Conference Presentation, Panel
London Summit 2015 - The Future of Finance: Strategies for a Fast-Changing Industry (I)
Milken InstituteAnna Edwards, Nobel Gulati, Dominic Lester, Seth Merrin, William White, Rupert Watson, Alexandra Altinger, Dan Copley
- The information revolution is projected to be more profound and enduring than the industrial revolution, driven by exponential computational growth and advancements in machine learning, with finance expected to be most deeply impacted due to its information-centric nature.
- Technology providers are encroaching on traditional banking value-added services such as lending, credit assessment, and remittance by leveraging lower cost structures and big data, thereby eroding banking margins and facilitating real-time card management.
- In emerging markets like China, credit scoring for approximately 500 million people lacking traditional history is expected to be enabled by analyzing platform data from entities such as Tencent and Baidu.
- The corporate bond market has doubled in the last decade while bank capital availability for trades has collapsed from $250 billion to roughly $15 billion due to regulation, prompting liquidity solutions like LiquidNet to connect 800 major asset managers in a previously non-automated sector.
- Global debt levels have risen by 20 percentage points of GDP since 2007, with huge corporate expansion in Southeast Asia and Latin America driving outstanding dollar loans to non-US residents to $9 trillion, leading to expectations of significant future debt relief and restructuring.
- Regulatory bodies are expected to focus on preventing catastrophic failures rather than optimizing system outputs, while the SEC anticipates doubling its corporate bond workforce as the asset class transitions to electronic trading faster than others.
- The financial system is predicted to undergo decentralization, potentially starting in emerging markets where the lack of legacy infrastructure allows technology to accelerate faster than in established regions, shifting away from the traditional hub-and-spoke banking model.
- Disintermediation trends are expected to expand into industries like insurance, with 495 of 500 existing lending platforms predicted to fail or be acquired, while 495 of 500 existing lending platforms are expected to fail or be acquired.
- Future business interactions are forecast to become fully remote, and financial services operating at supermarket margins are expected to deploy significantly more technology than currently exists.
- Technology is expected to force financial companies to separate verticals such as money management, lending, and distribution, while complex services like Chinese IPOs will remain dependent on human and regulatory intervention.
- While high-frequency trading is expected to continue exploiting supply-demand imbalances, potentially exacerbating flash crashes, consumer accountability and market competition are anticipated to limit excessive pricing by technology providers.
- Europe is expected to develop large fintech businesses in online lending and trading software despite smaller addressable markets, and capital previously hoarded by regulated institutions is expected to flow more efficiently to where it is needed through tech-enabled intermediaries.