Technology is changing the expectations and experiences of consumers in every industry. Within the financial services sector, the changes being brought about by the rapid pace of technological developments are immense ̶ and profoundly disruptive. Dr. Rufaro Mucheka, Head of Strategy and Rest of Africa: Nedbank Financial Planning on new generation fintech.
A steady flow of young, innovative, technology-based competitors is forcing even the established giants of the financial sector to reconsider the way they have always done business, in order to stay competitive in an environment where access to financial products and services is easier, cheaper and more customisable than ever before.
Fortunately, with transformation comes opportunity. Advances in technology have made it possible for financial services companies to reach clients and markets that were previously largely excluded from banking services, due to the overwhelming logistical challenges involved in reaching them.
In particular, the new generation of FinTech’s have capitalised on this potentially massive reserve of untapped revenue by catering directly to the needs of under-served clients, including those with low credit scores who are unable to obtain loans in the traditional way, and small- and medium-sized businesses that have long struggled to access finance to meet their growth needs. In the process, these FinTech’s are also providing more cost-effective and compelling alternatives to the conventional offerings of large corporate financial companies.
Mobile advancements
Advances in mobile technology are playing a key role in enabling new financial services providers to effectively leapfrog the challenges that have long plagued the sector due to underinvestment in physical transactional infrastructure. As a result, there has been a surge in mobile banking offerings that, on the positive side, have made it possible for anyone to bank anywhere, at a fraction of the costs that were previously incurred. Robotics and artificial intelligence are an additional technological benefit for customers, as they have made it far easier for clients to access the services they want, at an affordable price.
This wave of mobile banking offerings and technology-based service provision is thus inevitably changing the face of financial services. Branches are closing, employees are understandably, albeit incorrectly, fearful of losing their jobs, and intermediaries are questioning their role in the new world of banking, insurance and investment.
The concern is explicable. So-called robo-advisory and robo-retirement services are now amongst the most rapidly growing offerings in the WealthTech sector. As it becomes increasingly easy to profile clients using big data and elaborate algorithms, and then present them with comprehensive, automated product or portfolio recommendations, the prospect of affordable, customised financial services for all is becoming increasingly real.
Will fintech make human advice redundant?
This naturally begs the question: “Will the rapid pace of FinTech development and access eventually make human advice redundant?” The answer is an emphatic ‘No!’ It will, however, force financial advisors to transform and evolve in terms of the role they play in the lives of their clients. If advisors can do that effectively, the value they offer could, in fact, increase exponentially in line with technological advances.
The simple truth is that humans and computers have different strengths and weaknesses. Even the creators of artificial chess-playing machines acknowledge that the best chess player is a team of both human and machine. So, as a financial advisor, the key to remaining relevant, needed, and in high demand in the face of an increasingly automated industry, is to leverage your humanity and play to the strengths you have ̶ which a robot never will.
Arguably the most valuable of those strengths is empathy. As a human advisor, you have the ability to build relationships with your clients, to understand their current situations and needs, and, most importantly, to apply insight to ensure they can access the full benefit of whatever the future brings.
So, while your electronic counterparts may have the artificial intelligence required to process massive amounts of data and come up with excellent product recommendations based on that data, it quite literally requires a human touch to ensure your client feels heard, understood and cared for.
Money is deeply personal
At its core, money is deeply personal. People’s financial decisions reflect their values, aspirations, and priorities. Yet most of us need guidance when faced with the complexity and range of banking, savings and investment options at our disposal. And because we are all unique, a purely data-driven recommendation, even if it is technically perfect for us, often won’t be enough to fully meet our needs.
The advisor who understand this and is able to extract the many benefits of technology and combine them with a deep understanding of their clients, which results in personal, empathetic and consistently excellent human service, will be the one who not only survives the 4th Industrial Revolution, but thrives because of it.