How IoT, AI and Blockchain will revolutionize financial services

It’s in the Bee Movie that we have our first encounter with the concept of Colony Collapse Disorder. The 2007 animated comedy film depicts the phenomenon of a mass disappearance of worker honey from the hive. In the film, bees, who generally, function as a very centralized organization decide to disappear from the beehive, leaving behind the queen bee. This results in a breakdown of the colony and considerable economic loss. Without bees, the production of honey, fruits, agricultural crops, flowers and vegetables is hit because they are primarily responsible for pollination.

Vittorio D'Orazio, Research Director- Banking and Investment Services, Gartner believes that the financial services industry is in the midst of a colony collapse disorder, as its delivery model changes in response to digital disruptions. In an interview with ETCIO.COM, Vittorio D'Orazio explains how financial services firms should navigate the digital age.

Bee movie-the 2007 animated comedy-is built around the premise of Colony Collapse Disorder. Do you think the financial services industry is in the midst of this phenomenon? What is the 2030 vision for financial services industry?
The financial industry is getting decentralized. As you rightly pointed out, this is clearly a kind of colony collapse disorder. It is important to make an analogy to explain this further. In 1998, the music industry had the best ever sales in Hollywood. Then technology started to change things. People started sharing content through email. In 1999, Napster allowed people to turn music into MP3 files and share it. Today, the music industry is no longer a sole channel for the delivery of music. New entrants like Echo, JuBo hold the power of delivering music.

Similarly, in the future there will no monolithic, centralized financial organizations to dominate the market. In 2030, financial services will cease to exist as we know it. They will be replaced by self-determining, intelligent, distributed, Peer to Peer value exchange services.
By 2030, incumbent financial institution employment will have fallen by 75%, while the addressable market will have increased by 50 %.

How does this vision impact the existing market, business and IT?
The truth is that our face the world is much more connected today. So the business model cannot be a value chain business model. It must be a platform based model. The infrastructure on which CIOs will build the new financial services organization will be distributed. And Blockchain technology is relevant to that.

Also the economic power index will change as a result of the new world order. We have always seen a concentration of financial services activities in the financial hubs like New York, London, Frankfurt, and Tokyo. In the new world this will change. New financial hubs will come up in India, China, Brazil and Indonesia.

In 2030, financial firms will have to compete in the programmable economy where they will see things emerging as the next big factor. They will have to focus on exploiting the “nexus” to drive greater efficiency as potential customers extend from people to things. Smart autonomous things will become a major customer of the financial firms and will enable new forms of value and interaction.

Decisions and servicing will be smart, virtual and not necessarily under your control. The customers will be opaque, nonhuman micro and bundled.

This vision will impact the business model and IT systems. If financial firms want to play this new competition game they need to build beyond the ecosystem boundaries.

In the book, Finite and Infinite Games by James P. Carse he says that finite game is the one in which there is only one winner whereas an infinite game has several winners.

In the future, financial firms will have to be infinite players. They need to play a game where there are many winners- that’s the condition for survival in the programmable economy.

Which technologies will shape Financial Services beyond 2030?
Unlimited, distributed compute power and smart systems change the balance of power in commercial interactions, undermining existing FS provider business models.

IoT, AI and Blockchain will be paramount for the financial sector. Today they are in an embryonic stage tomorrow they will be mainstream. So CIOs need to improve their understanding of the impacts of these three big generational technologies that will revolutionize financial services.

What actions should CIOs take to position their firms for success?
In order to stay on top of the digital disruption CIOs need to delegate more day-to-day activities, and spend more time with customers and business leaders, to influence and achieve enterprise business savvy, as well as build stakeholder power.

CIOs need to co-pilot the need for more coherence and clarity concerning digital strategy and the role of the FI as a platform business in digital ecosystems that are co-creating value for participants.

They will have identify and rationalize processes and silos creating frictional barriers to business partners, customers and the digital ecosystem. They need to foster openness and promote more porous institutional boundaries that allow for the capture of new economic opportunities

CIOs need to ensure the digital strategy stays on track by closely monitoring business returns. leading CIOs spend up to 70 %of their time “in the business” and “with the business.” CIOs of BFSI sector should aspire to this goal.