The Fourth Industrial Revolution and Its Influence on Financial Industry.

The 4^th industrial revolution is a big wave upon the society. Are you going to win against the wave or be pushed by it? I wish to provide some insights into winning this wave in the financial industry.

The exact technologies constituting the 4^th industrial revolution is 1) D&A (Data and Analytics); 2) Artificial intelligence; 3) blockchain; 4) Internet of Things. These new technologies will bring the following changes: 1) customized financial services; 2) quickened credit analysis; 3) distance services; 4) convenient payment services.  

Data and Analytics

Some say that the center of the 4^th industrial revolution is the big data.

An example of the use of big data is Visa using customers’ information and issuing customized discount coupons as a tool of target marketing. South America’s insurance company Santam uses D&A to reduce insurance fraud and to reduce the time of the process. Therefore, big data will bring these changes: 1) better services and products using big data; 2) customized marketing services using SNS and GPS; 3) reduction of fraud in insurance and credit card industry; 4) new credit analysis model; 5) better ERM (Enterprise Risk Management)

Artificial Intelligence

Goldman Sachs uses artificial intelligence Kensho to reduce 600 traders to 2 traders. Artificial intelligence is aiding the decision making process for stocks, bonds, currencies as well as loans, asset allocation and financial consulting.

Areas that artificial intelligence is helping:
1) financial advisory and trading

2) economic analysis

3) algorithmic trading

4) credit analysis

5) personal advisory

6) Chatbot

Citigroup uses IBM AI “Watson” to process credit analysis. China Tencent Webank uses AI to finish loan analysis in 2.4 seconds and to transfer the money in 40 seconds. AI will bring the following benefits: 1) reduction in fees; 2) increased productivity 3) risk reduction, 4) customized services, 5) new business model.

Internet of things

Internet of Things is a network that shares information related to things, space, people and all things. Italy’s insurance company Generali Seguros and Telefonica uses IoT technology to predict a driver’s driving habits, predict the insurance fees, and create an auto insurance product based on this.  

IoT will help gather data in order to facilitate the following: 1) credit analysis 2) creation of products 3) underwriting 4) risk management and pricing. Using IoT, credit analysis, customized products, and risk management can become more precise.

Benefits from Such Technologies

1)    Customized financial services

The problem of lack of mediation can be completely solved. Revolutionary personalized services will be introduced. There can be personalized insurance products, personalized investment products, personalized wealth management, personalized risk management.

2)    Facilitation of Credit analysis

One of the requirements in the financial industry is having to know the exact credits of the customers. This will decide the level of interest rates and prediction of default. Before, financial industry could only gather about 20 data such as personal info and transactions info. However, with the artificial intelligence, a model that analyzed 1000 data was developed.

3)    Convenient payment and various payment methods

There is accelerated increase in various non-cash payment methods, such as credit card, check card, mobile card, point payment, cryptocurrency and so on. In the future, blockchain will allow further development of these non-cash payments.

In my next article, I will discuss some interesting financial products that have been introduced as a result of the society’s transfer into 4^th industrial revolution.