Finance & The Rise of Fintech
The days of queuing up in a bank to transfer money or paying bills with cash are long passed, at least they should be.
If we want to transfer money from one person to another – it can happen in an instant using a huge range of devices. Phones, laptops and even Playstations, are all financial instruments.
Inversely, there are tech companies for transactions, insurance, risk with developers armed with languages like SQL and IronPython that help them sift through data swiftly.
This post will explore how tech is rapidly transforming finance and how you can keep your skills relevant in an increasingly competitive industry.
An Ever-Evolving Landscape
Technology has changed the way consumers approach banking, making transactions a more fluid experience.
But this is not limited to “last mile” point-of-sale (POS) transactions like consumer mobile banking and contactless payments! The speed and volume of transactions in the global market creates a tremendous amount of valuable data, with novel methods needed to process it.
This data enables financiers to make better decisions, perform risk assessment and determine deviation faster than ever. In essence, the two processes feed each other. Analytical thinking reduces pain-points at the POS, which produces more data and so on.
These evolutions were borne from broad technology adaptation in the finance industry.
According to the World Transaction Report, wide access to mobile data is key in their advancement and non-cash transactions have grown by 8.9% globally. Shockingly, Cisco’s report estimated that more folks will have phones than electricity by 2020!Banking is easier and they get more data so everyone wins, right? Well… not quite.
Some will experience the dark side of wholesale changes. CitiBank’s “Digital Disruption Report” details how the banking sector is at an “automation tipping point.” The same report details the effect on banking personnel with all signs pointing to widespread redundancies.
“We believe that there could be another 30% reduction in staff during 2015-2025,” stated the report, stressing the necessity for finance staff to modernise or face obsolescence.
Tech Adoption & Market Opportunity
To remain competitive, banks have had to blaze a trail in tech adoption – spending more than any other industry on tech integration. In turn, this has created a murky “competitive or cooperative?” relationship between finance and tech.
Businesses of every size continue to adopt aspects of finance technology to reduce customer pain points, from accepting contactless (time) to BitCoin (control). Tech companies are also actively creating their own payment methods with Apple / Android Pay, China’s AliPay and way, way more. Ultimately, it was only a matter of time before FinTech became the standard for banking.
According to an IDC Report, worldwide revenues for information technology products are set to grow 3.3% between 2015 – 2020. 3.3% isn’t much, right? To put it into context, IT products account for $2.3 trillion, growing to $2.7 trillion by the end of 2016 alone.
FinTech growth is expected to continue with the introduction of PSD2, law that aims to “level the playing field” in the finance industry.
- Contribute to a further integrated and efficient European payments market.
- Level playing field for payment service providers (including new players).
- Ensure a high level of consumer protection and of payments security.
- Encourage lower prices for payments.
- Facilitate the emergence of common technical standards and interoperability.
Lower legal barriers will have an initially positive effect on traditional banking, but it will ultimately create an intensely competitive, global industry… for the banks. In this information driven, globalised age – the flow of information is imperative for key decision making.
Knowledge Transfer & Collaboration
Finance has always lead the way in respect to third-party tech adoption (cloud services, mobility and big data) spending. Despite this, traditional banking is still seen to have a static flow of information.
According to a 2016 Deloitte report, the rapidly expanding global market requires every industry – not just finance – to adopt a knowledge strategy.
“People must work differently: they need to collaborate with peers that are overseas, exchange ideas, keep current on global matters and have quick answers to their questions.” stated the report.
This ethos is the driving force behind FinTech, and existing financial institutions can adopt this model through cross-collaboration and innovation. Encouraging stalwart dedication to innovation.
The information flow required to maintain a competitive advantage is increasing rapidly. Deloitte’s research confirmed an culture shift towards better knowledge strategy as 80% of those surveyed agreed it created a competitive advantage.
“You will probably need to develop a new institutional capability to constantly screen new technologies, decide which make the cut, and then plug these pieces into your information technology architecture” stated a 2016 PwC Report.
Associated costs play a huge role in these decisions, and understanding the screening process adds tremendous value to the finance department.
Deciphering Mountains of Data
The incredible speed and global scope of financial transactions has created a necessity for new analytic methods utilising technology. This has placed a huge emphasis on coding languages that allow for advanced financial analysis.
SAP tricks are passe – techie financiers can tailor their own analysis software.
Python – the number 1 ranked language for finance professionals – is growing in popularity, and constricting finance jobs for non-tech personnel. Finance industry programmers utilise Python for a huge range of tasks; from pricing to risk management and for trade management.
Support from a dedicated community has created a wealth of libraries, tools and tutorials for the versatile language.
Python has many iterations that use its simple, flexible language for different purposes. Take IronPython for example, it has syntax similar to accounting and is designed for financial analysis.
As a finance manager, you don’t have to learn how to code – but getting a grasp on a coding language like Python will allow insights you had never thought imaginable.
Living with doubt over your career is stressful enough, so it may be advisable to change tack altogether – why not join the other side?
If banking’s rapid change and uncertainty has you looking for the exit door, there’s a huge chance a tech company will need your skills. No no, not Fintech – finance for tech companies.
Learning the fundamentals of tech, combined with accounting acumen could be the shot in the arm that your career needs and it may not be in traditional banking.
If you’re looking for a change – then why not switch to being tech’s cash-custodian? Huge companies like Google are always looking for account executives, and in the age of the start up, there’s a company born every minute.
Generally, they provide brilliant salaries and some great surface perks – if you’re into that!
You can also go the extra mile and just straight out learn Python and become a super-powered financial demigod – but maybe that’s for another time.
Cash was once king, but in the rapidly changing finance industry; only a fool would be king for a day.