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2018 | OriginalPaper | Chapter

2. Disruptive Trends

Author : Daniel Fasnacht

Published in: Open Innovation Ecosystems

Publisher: Springer International Publishing

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Abstract

The financial world has been in transformation as seldom before. In this chapter we explore the key drivers for change and explain trends and its implications in the context of the banking, wealth, and asset management industry. While some developments are going to disrupt business models of commercial and corporate banking and change the way we exchange currency, stocks, derivatives, and commodity in the near future, others may just incrementally improve wealth management services. It is crucial to grasp the speed and magnitude of disruptive trends to be able to master the strategic change. Based on the synthesis of studies from consultancy firms, scholars, and own research and experiences, we compiled four trend categories that converged to create a new business paradigm, namely, market, client, regulation, and technology. While demographics lead to an inevitable intergenerational wealth shift, in Asia, rapidly emerging growth regions generate enormous new wealth. Incumbent banks are threatened by e-commerce and technology firms like Alibaba and Tencent gaining market shares. Millennials and other underserved client segments are predisposed to switch their financial advisors. They are requesting digital banking platforms with robo-advisors, virtual agents, crowdfunding, and cryptocurrencies instead of brick-and-mortar banks and ATMs. We suggest embracing cognitive technologies such as artificial intelligence and machine learning to increase efficiency and effectiveness and satisfy the increasingly sophisticated demand of the next-generation clients. Every market participant needs to comply with new regulations to stabilize the global financial markets and to control shadow banks. Look at these developments as a chance to regain trust, innovate, and grow.

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Footnotes
1
Calculations based on the Capgemini World Wealth Report Database, [online 15 August 2018] https://​www.​worldwealthrepor​t.​com/​reports/​wealth and McKinsey&Company (2017) European Private Banking Survey 2017. McKinsey Banking Practice, September 2017.
 
2
BCG (2017) Global Wealth 2017. Transforming the Client Experience. The Boston Consulting Group, June 2017.
 
3
For sources of information to “One Belt and One Road”, see Jinchen, T. (2016) “One Belt and One Road: Connecting China and the world”, McKinsey&Company, July 2016; China-Britain Business Council (2016) “One Belt One Road: A role for UK companies in developing China’s new initiative”, China-Britain Business Council http://​www.​cbbc.​org/​
 
4
China Daily (2017) “Full text of President Xi Jinping’s keynote speech”, [online 15 May 2017] http://​www.​chinadaily.​com.​cn/​beltandroadiniti​ative/​2017-05/​14/​content_​29341195_​5.​htm
 
5
China Daily (2017) Top 10 internet unicorns in China. Issue 10 April 2017, [online 15 January 2018] http://​www.​chinadaily.​com.​cn/​business/​2017top10/​2017-04/​10/​content_​28852711.​htm. The think tank referred includes the Great Wall Enterprise Institute (GEI), see http://​global.​gei.​com.​cn/​aboutUsEn.​jhtml
 
6
Source: International Labour Organization (2016) World Employment Social Outlook: Trends 2016, International Labour Office, Geneva, [online 16 January 2018] http://​www.​ilo.​org/​global/​lang%2D%2Den/​index.​htm; EY (2015) Global Generations: A Global Study on Work-Life Challenges Across Generations. [online 16 January 2018] http://​www.​ey.​com/​us/​en/​about-us/​our-people-and-culture/​ey-work-life-challenges-across-generations-global-study; Eurostat (2017) Population Structure and Ageing. [online 16 January 2018] http://​ec.​europa.​eu/​eurostat/​statistics-explained/​index.​php/​Population_​structure_​and_​ageing; Saito, K. (2014) Solving the “Super-Ageing” Challenge. OECD Forum, 2014.
 
7
PWC (2015) Millennials and Financial Literacy – the Struggle with Personal Finance. PWC, July 2014.
 
8
Accenture (2017) Millennial and Money: The Millennial Investor Become a Force. Accenture New Face of Wealth Management Series.
 
11
Capgemini (2017) World Wealth Report 2017. Gapgemini.
 
12
Among many other rankings and lists, since 1987, Forbes has scoured the globe tracking the fortunes of the world’s wealthiest people. More than a catalogue of individual wealth, the global rich list reflects the changing nature of the world economy. Since it began, old world power players like Japan and Germany – along with the billionaires who dominate their businesses – have given way to the latest global hotshots such as booming China, India, and Russia. Striking is the rising of the total net worth and the change in the number of billionaires – both records in the 31 years that Forbes has been tracking billionaires globally. See Forbes The World’s Billionaires. [online January 29, 2018] https://​www.​forbes.​com/​billionaires/​list/​; Data for detailed analyses derived from the Wealth-X and UBS Billionaire Census Report 2017 and The World Ultra Wealth Report 2017, [online 19 January 2018] https://​www.​wealthx.​com/​report/​the-wealth-x-billionaire-census-2017/​
 
13
PEW (2011) The Future of the Global Muslim Population. Pew Research Center on Religion and Public Life, January 2011.
 
14
IFSB (2017) Islamic Financial Services Industry Stability Report 2017. Islamic Financial Services Board, May 2017.
 
15
Source: Eurekahedge, [online 19 January 2018], http://​www.​eurekahedge.​com/​Products/​islamic-fund-database
 
16
ATKearney (2012) The Future of Islamic Banking. May 2012.
 
17
Source: Live population of the world [online 19 January 2018], https://​www.​livepopulation.​com/​world.​html
 
18
WHO (2016) “World Health Statistics 2016”, World Health Organization.
 
19
Data for life expectancy and average widowhood of women are from the US Social Security Administration (2017). The 2017 Annual Report of the Board of Trustees of the Old Age and Survivors and Disability Insurance Trust Funds. US Government Printing Office, Washington, DC.
 
20
BCG (2010) Leveling the Playing Field: Upgrading the Wealth Management Experience for Women, The Boston Consulting Group, July 2010.
 
22
ThinkAdvisor (2016) “How Millennium Women, Men View Retirement Differently” ThinkAdvisor, 15 November 2016, [online 19 January 2018] http://​www.​thinkadvisor.​com/​2016/​11/​15/​how-millennial-women-men-view-retirement-different
 
23
Source: Viacom Media Networks The Millennial Disruption Index.
 
24
Accenture (2017) Millennials and Money. Accenture New Face of Wealth Management Series.; Bank of America (2015) Better Money Habits - Millennial Report. Bank of America, Fall 2015; FirstData (2015) There’s no slowing down millennials: Capitalizing on a growing and influential generation. FirstData Whitepaper.; Skinner, C. (2015) “Millennials on banks and money”, BAI Research, 11 December 2015; FICO (2014) Millennial Banking Insights and Opportunities. FICO Millennium Report, September 2014.
 
25
Ibid 23.
 
26
See Communication from the Commission to the Council and the European Parliament “Shadow Banking – Addressing New Sources of Risk in the Financial Sector”. European Commission, Brussels, 4 September 2013.
 
27
Ibid 26.
 
28
EY (2015) Banking in Asia-Pacific: Size matters and digital drives competition. Ernst & Young.
 
29
IMF (2017) Global Financial Stability Report October 2017: Is Growth at Risk? Global Financial Stability Report, October 2017.
 
30
The section in the book is grounded on a narrative by Holland, R. and Green, A. (2006) Swiss Gnomes and Global Investing (Secrets of the Great Investors). Audio CD. Blackstone Audio, Oregon.
 
31
See, the overview map of all live and proposed regulatory sandboxes at Innovate Finance [online 20 February 2018] http://​industrysandbox.​org/​regulatory-sandboxes/​
 
32
EBA (2017) “Discussion Paper on the EBA’s approach to financial technology (FinTech)”, European Banking Authority, Brussels, 4. August 2017.
 
33
See, the consultative document of the Basel Committee on Banking Supervision (2017) “Sound Practices: Implications of fintech developments for banks and bank supervisors”, Bank for International Settlement, 31 October 2017.
 
34
See the World Economic Forum industry project of the Financial Services Community, in collaboration with Deloitte, WEF (2015) The Future of Financial Services. June 2015; WEF (2017) Beyond Fintech: A Pragmatic Assessment of Disruptive Potential In Financial Services. August 2017.
 
35
Sources: Forrester (2017) The Forrester Wave: Predictive Analytics And Machine Learning Solutions, Q1 2017. 7 March 2017. Deloitte (2017) Technology, Media and Telecommunications Predictions 2018. Deloitte Global.
 
36
The authors chatbot experience with “Rose”, the UBS robot, [online 25 January 2018] https://​paidpost.​nytimes.​com/​ubs/​what-it-takes-to-be-human.​html
 
37
See the IBM Banking and Financial page for research insights, news, and solutions [online 25 January 20187] https://​www-03.​ibm.​com/​press/​us/​en/​presskit/​42846.​wss
 
38
Sources: MyPrivateBanking and BI Intelligence; Kocianski, S. (2016) The Robo-Advising Report. BI Intelligence, May 2016; Deloitte (2016) The expansion of Robo-Advisory in Wealth Management.
 
39
Goldman Sachs (2015) The Future of Finance: The Socialization of Finance. Goldman Sachs Equity Research, 15 March 2015.
 
41
The World Bank (2013) Crowdfunding’s Potential for the Developing World. Information for Development Program, infoDev, The world Bank.
 
42
It is believed that the proposal was published under a pseudonym, i.e. Nakamoto, S. (2008) Bitcoin: A Peer-to-Peer Electronic Cash System [online 2 February 2018] https://​bitcoin.​org/​bitcoin.​pdf].
 
43
CoinMarketCap (2018) Cryptocurrency Market Capitalizations. [online 15 May 2018] https://​coinmarketcap.​com/​
 
44
IBM (2016) Leading the pack in blockchain banking. IBM Institute for Business Value and the Economist Intelligence Unit.
 
45
For mining energy consumption, see Power Compare (2018) Bitcoin Mining Now Consuming More Electricity Than 159 Countries Including Ireland & Most Countries In Africa [online 2 February 2018] https://​powercompare.​co.​uk/​bitcoin/​
 
Metadata
Title
Disruptive Trends
Author
Daniel Fasnacht
Copyright Year
2018
DOI
https://doi.org/10.1007/978-3-319-76394-1_2

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