Financial services set for a fundamental shake-up - Deloitte
04 March 2016 | 23911 views | 1
The emergence of a raft of disruptive technologies and trends will fundamentally transform the financial industry over the next five to ten years, says Deloitte.
The Deloitte report examines how various disparate trends in areas such as artificial intelligence and machine learning, blockchain technology, collaborative ecosystems, cryptocurrencies, demographics, and customer experience are coming together to influence the industry’s future.
Deloitte forecasts that reliance on third parties for noncore infrastructure and talent will be a common phenomenon as banks become increasingly connected via a complex network or web of vendors and third parties. Brand equity in the industry will also likely flow from partnerships with others in the ecosystem as banks play catch up with super-consumer brands such as Google and Apple.
"This extended ecosystem, while offering many benefits, will also pose new operational risks," states the study.
On the technology front, Deloitte suggests the emergence of distributed ledger technologies will radically reform the operations of major market infrastructures, from payments to capital markets.
"Private, permissioned blockchain-based payment systems will gain significant transaction volume by 2020," says the report. "Whereas an uber-blockchain industry utility, on the scale of ACH, will likely be a reality closer to 2025."
Corporate payments may in fact lead the way in blockchain innovation, suggests the report, reducing the scope for intermediaries and exerting further downward pressure on fee margins.
In the capital markets, machines are expected to dominate almost all aspects of the securities trade cycle, and blockchain technology will play a prominent role in this transformation.
"With increasing automation and faster clearing and settlement cycles, markets will become more efficient, and differentiation hard to find," states the study. "But the role of human insight and strategic advice will become even more important in serving clients, building algorithms, and investment decision-making. Reaching a T+0 settlement cycle will only happen gradually, and certainly not within the next 10 years."
One of the biggest shakeups will come from the marketplace lending industry, which will see consolidation, triggered by a normal credit and interest rate environment.
The transformed industry landscape that emerges will comprise three variations, says Deloitte: "First, a few marketplace lenders with scale will survive, acquiring smaller rivals and securing joint ventures with big banks and partnerships with small banks; second, big banks will acquire marketplace lenders and other technology/data ecosystem players, replacing or strengthening many aspects of their banking operations; and third, some MPLs will choose to provide white-label services to banks."