This year’s World Economic Forum (WEF) hosted over 2,500 participants, which included more than 1,000 chief executives or company chairs and 40 world leaders. The end of 2015 left many subjects in limbo and needing to be discussed, such as the rising interest rates, as well as the refugee crisis and climate change. Alongside these topics, the impact of technology on the financial industry in the 21st century is an emerging issue and many professionals framed this around the ‘Fourth Industrial Revolution’ narrative that dominated the Davos conference this year.
Chief executive of Innovate Finance, Lawrence Wintermeyer, highlighted how the three key themes of Davos this year were financial inequality, migration and market turmoil, as reported in CityAM, and the organisation were present at the forum to address the changes occurring in London’s global fintech sector. Wintermeyer spoke of how we are exposed to the fusion of physical, digital and biological spheres with the use of wearables and smartphone applications.
“The media technology narrative regularly brings to our attention the potential impact of the internet of things, self-driving cars, virtual reality, 3D printing, artificial intelligence, and a range of emerging technologies that are set to change our future for the good, as well as raising issues relating to the impact on labour markets and economic growth.”
Reuters also sees this technology boom as a result of the fourth industrial revolution and explored how what may seem like science fiction right now, will become scientific fact by 2025, according to executives at the WEF. Satya Nadella, chief executive of Microsoft, agreed with this stance. “There is an economic surplus that is going to be created as a result of this fourth industrial revolution. The question is how evenly will it be spread between countries, between people in different economic strata and also different parts of the economy.”
As Nadella said, adoption rates of technology will vary on a country by country basis and a UBS report released in Davos revealed how extreme levels of automation and connectivity will damage further the inequality and wealth gap between the developed and developing economies, as Reuters reported. Global head of emerging markets for FX, rates and credit at the bank, Lutfey Siddiqi said that it is likely that if policy measures are not taken, inequality will be exacerbated.
“The fourth industrial revolution has potentially inverted the competitive advantage that emerging markets have had in the form of low-cost labour,” Siddiqi mentioned in the UBS report. Despite this, the biggest fintech news that came from Davos was the prediction that cash would be eradicated in ten years’ time.
“Cash I think in ten years’ time probably won’t exist. There is no need for it, it is terribly inefficient and expensive,” said John Cryan, chief executive of Deutsche Bank, during a discussion on fintech, according to Reuters. As well as this prediction, financial technology was described as hysteria by chief executive of Morgan Stanley, James Gorman – “this is going to unfold over many years in many ways,” Gorman said.
This sense of distrust is a feeling that emerged after the financial crisis and it could be said that the larger financial institutions are feeling threatened by the newer, more innovative players. CEO of online money transmission service TransferWise, believes that finance is now the realm of the digital disruptor and the industry is no longer protected by bricks and mortar banks, according to The Guardian.
“Back in the days you would build the biggest building in the city and say: ‘You can trust us’,” and now after the financial crisis, “people realised these institutions called banks are really about generating profit and fuelling the greed of bankers.”