This book review is written by Sheldon Freedman, a fintech and funds lawyer at Hassans in Gibraltar and an expert in Security Tokens. We asked Sheldon to write a 3 part post on Security Tokens in November 2018 (use the Security Token tag on Daily Fintech to see these and other posts on this critical subject). As Fintech goes mainstream, there are more books and educational courseware on the subject. The Future of Finance: The Impact of FinTech, AI and Crypto on Financial Services looks like one of the better ones. As Daily Fintech Editor, I like to find experts to review these books. You can buy The Future of Finance book on Amazon or direct from the publisher.
Out this month is The Future of Finance: The Impact of FinTech, AI and Crypto on Financial Services (Palgrave Macmillan, 312 pages). Canadian lawyer-turned-financial-services-consultant-turned-entrepreneur-turned-Big-Four-Hong-Kong-Cypto-Digital-Assets-guru, Henri Arslanian, together with co-author French engineer-turned-financial-officer-turned-entrepreneur-turned-Hong-Kong-AI-guru, Fabrice Fischer, have contributed a useful volume for layman and professional alike. The book is written in stodgy text-book-ese, a primer in financial services transforming in the age of technological disruption, detailing with remarkable clarity where financial services is today and how it got here.
Understanding the development of financial services as impacted by dramatic advances in computation, data science and connectivity is essential to grasping today’s industry; the authors do not disappoint in fulfilling their task of explaining. Beyond the machines, the authors describe how sustained low interest rate environments led to intensive high-risk investment in technology, and how regulators encouraging competition spawned vigorous innovation and disruption.
Even though the book is titled, The Future of Finance, there is little prognostication in its pages. This is because multi-disciplinarian pro’s like Arslanian and Fischer know the innate unpredictability of technology and finance mixed with the innate unpredictability of human beings makes prognostication impossible. Rather, these two top-drawer consultants accomplish what good consultants do: they arm clients (and us readers) with the understanding of the forces in play that will shape tomorrow so that we can think and try to understand together as Unpredictable Future reveals itself. Wise to the perils of prediction, the authors cite “Amara’s Law” that “we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” (This is a variation on the “Gartner hype cycle”, where observers initially expecting rapid, disruptive change, dismiss the technology in disillusionment when its adoption is not immediate – only to find the disruptive technology a ubiquitous part of their lives a short few years later.)
Fintech companies have come to threaten incumbent financial services organizations in recent years. The most dramatic aspect of industry development currently, however, is rather the rise of Techfin. The difference between Fintech and Techfin is in the differing natures of the underlying organizations. Fintech usually refers to niche innovation delivering improved services using digital technologies to reduce costs, increase revenue and remove friction. Techfin is big technology companies (think Alibaba, Facebook, Tencent, Google, Apple, Baidu) delivering superior financial products as part of broader service offerings. Both Fintech and Techfin collect and analyze massive data sets, learn from the insights to improve personalization and digital engagement in real-time, and expand offerings in response to consumer needs. The authors describe recent domination in Asia by Alibaba and Tencent on a breathlessly astounding scale. Tenchfin behemoths, built on digital platforms, challenging competitors’ entire legacy systems, are the reigning industrial experts at reducing operational costs and monetizing their businesses. Techfin players often already command brand loyalty and trust by virtue of their serving millions of customers over many years – and they possess their customers’ data as well.
We know that the future of finance will be centered on the raw, unstructured big data being interpreted by machines working in a cloud-based environment. The authors explain well how the vast proliferation of data, connectivity and storage capacity make the interpretation and management of data the King of capabilities. The book devotes considerable space explaining AI’s crucial significance. The future of finance is platformisation, the shifting market dynamics created thereby and the renovation of the back office – all wrapped up to deliver spectacular customer experience. Who will own the platforms? Who will deliver the services? Who will win the contest for the customer? Who will set standards? No one knows, but Messrs. Arslansian and Fischer have given us a playbook.
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