Change is a relentless theme in banking and financial services. This book describes the strategic implications for financial services firms in North America, Europe, and other advanced economies. The editors argue that traditional banks, asset managers, and insurers (i.e. incumbents) will proceed to dominate the financial services space. However, probably the most successful incumbents will partner with financial technology firms to supply higher and more revolutionary services to retail customers and small businesses at a lower cost. This technological revolution will profit customers and result in a more open and inclusive economic system.
The book provides a roadmap for the evolution of the financial industry in response to 3 structural forces driving change in financial services worldwide:
- Tightened regulation within the wake of the worldwide financial crisis.
- Innovations are driven by recent technologies, including Fintech 3.0 (from 2009), wherein start-ups and recent market entrants offer financial services directly to non-public customers and firms.
- Demographic changes, including the profession advancement of millennials and the retirement of baby boomers.
In my view, one among the unexpected consequences of the regulatory responses to the worldwide financial crisis was that they enabled a wave of innovation and technological disruption each inside and outdoors the financial industry. Domestic regulations comparable to the US Dodd-Frank Act (2010) and the UK Banking Reform Act (2013) made the financial sector safer and more stable than before. However, these regulatory reforms also made the financial sector less profitable, less liquid and more fragmented. Competition from shadow banks and other unregulated actors increased.
An initial source of disruption was industry insiders leaving established firms to form startups that drained the industry’s profit pools. According to Tiff Macklem, current dean of the Rotman School of Management on the University of Toronto, the worldwide financial crisis and its aftermath also forced business schools and bankers to broaden the scope of finance education. This broadening features a renewed deal with culture and ethics, in addition to consideration of “non-financial” risks comparable to those arising from worker behavior, technological disruption, and climate change. Market participants, including boards and regulators, have recognized the importance of culture in creating social norms that influence what people do when nobody is watching. As an associate professor of finance at NYU Stern School of Business, I strongly imagine that universities also can offer more simulation-based experiential learning while expanding the curriculum beyond traditional finance topics to incorporate risk management.
Macklem describes two mega-forces which can be impacting the economy, finance, and society—namely, technological disruption and climate change. New technologies, including artificial intelligence and blockchain, are creating recent opportunities, but there also needs to be ways to commercialize innovations and equip startups with the business acumen needed to succeed. One successful example is Rotman’s Creative Destruction Lab, which helps science-based, early-stage firms raise capital, scale their business, and solve market failures through business acumen.
As a passionate advocate for tackling climate change risks, I agree with Macklem that sustainable finance needs to maneuver from its area of interest in financial markets to the mainstream. This shift is needed because more extreme weather events linked to climate change are resulting in more frequent extreme losses. The financial sector has a critical role to play in redirecting savings into more sustainable investments and helping households and businesses manage recent climate-related risks.
In addition to listing the financial advantages, Trenowden explains how gender diversity improves talent acquisition and retention, innovation, productivity and customer loyalty. She then outlines six concrete actions leaders can take to extend gender diversity of their organizations:
- Recognize and address hidden prejudices.
- Diagnose the issue and set measurable goals.
- Provide gender-neutral job descriptions.
- Change your hiring practices.
- Connect women with high-level sponsors.
- Provide female role models.
As an worker of an organization where 70% of the workforce is either women or minorities, I fully agree with Trenowden’s view on the importance of gender diversity in improving financial performance.
In summary, this book will function a guide for each established and recent entrants in the approaching decade because the financial industry strives to place the shopper at the middle. The most lasting impact of the technological revolution in banking might be the improved customer experience. Successful financial intermediaries of the following decade will deal with the needs of shoppers and recognize that this industry exists to serve them initially.
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