Surely you have seen and recently heard topics and concepts such as: "the Fourth Industrial Revolution or Industry 4.0", "Fintech", "Digital Transformation" among others, which have become trending topics at a country and global level, but... do we understand these concepts? How does it affect us in our daily and work life? How do we prepare to face this new era of disruptive technology? What is a Fintech? To address these issues, let's apply the famous ¨Divide and Conquer strategy attributed to the Roman Emperor Julius Caesar.
So, from a high level perspective, let's try to understand what this Fourth Industrial Revolution consists of. According to Wikipedia, this is defined by the fusion of technologies that are under testing or in the development stages, trying to eliminate the gaps between the physical, digital and biological spheres. This concept was coined by the founder of the World Economic Forum, Klaus Schwab, in the 2016 edition of the forum.
Schwab indicates that the 4th Industrial Revolution is marked by emerging and disruptive technological advances in areas such as:
in addition, the trend in all areas is to implement automation and data exchange in different fields.
These technological advances have forced different industries to focus their efforts on being a part of this revolution and avoid the well-known Kodak case. Let me very briefly summarize this case that leaves us with important lessons: Kodak was founded in 1888 and positioned as the reference brand of the photographic world. In 1975 they themselves invented the first digital camera. Over the years, Kodak decided to specialize only in photographic rolls and printing, leaving aside their invention in digital photography. Therefore, the competition took advantage of this "dismissal" and ironically in 2012 Kodak declared bankruptcy at a time when digital photography was booming.
This case about Kodak leaves us with a great lesson at the business level which is: although we are the best at providing a service, we must always be following the pulse of market trends and seek the rapid adoption of new technologies to reduce time to market at the time of releasing a service or product.
The phrase “Digital Transformation” perhaps makes more sense. It consists of defining strategies to adapt new technologies within a company with meaning, avoiding the unnecessary purchase of software and hardware, aligning these processes to the strategic objectives of the company.
"Although we are the best at providing a service, we must always be following the pulse of market trends"
Digital Transformation is based on four fundamental pillars:
This sounds quite simple, but by nature human beings are resistant to change, as this generally causes uncertainty which slow down these processes; therefore, its important to promote strategies that strengthen the culture of the organization for the adoption of these new processes, and this must begin at the C-level and permeate down.
Another booming concept is Fintech. This term comes from the union of two words: FINANCE and TECHNOLOGY; therefore, Fintech can be defined as the companies that offer innovative financial products and services to customers through the use of technology.
The incursion of these products in the market has been propitiated by new generations of expert users in technology, starting with the generation of Millennials. They expect agile financial services such as: transfers, loans and investment management through technological channels, avoiding the need to physically approach the financial entity or speak with different people.
"[...] its important to promote strategies that strengthen the culture of the organization for the adoption of these new processes, and this must begin at the C-level and permeate down"
But then, is a bank a Fintech? Are Fintech and traditional financial institutions competitive? We cannot ignore that the incursion of this model was born thanks to the benefits offered by technology, therefore, startups have certainly played an important role for this emerging model.
A traditional financial institution, such as a bank, seeks support from Fintechs to implement payment systems, electronic wallets, credit card payment carousels, prediction of trends and Big Data strategies that allow them to analyze consumption. On the other hand, we find Amazon promoting its credit and debit card, or Apple with its Apple Pay product on its different devices, and Facebook with its Libra cryptocurrency project. These last examples, as we know, are not financial entities, but through technology they offer financial services to their clients. According to a study carried out by the EIPE Business School, illustration 1 shows the distribution of the different sub-sectors in which Fintech currently has presence.
This same study highlights how the number one Fintech is the Chinese company called Ant Financial (formerly Alipay), which is dedicated to the management of electronic payments. This startup is valued at approximately US $150 billion.
In summary, Fintech sees the convergence of new technologies (fourth industrial revolution) and the need of the financial market to adapt to them (digital transformation) to effectively and efficiently meet the emerging needs of the sector.
Finally, what can we visualize regarding the future of Fintech? This sector is ever-changing, and is constantly evolving and growing, impacting retail, financial services and telecommunications industries, among others. It’s important to be in constant research and on top of the latest technological trends that are impacting our lives and our society at an exponential rate.