Effects of Disruptive Technologies in Financial Markets

“Disruption,” “revolutionizing,” and “digital transformation” have lost their meaning in financial services. Emerging technologies are headed for impact. AI, IoT, 5G, and quantum computing are forming powerful clusters that are reshaping financial services, offering new opportunities to firms and consumers.

How will financial services change in the near future, and how will businesses and individuals benefit？ Forging New Pathways: The Next Evolution of Innovation in Financial Services, a report by the World Economic Forum and Deloitte, explores this. Over the past year, financial services executives, experts, academics, and regulators participated in over 200 interviews and nine international workshops.

The study divides emerging technologies into four clusters, with AI and cloud at the center as the core cluster that unlocks other technologies. AI and cloud are essential because they can access and analyze data generated, stored, and transmitted by other technologies. They belong to all clusters. The remaining clusters focus on the following capabilities:

Bridging the physical and digital financial worlds, creating new data generation and access methods (5G, IoT, TSH, AR/VR, AI, cloud).

Enabling new, more secure ways to organize and structure transactions of currency, securities, and data (DLT, PETs, AI, cloud)

Quantum, AI, cloud AI analysis

These clusters interact to create new financial products and services that benefit individuals and businesses. Technology clusters will impact three areas:

1. Automated financial services daily tasks

Responsible automation allows seamless transactions for routine activities by combining technologies from clusters one, two, and three. This can open new revenue streams for financial services companies and related industries, while simplifying the customer experience.

Consider AI, cloud, IoT, 5G, and DLT-enabled M2M payments. A payment network or consortium of institutions develops a protocol to decide, authenticate, transmit, and receive asynchronous M2M payments for consumers. This protocol could improve user experiences.

An electric vehicle with a bank-linked digital wallet is an example. When the owner drives through tolls, recharges, and parks, consent parameters can automatically deduct payments from the wallet, simplifying the tedious process of making individual payments. When the vehicle is expected to idle, the owner sells power back to the grid and collects payments.

Consider a short-term property rental company with a commercial bank-linked digital wallet. The wallet automatically hires cleaners, pays taxes, and receives guest payments. Guest revenue pays monthly mortgage charges through the wallet. Administration is greatly reduced.

2. Cross-industry partnerships satisfy customers' financial and non-financial service needs simultaneously.

Financial services firms are increasingly meeting customers where they are with customized products and services at the right time or in advance. Emerging technology clusters enable granular data collection, timely analysis, and secure information sharing, helping firms determine which services each customer needs and when. These technologies enable cross-industry collaborations and end-to-end customer solutions.

A plausible insurance use case can demonstrate opportunities. AI, cloud, 5G, and IoT could create a connected post-claims solution. A connected ecosystem of product and service providers provides a differentiated claims handling process to boost customer loyalty and back-office efficiency.

Auto insurance. Imagine an accident notifies the insurance company. The company also knows the car's impact speed, airbag deployment, fluid levels, and other details from embedded sensors.

The insurance company analyzes IoT sensor data to determine that the damage is minor but requires immediate assistance. Through an approved supplier network, the insurance company uses cross-industry partnerships to provide accident-related services immediately. The driver receives a tow-truck and additional transportation from the insurance company. The insurance company also arranges a rental car and auto body shop appointment for the following day to reduce stress.

3. Customers will ignore financial services.

The new financial services evolution's greatest achievement may be that emerging technology clusters' changes may go unnoticed. That is, a business or individual will find that their financial needs are met and financial opportunities greatly expanded, but this will be done so seamlessly and integrated into one's life that financial services and products will not be front of mind.

The World Economic Forum report includes several use cases that show how this customer-centered environment is developing. With emerging technologies enabling automated feedback loops, we can be sure that the customer will remain center-stage for years to come.