It’s no secret that markets gravitate toward greater efficiency with financial services being no different. As we often cover market segments ranging from peer to peer lending, wealth management / robo advisory and online syndication / crowdfunding marketplaces, the innovation emerging is multifaceted and rapid. It’s directed towards reducing friction and better overall service quality or user experience in financial services contexts. But what does this really mean - a future where software developers replace bankers as the architects of financial services?
The Federal Reserve of the United States recently announced the plan to allocate banking licenses for upstarts. Today you can bring a comprehensive online financial services platform to life in a matter of months, at least as far as the technological infrastructure. What do these trends mean for the future?
The age old adage of relationships and their importance is deeply rooted in financial services, reflected in corporate banking, investment banking and trading. However, there are strong arguments that ultimately relationships will give way to efficiency in various sectors regardless of the importance of the relationship, it will become secondary to the cost of the transaction.
We are not advocating for the extinction of relationships and their value. However, it can be argued that relationships play a smaller role in market segments than what is often thought. In the future people will likely pay a premium for that relationship and human attention, rather than the efficiency of the standard model and service roles will become more specialized around clients service needs.
Its important to not get stuck in a fallacy, where existing services are modernized in the future and ‘solved’ through a magical solution. Financial services are a complex segment, with regulatory policy playing a large part on them, and any development is going to take time to mature. The future is full of opportunity, and it is up to each and every organization to build the services that supercede others for the most efficient and best user experience. This is where the profit will be found, yet the implications may be far different than what we had imagined.
For example, take a sector such as life insurance industry becoming more ‘user friendly’. What does this mean in practice, who actually wants to hear from their life insurance company and what on earth would you like them to communicate to you?
What we do know is that the modernization of services and financial inclusion will continue to dominate the discussion, and will reign in a new wave of financial services that are more efficient and transparent. These traits will be transformational for the financial services industry as the software banker takes hold and dictates the relationship with your financial portfolio.
Read the whole article on Crowd Valley News.
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