Digitization of

Financial Products &

Services
BUSI1044

Slides by James Killoran

Disruption and
Emerging Trends

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 What is disruption
• Radical change to an existing industry or market due to technological innovation
• Smaller, lesser known businesses with relatively limited access to resources can
challenge the established businesses
• Discussion!
 What are some notable disruptions you can think of over the last decade or so, either related to
the finance industry or another?

• Disruptive innovation (Harvard Business Review)

https://hbr.org/2015/12/what-is-disruptive-innovation
 Powerful way of thinking about innovation-driven growth
 Huge amount of capital across many industries being allocated to innovation, both in new and
well-established enterprises
 Being innovative does not equal being disruptive
 The topic of what is, and isn’t, considered disruptive innovation is debated and, to some extent, subjective
(within some generally-accepted guidelines)
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Trends shaping the landscape
• Mobile Banking:
 Electronic funds transferring
 Mobile cheque deposits
 Online Loan applications and funding

• Blockchain
 Revolutionary technology with applications in RegTech, payments, escrow, loans, general ledger posting,
etc.

• Big data
 Data-driven decision making
 Personalized customer service
 175 Zettabytes (globally) expected by 2025 (Seagate Technology)
 1 Zettabyte = 1,000,000,000,000,000,000,000 or one sextillion bytes

• Mobile apps
 Bank or non-bank provided
 Many third-party service providers

• Automated wealth managers

 Personalized portfolio optimization & investment advice, Robo-advisors, etc.
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 Trends shaping the landscape
• AI/Machine Learning
 Incredibly important driver of innovation
 Has applications in process/cost efficiency and profit generation

• Robotic Process Automation (RPA)

 Less methodologically complex than AI/ML, but still important
 Great use cases involving repetitive, “rules-based” tasks, that don’t necessarily involve
any “learning”, unlike AI/ML
 Gartner – approx. 80% of leading institutions will, or already have, integrated RPA
technology for daily use
• Fintech
 See slides in FinTech section

Fingent & SnapComms 6

Where (and who) are these
advancements coming from?

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Consumer Demand
• Prevalence of Globalization spurred a need to ensure that access to products
& services weren’t location-specific
• Computing power, Internet availability and an increasingly mobile-centric
population has helped make digital process possible
• Warren Marshall – CEO of the Credit Union who first facilitated banking
transactions over the Internet
• Marshall said: “The time is coming upon us very quickly when financial
services will not be differentiated by the product, but by how the product is
delivered”
• Financial Institutions started paying attention to customer needs and wants
• Then: Financial Institutions drove how customers interacted with them
• Now: Customer preference drives how Financial Institution interact
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Consumer Demand Cont'd
• A lack of digitization is a considerable risk for financial product & service
providers
• if needs not being met, customers highly likely to take their business
elsewhere
• Customers are, on average, much more informed given access to online
information
• especially for non-complex products/services, customers may be included
to either “self-serve”, or will at least have a strong knowledge base if
soliciting personal service
• going forward, personal service will still be an important part of the industry
– however, the importance of personal service will be strongly correlated
with the complexity of the product or service on offer
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Consumer Demand Cont'd
• Speed!
• Linked Services:
• Ex: let’s say you have your Car Insurance, Registered Retirement Savings Plan (RRSP)
Account, and Mortgage, all with one Financial Institution
• Traditionally, these areas may not know about your relationship with the other, making
optimizing the service incredibly difficult
• With a linked omnichannel approach, your institution would have all relevant information on
hand to better serve you, no matter which part of the bank/institution you might be
interacting with
• In week 3 lecture, discussed how customers are driving digitization.
• Environmental, Social & Governance (ESG) Investing
• More and more companies coming up with Funds/ETFS
• Evaluating ESG of Companies
• Banks will start evaluating and reporting on the environmental impact of, not
only the Bank’s operations, but companies that it does business with
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FinTech
(Financial
Technology)

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 What is Fintech
• Describes “new tech that seeks to improve and automate the delivery and use
of financial services” (Investopedia)
https://www.investopedia.com/terms/f/fintech.asp
• “FinTech” been around for quite some time, believe it or not, but has become
more prevalent (very quickly) in the last several years https://builtin.com/fintech
 Early days:
 ATMs
 Electronic Trading
 Nowadays:
 Venmo
 HFT (High Frequency Trading) Algorithms

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 The FinTech Ecosystem
• Robo Advisors & personal Finance
 Personalized investment and money management tools
 Robo-advisors – “digital platforms that provide automated, algorithm-driven financial planning
services with little to no human supervision” (Investopedia)

• RegTechs
 Helping institutions with managing the complex regulatory compliance process
 Fraud
 Complying with regulatory requirements and demonstrating compliance

• Digital Banks
 Think of these as your average bank, except that it exists fully (or primarily) online
 Tangerine
 Mogo
 Focus on improving the existing traditional banking process

• Payments
 Basically, the facilitation and processing of transactions, exchanging value (money) between parties 14
 The FinTech Ecosystem Cont'd
• Blockchain and Crypto
 The technology (blockchain) behind this relatively new asset class (crypto)
 Platforms facilitating the exchange of crypto, mining, developing, etc.

• InsureTech
 Companies building and deploying technology in the insurance space, helping to drive improvements in
the industry (pricing, customer-centric, flexible options, etc.)

• Digital Identify Verification

 Companies providing ID services to confirm you are who you say you are
 KYC (Know Your Client)

• Alternative Finance
 A catch-all of sorts, referring to the space not necessarily covered by the traditional segments of the
industry and/or providing somewhat similar services in a revolutionary way
 Crowdfunding, peer-to-peer lending, etc. (alternative financing)
https://cdn.advocacy.sba.gov/wp-content/uploads/2016/09/07142233/What-Is-Alt-Fi.pdf
 Buy now pay later
 Credit scoring
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FinTech Differentiators
• Conceptually innovative approaches
 New, effective and efficient ways of doing things
 Ex: as opposed to simply being able to view account balances online, a FinTech company may create an
app to help you manage your spending, alerting you when your spending patterns have changed, and
suggesting you adjust your habits to meet your goals. “Mint” is an example of this.
 Some traditional banks have followed in these footsteps (“myspend” from TD, for example)

• Simplification
 An emphasis on customer-friendly solutions to meeting their needs
 Discussion!
 What are some ways that the financial products & services delivery process has been simplified and/or
streamlined?

• Personalization
 Leveraging huge amounts of data, and combining with advanced (and smart!) technology,
products & services can be personalized to meet the needs of incredibly targeted subsets of the
population which will help:
 Ensure the customer is provided with the most relevant product/service
 Increase chances of winning business
ScienceSoft 16
Benefits of Bank and FinTech Partnerships
• Collaboration can be beneficial for both parties (and for customers)

• Trust in technology companies is at an all-time high

• Brand/reputation enhancement

• Cost and process efficiency

• Broader access to customers

• More, and better, products & services on offer

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Challenges in FinTech
• Adaptability
 Particularly traditional institutions integrating with emerging institutions.

• Current Balance of Power

 The balance of power is still in favour of the larger traditional institutions, as they have the
capital, customer base, and regulatory compliance experience

• Adhering to regulatory requirements

 Complex
 Costly – large teams of people required

• Shifting skillset requirements

 This could lead to a skill shortage as the skills needed to perform the duties of financial product
and services development, management and offering are changing

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Questions?

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