True Transformers: On the Future of Financial Services as "Enablers" in the 21st Century

The diagnosis is clear. After the Corona crisis, the world has irrevocably arrived in the digital age. Even with regard to the financial industry, it has become clear to the last doubters that data, algorithms, and virtual communication lay the indispensable foundation for business models and customer interactions in the 21st century. The pandemic has primarily brought a digitalization push with various coercive measures, which has catapulted existing solutions for a decentralized exchange, for automated investment recommendations, or for contactless payment into the mass market. A process that under normal circumstances would probably have taken several years with regard to the cultural foundations of working, consulting, or trading became a stark reality within a few months.

Thus, the crisis was and is also a stress test for the health system, the economy, society - and for the financial industry, relentlessly revealing future potentials, but also limitations. Seen in this light, there is much to be said for understanding the crisis as a monumental global pilot project that offers forward-looking actors the chance to learn. 

The obvious conclusion is that the digitalization of the financial industry in the early 2020s was not on the verge of the much-heralded disruption by blockchain solutions or AI-based applications, but rather at the beginning of a much longer and more comprehensive transformation that is not primarily characterized by bits, bytes, and bitcoins. The conclusion for the financial industry: 

 (Digital) technology alone is not a strategy. It is only a means to an end. As a result, it is becoming clearer than ever that long-term solutions must be based on the future needs of users. In concrete terms: Just because it is possible to publish case numbers on a daily or hourly basis, this does not mean that citizens will be able to better assess risks or make long-term decisions. Similarly, the possibility of sending movements on financial markets to private customers or small savers in real time on a smartphone helps just as little to increase returns or provide an overview. Moreover, especially when it comes to complex issues, direct contact between people is key - whether it is clarifying delicate health diagnoses, or when planning long-term finances. Furthermore, it has been shown - and this insight is also relevant for financial service providers - that it is not the individual needs alone that count, but those of society as well. As useful as the theoretical benefits of contact tracing might have been, it has been of little practical use if the public does not trust sharing their data. Transferred to the world of finance, it is also clear that without the trust of the general public, neither cryptocurrencies from Bitcoin to Libra, nor algorithm-based investment recommendations will be successful in the long term. With a view to the new possibilities of tokenization or NFTs as a future asset class, this requirement becomes even more important - also with a view to the still little-noticed ecological footprint of the exponential increase in the necessary data centers.

From this perspective, three fields of action can be derived for future-oriented and resilient financial service providers:

1. Building up systematic early recognition: With the high dynamics of change, it is becoming indispensable for companies - but also for the regulator - to deal with new technical possibilities in a forward-looking manner and to translate associated opportunities and challenges to the business, but above all, also to the social framework conditions. The consequence of this is an increased ability to face the future, one not characterized by the constant pursuit of the latest trends and hypes, but by more stability and long-term thinking.
   
   
2. Aligning with future demands of users - and society: The core of resilience lies not only in restoring the status quo, but in aligning with the future demands of the market. However, this also requires defining what that core will be in the future. The mere optimization of the financial concerns of individuals or organizations is no longer likely to be sufficient.  Insurance companies, like banks, have traditionally played a central role in economic and social progress, whether by financing large-scale projects in the context of the first or second industrial revolutions, such as the construction of rail networks or factories that marked the dawn of a new era. The introduction of social insurance is regarded as an early "social innovation" because it made it possible to increase productivity and at the same time provide health or old-age provision. Looking ahead to the fourth industrial revolution, it is obvious that the transition to a data-based but also to a sustainable economy requires forward-looking investments. For financial service providers as "true transformers", this requires the forward-looking identification of societal demands and the linking of market-based and societal progress. This not only lays the foundation for trust, but also increases attractiveness as an employer in international competition.
   
   
3. Development of cross-cutting networks: On the one hand, stable and efficient platforms with interfaces for the integration of new innovative solutions are needed for the development of user- or society-oriented offers. This initially requires the definition of binding standards at national and international levels, which can only be defined by the industry - together with the regulators. With a view to a holistic understanding of the services of financial service providers who do not base their offers solely on monetary aspects, but rather on the general requirements of people in the understanding of "digital wellbeing", new partnerships are opening up that go much further than traditional banking or insurance ecosystems are aiming for. In addition to the resulting partnerships, the need to position oneself in international competition is also growing. As a "learning" from the Corona pandemic, but also with a view to the historical role of the financial sector, a positioning is opening up for Switzerland in particular that focuses on security and stability yesterday as well as tomorrow. There is the recognition, too, that interconnection of economy and society as the foundation for this, and positions it in international competition with truly innovative solutions and offers.