“81% of banking CEOs are concerned about the speed of technological change, more than any other industry sector.”
– PwC, Financial Services Technology 2020 and Beyond: Embracing disruption
Accelerating technological change has begun reshaping the financial services industry. Disruptive technologies like blockchain, artificial intelligence (AI), and the Internet of Things (IoT) are introducing massive shifts in the design and management of global finance. This includes a wide array of financial technology (fintech) that builds on cryptocurrencies, peer-to-peer lending, and crowdfunding platforms.
Blockchain, the public ledger for all cryptocurrency transactions, will impact the financial services world and has already begun to. People commonly compare blockchain technology to the growth of the Internet in the 1990s, the reality is that blockchain could represent a far more substantial shift.
Just as the internet made it possible for individuals and groups to quickly and cheaply transfer information without the need for intermediaries, blockchain technology offers the same capabilities for transferring value.
Blockchain technologies promise to redesign banking and finance. This includes core finance functions, enabling the elimination of third parties and technology bottlenecks, along with full transparency in financial transactions. Blockchain or distributed ledger technologies (DLT) embody a significant and ongoing transformation of finance, accounting and identity systems that is both broad and deep. Indeed, as PwC explains, it is now obvious that the accelerating pace of blockchain or DLT is driving creative destruction across the financial services industry.
The truth is that more and more investment firms are becoming increasingly dependent on young Fintech start-ups for supporting new capacities such as risk modeling and data collection. In fact, global investments in Fintech have more than tripled over the past decade, reaching $12 billion in investments.
In response to these disruptive forces, companies are now challenged to upgrade their human capital resources at ever-faster rates. Beyond the bureaucratic systems of the Industrial Age, workers must be better prepared to leverage autonomous creativity to solve real-world problems. This includes recruiting expert talent from outside the traditional finance sector and developing robust learning systems to augment human resource (HR) programs.
This converges with an increasing focus on creativity and entrepreneurship among a growing portion of the labor force. In the United States, alone, the US Chamber of Commerce finds that 27% of the labor force is currently self-employed. This suggests that “financial institutions will need to adopt a ‘talent exchange’ mindset, leveraging part-time and/or self-employed individuals in a creative manner”.
In this era of AI and disruptive innovation, we are seeing a new strategic focus on human capital strategy through revitalised recruitment, learning and development (L&D), partnering and cultural initiatives. Smart organizations within the finance sector need to focus more attention on learning systems that support creativity and ingenuity. Learning and training within the finance industry requires advanced competencies that build on network collaboration, digital fluency, and entrepreneurial innovation.
Rapidly advancing technologies, evolving customer expectations and a changing regulatory landscape are accelerating the social and economic impact of disruptive innovation in financial services. In the post-crisis era, regulatory frameworks have become increasingly critical to managing technological change.
This means initiating more active steps for creating and fostering a culture of innovative thinking and talent development. Many executives now look to their IT departments to continually facilitate game-changing innovation while also increasing efficiency and driving down costs. Regulators too, are demanding more from the finance industry around compliance, and have started to adopt new data driven technologies to collect and analyze staggering amounts of information.
Beyond the “information age” or “knowledge economy,” however, a more accurate characterization of our era is the Imagination Age. In this era, work is shifting to design, meaning making, and the development of novel ideas and artifacts.
Technology-driven innovation represents a shift not merely from mass manufacturing to something else, but a qualitative transformation in the very nature of work. Bureaucratic institutions like those found in the finance industry need to address the growing preference for flexibility and entrepreneurship among new generations of creative workers.
To be sure, passion and purpose are becoming pivotal to skilled professionalization. Following this line of reasoning, Richard Florida argues that creativity is the defining principle of the global economy. The idea of an Imagination Age was first articulated by Rita J. King to describe an era in which the imagination becomes the primary driver of economic value. This includes technological trends like virtual reality and augmented intelligence, and the rise of digital platforms focused on user-generated content.
The capacity for organizations to consistently support personnel in improving workforce development creates a massive competitive advantage. According to research at IBM, employees who do not feel they can achieve their career goals at their current organization are 12 times more likely to consider leaving than employees who do feel they can achieve their career goals. Of course, much of this revolves around technology and professional support.
In order to educate workers for this new era, the financial services industry will need the support of L&D organizations that are focused on advancing professional development. As McKinsey observes, the compound annual growth rate of education and training expenditure is projected to grow at 7 to 9 percent globally over the next few years. And with only 2 percent of that education spending designated for digital learning, this amounts to $4.5 billion in and through private investments to educational technology companies.
Consider the fact that 71% of CEOs cite human capital, ahead of products, customer relationships and brands as the leading source of sustained economic value. Moreover, CEOs rank “People Skills” in the top 4 “External forces impacting the enterprise”. Indeed, supporting personnel through education and training is now a critical challenge.
Unfortunately, most learning systems today are based on models that were developed over a century ago. For example, as researchers at the Harvard Business School and the Chan-Zuckerberg Initiative point out, today’s AI-enabled, information-rich tools are making organizational learning the foundation of business innovation.