In conclusion, the technological revolution in banking will lead to an improved customer experience. The book provides valuable insights for both incumbents and new entrants in the financial industry as they strive to put the customer first and navigate the evolving landscape.
