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The world of finance is changing. Consumers are becoming more demanding for ease of engagement, while financial institutions are under pressure to transform services using advanced technology. With a host of start-ups threatening the major players through innovative approaches to the market, it’s becoming an increasingly complex landscape to navigate. The one clear theme underpinning these shifts is applications. The financial sector is set to be transformed by the evolution of apps, whether adapting working methods to achieve greater efficiency or by consumers looking to better understand and manage their finances.
F5 Networks recently commissioned a report called The Future of Apps conducted by the Foresight Factory, which unveils some fascinating insights into major trends and projections that will significantly impact society over the next decade. The findings include important trends that will affect the finance industry and, in particular, the use of blockchain. With new breakthroughs in technology set to influence businesses across a variety of industries, the report sheds light on where action must be taken to capitalise on the opportunities and avoid areas of increasing threat.
Within the consumer market, there are significant levels of interest in more personalised, predictive services when it comes to finance. This is particularly the case among Gen Y10 consumers: nearly 6 in 10 (58%) agree that they would be interested in a service that predicts their future financial situation based on current factors, such as professional performance and spending.
Within other areas of financial services, cognitive apps or cognitive computing more generally, is also being explored for its capabilities to tackle industry issues that are growing in proportion to the digital economy (e.g. fraud). Ahmed Shanab, High Performance Computing and Data Analytics Leader - Middle East, Africa and Turkey, IBM comments: “There are many banks and organisations considering how to use AI to prevent fraud, taking action against security attacks before they have happened.”
However, for some experts, the mid-term will still be about helping humans to make better decisions. We are looking at the horizon closer to 10 years before AI and machine learning are really in the driving seat. Jana Eggers of Nara Logics comments: “To me, what's next is how we can empower humans ... the computer can calculate many more options and the human can do a better job at deciding between those options. Very little of what we do is actually computing; a lot of it is decision and reasoning – and computers really aren't there yet.”
New networks - blockchain
At a time of widespread uncertainty and distrust in so many areas of society, blockchain’s central promise of new, ultra-secure measures for certainty and authenticity, without an expensive middleman, is an incredibly compelling proposition. For many experts, blockchain is the biggest disruptor yet for the digital economy.
To date, blockchain is best known as the technology behind Bitcoin and uptake so far is probably most advanced in the financial services sector. However, evolutions in the underlying technology to increase privacy are expanding the range of use cases. One of the many dApp concepts (i.e. de-centralised apps) emerging, envisages the use of smart contracts enabling donors to fund small businesses in Kenya using digital currency. It is the brain child of 4G Capital, which provides instant access to credit for small business growth in Africa. The money lent would be converted and disbursed to the businesses using 4G Capital's transactional system.
OpenBazaar, which is already live, aims to be a decentralised version of eBay. ‘Sellers’ download and install a programme on their computer that directly connects them to other people looking to buy and sell goods and services. Bitcoin is used as the currency for transactions between sellers and buyers.
The ethos of dApps chimes with growing appetite in the consumer market for peer-to-peer solutions, driven by a combination of distrust of institutions and a desire for a better deal or value. Across Europe and South Africa, nearly a third of consumers (32%) have used or would be interested to use a peer-to-peer lending website, rising to 37% of Gen Y.
That is not to say, of course, that more traditional approaches to transactions, proof of authenticity and cyber security will not be a significant feature of the digital economy. Blockchain continues to have a range of limitations. Analysis from the Open Data Institute (ODI) has highlighted a range of potential stumbling blocks including interoperability, privacy and the need to find information within the blockchain, among others.
However, as awareness and understanding of the new technology grow, consumers will also relish the chance to swing the balance of power back in their favour when it comes to the control of data. Financial organisations must be prepared for the potential impact on them from new entrants to the market and changing expectations about the services which can be offered.
Responding to significant market changes
What’s certain is that there is growing pressure on organisations and developers to stay relevant. Demands are changing at a lightning pace and security concerns are surging. The Future of Apps report indicates how the balance of power is shifting away from businesses, creating immense opportunities for those capable of delivering apps with speed, adaptive functionality and security.
Based on the discussions I’ve had with business leaders in the financial sector, many firms are only just starting to reap the benefits of applications and are still concerned about the resulting security implications of moving too quickly. Nevertheless, it is essential organisations continue to assess new technologies as they enter the market and develop strategies, across DevOps, IT, security and business teams. Looking further ahead, access to growing sets of personal data, combined with the ability to process and manage such information locally, will create new opportunities for consumers to become gatekeepers over their own data. The need for greater transparency, combined with emerging business models built on blockchain technology, will drive more people to call for the financial industry to safeguard data and improve overall application security standards to retain consumer trust.