The World Economic Forum spent almost 15 months researching and writing their comprehensive new report titled The Future of Financial Services. The report was developed working with hundreds of experts and innovators across the globe, including representatives from UBS, Lloyds, Deutsche Bank, Nasdaq, Metlife and many others. Of note, Deloitte Consulting LLP in the U.S. was the official professional services advisor to the World Economic Forum for this project.
WEF report examined three key questions
The WEF report was structured around three key questions:
1. Which emerging innovations are the most impactful and relevant to the financial services industry?
To answer this question, the authors identified 11 key clusters of innovations based on their impact on the core functions of financial services.
2. How will these innovations impact the ways in which financial services are structured, provisioned and consumed in the future?
To answer this question, the report considers a range of scenarios assessing the nature and the degree of the impact of each innovation.
3. What would be the implications of these changes on customers, financial institutions, and the overall financial services industry?
Answering this question required an analysis implications of various scenarios on customers, institutions and the overall financial services ecosystem.
Insights into potentially disruptive innovations in financial services
Key insights in the WEF report included:
According to Giancarlo Bruno, Senior Director, Head of Financial Services Industry, and the rest of the WEF team, “innovation in financial services is deliberate and predictable; incumbent players are most likely to be attacked where the greatest sources of customer friction meet the largest profit pools.”
Moreover, and also predictably, innovations in financial services are having the greatest impact in business models that are platform based, data intensive and capital light.
Of particular interest, the WEF analysts argue that the earliest disruptive impacts will be seen in the banking sector (esp. retail banking), but eventually, the greatest impact of disruption will be seen in the insurance sector.
The report also suggests that “incumbent institutions will employ parallel strategies; aggressively competing with new entrants while also leveraging legacy assets to provide those same new entrants with infrastructure and access to services.”
Bruno et al. also point out that a great deal of collaboration between regulators, current institutions and newly emerging businesses will be required to get a rel grip on how these various innovations will alter the risk profile of the industry.
Finally, the WEF team highlights that this disruption is not a one-off, discrete event, but rather “a continuous pressure to innovate that will shape customer behaviours, business models, and the long-term structure of the financial services industry.”
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