New technologies in the financial field, among which the digitization of tasks and processes has a prominent place and in which others such as distributed ledger technology, blockchain, virtual currencies, “big data”, artificial intelligence, high frequency trading, smart contracts and automated financial advice (“robo-advice”) also have a prominent presence, are already in operation in the financial industry and anyone who takes out a financial product or service today will be exposed —to a greater or lesser extent, whether they are aware or not— to any of the above.
These technologies have their effects, both on the supply side and on the demand side. With regard to supply, the clearest effect that could be cited is the increase in the product offering, which in turn tend to become more specific and in some cases to increase their complexity. For example, we could mention the case of contracts that are executed automatically, life insurance that pays the client to walk —by linking the synchronization of the steps with various “apps” that are in charge of counting them—, or robotic financial advisors that make investment proposals based on the client’s profile.
The client, being permanently connected, can receive offerings of financial products and services in a direct or indirect way that, in some cases, they can take out through their “Smartphone” or “Tablet”. However, if this ease in taking out financial products and services is not counteracted with the provision of adequate and accurate information and sufficient financial knowledge, the risk in decision-making for both the individual client and the financial system in general will tend to increase.
In turn, on the supply side, new technologies are fostering increased competition, not only between traditional players, such as financial institutions, but also between other types of “players” such as companies “Fintech”. Obviously, this is positive for the financial customer, as this competition encourages a drop in prices for products and services.
On the demand side, a greater need for financial and digital knowledge and skills on the part of customers is to be expected, as the percentage of sales made through telematics channels gradually increases.
There will also be a gradual shift towards greater digitization, as the “millennials” and especially the people belonging to the so-called “generation Z” are joining the market.
Finally, we must not forget the growing concern among the population about climate change, in which the financial system has a main role as a mobilizer of resources within the economy. Sustainable finance is emerging as the new way of making the financial system collaborate in the mission of protecting the planet and, to this end, digitization can act as a lever for change.
