Written by: Spiros Margaris | Margaris Advisory
This article is part of the ‘ T hink Further ’ series sponsored by Fred Alger Management .
When I was invited by the Fred Alger Management to participate in their creative program called ‘ Think Further ’, I felt very honored and at the same time challenged.
To predict the future of the financial technology (Fintech) industry, I was wondering how to do justice to an industry that quickly adapts, develops and has such a disruptive impact on the financial sector.
For any readers who are not familiar with Fintechs, I like to provide a simple definition. Fintechs are mostly startup companies who want to change the banking experience and the financial industry through innovations and technology. In the process, they hope to make the financial sector more accessible, less expensive, and simpler.
I firmly believe that Fintechs will change the financial industry the way another innovative disruptor, Amazon, changed the business model of many retailers forever.
The hottest areas in Fintech, according to a recent report by Accenture and the Partnership Fund for New York City (released in June 2015), are payments, lending, trading technologies, and wealth management. The significant interest generated in these areas, along with billions of dollars in investments by banks, insurers, venture capitalists, and tech giants further fuels the explosive growth of the Fintech industry.
Everything in Fintech is still up for grabs and trends, interests, and emphasis will continue to change as customer and industry demands change.
If I had to pick what disruptive financial technology will impact a multitude of fields in the next 5 – 10 years, I would emphasize two: blockchain technology and cognitive computing.
My first prediction: Blockchain Technology
I want to start my predictions by talking about blockchain technology because it already has a huge disruptive influence and impact on innovations in Fintech, financial services, and non-financial markets.
Many financial incumbents are putting enormous amounts of money and research behind blockchain technology to develop commercial applications.
They all see tremendous savings and earnings potential by eliminating the need for a “trusted middleman” as the technology can provide a public ledger of transactions.
Although most incumbents feel strongly about blockchain technology, it is not yet known what applications and uses will emerge that will finally change the financial industry status quo. I want to stress that financial institutions are still at the beginning of making blockchain technology work for them in the real world. Some of the key challenges and risks are the computing power needed, energy to support the system, regulation, and reliability.
Those obstacles will eventually be overcome through experimentation combined with collaboration by all market participants. More of the latter will increase the chances of making blockchain technology a reality with a tremendous real world impact beyond what we can imagine today.
My second prediction: Cognitive computing
Cognitive computing combines artificial intelligence (AI) with new advancements in machine learning algorithms that mimic the human brain. It allows computers to accumulate expertise, experience, and knowledge in order to participate in the decision-making process and understand and react to natural language. I believe that cognitive computing will have an enormous and far-reaching impact on the financial industry.
AI applications are successfully used today by many fields including finance, health care, science, and retail. In finance, for instance, AI is already used in cost savings, reporting, and reducing risk. However, cognitive computing will take AI to the next level.
The Fintech firm who masters the potential of cognitive computing first will have an enormous advantage over their direct competitors, financial incumbents, and tech giants.
Cognitive computing will change and have a massive impact in every aspect of business and finance. We only have scratched the surface of what cognitive computing capabilities are yet to come.
Both blockchain technology and cognitive computing will help unleash the true potential of the Fintech disruptive revolution. Their influence and impact will be felt during and beyond the next ten years.
My Fintech Bucket List
When I started to brainstorm about the technology that will have the biggest impact in the years to come, I was reminded of the old wisdom among science fiction writers. They always wrote about the present, even though they called it the future.
Having presented two predictions for disruptive technologies that will affect the industry for years to come, I want to discuss what I’d like to see in the future from Fintechs. To do this, I will take a somewhat unorthodox approach and go back even further in the past to capture some feelings and dreams that still hold true today, and will also in the future.
As the inspiration for a Fintech future - a “Bucket List for Fintechs” - I compared two science fiction movie cult classics from 1968 which I loved: Barbarella and 2001: A Space Odyssey.
Barbarella and its heroine, who inspired and influenced pop culture for decades, showed me a sexy fantasy future that seemed so enjoyable and exciting that I wanted to be part of it.
2001: A Space Odyssey addressed all the basic fears and impacts associated with technology and artificial intelligence by taking us into space. The excellent directing by Kubrick, the movie cinematography, and special effects were so masterfully done that it felt real. It intrigued us so much that we wanted to know what might come next.
Both movies have the essential elements of what financial technology ultimately should be, and aim for. They made us want to be part of an enjoyable, exciting experience and at the same time kept us intrigued and curious, so we continued to long for the future.
Thus, Fintechs, financial institutions, and tech giants will have to provide intuitive services that are sexy and exciting, like Barbarella, and technology that will provide magical solutions as implied by Kubrick's 2001: A Space Odyssey vision.
As Steve Jobs perfectly phrased it, "You've got to start with the customer experience and work backwards to the technology." Most consumers are not interested in the complexity that lies behind great features and products, but in how those solutions make us feel and how they make our lives easier and better.
We know that the digitalization of all industries will stop for no one, and we either adapt to it or watch it pass us. However, I am convinced that the future is not about technology alone, but the combination of technology and human ingenuity since both can benefit from the strength of the other and create a truly win-win situation.
In the end, we are all well served by thinking and dreaming as big as possible. Even if we falter, we are still further ahead than we were before. Knowing this, I look forward to witnessing the next innovations in the Fintech industry.