Abstract
The banking and financial services industry today stands at the crossroads between the traditional methods of business and the evolving modern methods of banking and providing financial services. Technological advancement in the field of finance has led to a whole new form of doing business which is a radical departure from the conventional methods of doing business. The players in the field of banking and finance are facing challenges and competition from entities which never existed in the traditional sphere. The banking and financial industry is not only facing stiff competition from these new age players; it is also facing challenges to find fresh talent who can tide off this industry. This chapter in its existing form shall present an overview of the banking and financial industry of today in the wake of Industrial Revolution 4.0 and identify some associated challenges.
TopIntroduction
The word “Revolution” is derived from the Late Latin term revolutio- “a revolving,” from Latin revolvere “turn, roll back”. Originally applied with reference to celestial bodies, this term came into common parlance with the publication of “On the Revolution of the Celestial Spheres ” by Copernicus. From here onwards this term acquired its subversive political, socio economic connotations. History has been marked with various revolutions that have changed the political course of nations. For instance, the English Revolution paved the way for liberal democracy, parliamentary sovereignty and a constitutional monarchy, the French Revolution established a new political system while the American Revolution brought Independence to the nation. These political revolutions have changed the course of political systems and governance structure and still are the basis for the political governance of today.
The economic history of the world is marked with industrial revolutions which have changed the manner in which businesses have evolved and are operating today. The origin of these industrial revolutions can be traced back to the Renaissance era when the printing press was invented. The invention of printing press led to a series of inventions which changed the lives of masses and gave rise to different businesses. Since then the industrial revolutions have changed the course of businesses and the associated services. While Industrial Revolution 1.0 was powered by the invention of steam as a form of power and resulted in mechanized production, the second revolution relied on power and resulted into mass production. The Industrial Revolution 3.0 functioned on electronic and information technology and led to automation of production and set the ground for the fourth industrial revolution. The first industrial revolution was mostly confined to the British Empire where the colonies were prominent suppliers of raw materials to the empire. This first revolution stayed for a period of approximately 50 years till the start of the 19th century and laid the ground for second industrial revolution. Initially limited to the United States of America, this revolution spread to other European countries and Japan. While the first two revolutions were restricted to limited geographies, the effects of the third industrial revolutions were widespread and global.
Figure 1 shows the time line and progression of Industrial Revolution
Figure 1. Evolution of Industrial Revolutions
The global business today is witnessing the fourth industrial revolution which is referred to as Industrial Revolution 4.0. The Industrial Revolution 4.0 is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres (Schwab, 2016).
Key Terms in this Chapter
Generation Y: This generation belongs to kids born in the 1980s and 1990s, and are perceived as familiar with digital and electronic technology and its use.
Non-Conventional Players: These players are the ones who have not been a part of the traditional financial service industry. They are the ones who have brought multiple innovations to the financial service industry and include services like robo-advisory, crowdfunding platforms, mobile and digital wallets, etc.
Industrial Revolution 4.0: The fourth industrial revolution is the current and developing environment in which disruptive technologies and trends are changing the way human beings live and carry out business.
Fintech: This word results from amalgamation of Finance and Technology. It implies the use of technology for better delivery and increase in scope of financial services.
Conventional Players: These players are the ones who have been traditionally involved in financial service industry and include players like banks, money transfer agents, financial advisors- to name a few.
Challenges: This would imply the situations which the participants of the financial services industry might encounter due to FinTech.
Financial Services Industry: This segment of the economy includes services of banks, investment houses, lenders, finance companies, real estate brokers insurance companies to name a few.