At the Nexus of Financial and Technological Innovation
Throughout history, most industries have experienced substantial disruption resulting from technological advancement. Today, the financial industry is being consumed by a very forecastable technology wave. In the wave’s wake will be winners and losers—and consequently, risks. Each of the four fintech spaces faces disruption as a result of rapid innovation: peer-to-peer (P2P) financing; robo-advising and systematic asset management; blockchain and smart contracting; and machine learning. P2P financing presents a substantial disruptive threat to the traditional banking function, including established securities exchanges. Contrary to the view of many, however, Cam Harvey believes technology is creating opportunities in asset management. For example, firms with advanced quantitative capabilities will likely squeeze out traditional discretionary advisors. As a result, medium-skilled workers in developed countries, who lack the appropriate training, will experience under- and unemployment, raising the specter of political risk. Winners will be those who until now have been underserved in education and in financial services—largely, the emerging markets. Alongside the positives of fintech advances, we need to manage the probable political risks.