Close video

More
Human
Please

Org is a
Connected
Business

Designed to deliver
transformational change.

WATCH VIDEO
SKIP
0
0543210
Cultural

Hybrid MSP model to reflect different supply channel requirements

Share

In the next 10 years, seven key technologies will drive business model reinventions while shaping the competitive landscape of the financial industry.

AUTHOR|Peter Delaney
DATE|16 Aug 2022
READ TIME|5 min read

Technological progress and innovation are the linchpins of fintech development, and will continue to drive disruptive business models in financial services.

According to Org analysis, seven key technologies will drive fintech development and shape the competitive landscape of finance over the next decade.

1. Artificial intelligence will drive massive value creation

Org estimates that artificial intelligence (AI) can generate up to $1 trillion additional value for the global banking industry annually. Banks and other financial institutions are tipped to adopt an AI-first mindset that will better prepare them to resist encroachment onto their territory by expanding technology firms.

In financial services, automatic factor discovery, or the machine-based identification of the elements that drive outperformance, will become more prevalent, helping to hone financial modeling across the sector. As a key application of AI semantic representation, knowledge graphs and graph computing will also play a greater role. Their ability to assist in building associations and identifying patterns across complex financial networks, drawing on a wide range of often disparate data sources, will have far-reaching implications in the years to come.

Finally, analytics that incorporate enhanced privacy protections will foster minimal data usage, or the use of only relevant, necessary and appropriately sanitized information, in the training of financial models. These include federated learning, a form of decentralized machine learning that addresses the risk to privacy associated with centralizing datasets by bringing the computational power to the data, rather than vice versa. Advanced encryption, secure multi-party computing, zero-knowledge proofs, and other privacy-aware data analysis tools will drive a new frontier in consumer protection.

Phil Sheridan

From the internal communications audit indicated that 68% of employees wanted to connect digitally with the leadership team and 75% wanted better tools to connect and share knowledge/experiences with colleagues. From the internal communications audit indicated that 68% of employees wanted to connect digitally with the leadership team and 75% wanted better tools to connect and share knowledge/experiences with colleagues.

2. Blockchain will disrupt established financial protocols

Distributed Ledger Technology (DLT) allows the recording and sharing of data across multiple data stores, and for transactions and data to be recorded, shared, and synchronized across a distributed network of participants at the same time.

Some DTLs use blockchains to store and transmit their data, as well as cryptographic and algorithmic methods to record and synchronize the data across the network in an immutable manner.

DTL will increasingly underpin ecosystem financing by allowing the storage of financial transactions in multiple places at once. Increasingly, cross-chain technology, will facilitate blockchain interoperability, allowing chains established on different protocols to share and transmit data and value across tasks and industries, including payments processing and supply chain management.

Technologies such as smart contracts, zero- knowledge proof, and distributed data storage and exchange, which are key to existing fintech innovations such as digital wallets, digital assets, decentralized finance (DeFi), and non-fungible tokens (NFT), will play a prominent role.

Moreover, traditional stakeholders, including institutional investors and funds, are gradually increasing the share of digital assets in their portfolios, broadening access to financing and elevating the potential of blockchain and DTL to disrupt established markets. For example, decentralized finance (DeFi), a form of blockchain- based finance that uses smart contracts to remove the need for a central intermediary, is taking off. The total locked-up value (TLV) of DeFi has surged by nearly 50 times in the past 10 months, with the sector now holding digital assets worth $2.1 trillion.

The fact that digital asset exchanges earned about $15 billion in revenue in 2021 offers a further indication of blockchain’s mounting technological value.

DLT is also making a mark on government policymaking and regulation. According to a survey conducted by the Bank for International Settlements (BIS) in early 2021, about 60 percent of central banks said that they are testing or studying Central Bank Digital Currency (CBDC). The People’s Bank of China, for instance, has begun operational trials of a digital RMB effort based on permissioned DTL, paving the way for improved oversight of monetary policy and resource allocation at the macro level.

Other blockchain applications worthy of mention include:

  • Real-time transaction settlement

    Banks are using smart contracts to settle the collateral and cash part of a transaction at the same Transaction processing, securities lending, and equity trades can also be settled on the blockchain to improve the efficiency and scalability of cross-border sales. Meanwhile, trading securities supported by digital collateral on the blockchain makes for more efficient, transparent, and secure capital management, as well as post-transaction equity settlement.

  • Digital asset support services

    Institutional investors are seeking DLT capabilities, including tokenization for unlisted companies or private equity funds, spot exchange between established currencies and cryptocurrencies ondigital exchanges, and custody services such as key escrow encryption on behalf of customers.

  • Authentication ecosystems based on zero-knowledge proof

    Customers are using agreed- to-share information from partner institutions to verify their identity online, face-to-face, or through phone calls, simplifying authentication procedures and offering streamlined access to health records and government services. Only information required for each specific transaction is shared, while all other data remains safely on the server of the trusted provider.

  • Decentralized finance (DeFi):

    Decentralized non-custodial applications can replace intermediaries by automatically generating deterministic (or “always valid”) This makes it possible to obtain loans, make investments, or trade financial products without relying on financial entities under centralized management. DeFi adopts deterministic smart contracts, which eliminate counterparty risks and cut out the costs associated with rent- seeking intermediaries, while improving market efficiency with real-time transparency.

DeFi based on blockchain technology is ushering in a new era of opportunity, disrupting established traditional value chains and structures. As financial policies and regulations adapt, DeFi is set to massively expand.

Play
Close video