By Miguel Mendez Perulles
Stillman News Writer
We often take certain services like online banking, mobile trading, and mobile payments for granted. These innovations have shaped our lives and the society around us. Currently, we are facing another wave of disruptive innovation in the financial services industry with AI, machine learning, and data analytics at its core. The integration of fintech with the financial services industry has been accelerated by the digital disruption we have been facing during the COVID-19 pandemic. The financial technology industry encompasses services from mobile payment apps such as PayPal and Apple Pay, to blockchain technology in popular cryptocurrencies like Bitcoin, robo-advisors in advisory firms, and even the insurance industry with insurtech (insurance technology). Insurance companies such as Lemonade use behavioral economics and AI to drive their business with fintech at their core.
As these industries continues to evolve, we must develop new skills to remain competitive in the job market. The Stillman School of Business is one of the first business schools in the country to offer a Financial Technology major. With efforts from the Finance and Computer Science departments, this new fintech major aims to prepare its students for the financial technology industry’s growing job market. Along with this, Stillman’s degree and certificate programs in the fields of IT management and business analytics are geared towards giving students a solid skillset in data analytics, workplace trends, and even programming knowledge.
In the financial advisory industry, robo-advisors have been a particularly helpful innovation, being adopted by several firms such as Charles Schwab and Vanguard. Unlike their human counterparts, robo-advisors have an expense fee that can be as low as .25 percent, beating out the cost of more than 1 percent that many financial advisors offer. “Robo-advisors also offer powerful algorithms to optimize investment allocations,” according to an article from The Motley Fool. having such a powerful tool for handling people’s assets poses a threat to financial advisors not embracing this new technology. Robo-advisors are not for everyone. Many people are still unsure about the reliability of them, and others just want a person to yell at when their portfolio drops. Robo advisors can help your portfolio become more tax efficient, maintain your asset allocation as your portfolio changes with the market, and update your time horizon as you get older. Robo-advisors grant access to financial advisory services that people might not have been able to afford, turning the luxury of a financial advisor into a more attainable service.
M&A is also a participant in the digital disruption of the financial services industry, with programs like OCR (optical character recognition) being implemented for data extraction, validation, and auditing, saving companies hundreds or even thousands of hours when working on a deal. The addition of cognitive intelligence and robotic process automation is expected to reduce human data error, especially when it comes to data entry. These new tools in M&A are expected to reduce the cost and increase the productivity of this growing sector of the financial services industry, making M&A a more scalable and profitable practice. These tools are not meant to cut out the human aspect from the M&A practice, but rather they are intended to work alongside individuals, allowing people to work on the most critical elements of a deal rather than bothering with data entry and sourcing.
Blockchain technology is most famous for being used as a ledger for bitcoin and other cryptocurrency services. This type of record-keeping is widely considered to be the safest type when dealing with transactions; this is because it is decentralized. With blockchain technology, instead of having one central location to store all the transaction history, a network of computer stores and cross-references the entirety of the transaction history, making it almost impossible to alter this ledger. Blockchain technology is implemented in commercial banking for international transfers, making it quicker and less expensive for individuals and businesses to transfer money across a country’s borders.
With the insurance industry being vastly unchanged over the past 100 years, insurtech (insurance technology) companies are attempting to disrupt the industry. Implementing AI and data analytics in the business models of insurance industries is expected to reduce costs for both the consumers and companies, improve risk assessments, and increase productivity. This big data revolution in the insurance industry lowers the barriers to entry, allowing new companies such as Lemonade to compete with established insurance providers. Large insurance companies will have to undergo a complete digital transformation as not to become archaic. Due to their size, this can pose a considerable challenge for them, allowing for new providers to take market share from these established companies.
COVID-19 has accelerated industries by 3 to 10 years, depending on the type of business, forcing us to adopt new technologies as we continue to adapt to a new way of life. The prominence and importance of financial technology will become more important as we continue to digitize our lives. We already see the uses of fintech all around us, from online banking to mobile trading apps such as Robinhood, we are reliant on these types of services. Online banks can provide services without any physical locations, thanks to the accessibility of financial technology, a feat that would not have been possible 20 years ago. Fintech is currently disrupting the core of the financial services industry, changing how money moves, and soon enough, changing how we think of money.
All these changes in traditionally sturdy industries can seem overwhelming, and even hard to follow. It is difficult to predict exactly when industries are poised for either wild success or big falls. But, by looking at trends, we can have a better understanding. The Stillman School of Business is committed to giving students this better understanding, through relevant coursework and degree opportunities.
Contact Miguel at email@example.com