top of page

New technologies continue to appear on the horizon while others struggle to gain greater practical relevance. The Fourth Industrial Revolution has been characterized by startling advances in automation and vastly-increased connectivity, upending customer behaviour and expectations while eroding industry boundaries. This has happened in multiple waves, providing banks with little respite between bouts of transformation. Large parts of the “front end” of banking are now self-driven via apps, and large parts of the “back end” are now composed of third-party providers of cloud computing and other services. Both halves of that value chain will continue to evolve, as an ever-wider range of tasks become automated and powered by machine learning. Meanwhile new technologies continue to appear on the horizon, such as quantum computing, while others continue to struggle to gain greater practical relevance, such as blockchain, tokenization, and smart contracts, which are progressively being inserted at different points in the value chain. Central bank digital currencies (CBDCs) may also drive changes in the intermediation role played by banks and traditional capital markets. However, rising interest rates and the end of an era of virtually zero-cost funding have presented a moment of reckoning for technology development and commercialization. The starting point for the use of any technology in banking and capital markets should not be theoretical futurology; it should instead be specific use cases designed to address particular pain points. In addition, technology should be valued for its relevance and consistency with organizational purpose - for example, better record-keeping or custody of assets. Banks may also need to revisit the handover points between online and offline services. Especially for systemically-important banks with vast market shares, it is important to ensure that digitalization does not result in a degradation of service in the form of branches that are too few and far between and relationship managers who are unavailable or inexistent. These banks should also ensure that new technology is not rolled out prematurely and without robust contingency plans for outages or cyberattacks. Cybersecurity is a threat of the highest order, in light of the potential involvement of state actors amid geopolitical tensions. Banks bear responsibility for ensuring adequate defences against cyber theft even when it involves social engineering, not just technology lapses; they must find a middle ground between efficiency and resiliency.

Financial Technology

KEY TRENDS

Financial Technology