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The fintech world, by Miguel Noguer
During his talk in the Refresher Programme series on February 20th, ‘Technology and the future of finance’, Miguel Noguer (Lic&MBA 93), associate professor in the department of economy, finance and accounting, addressed the importance of technology in the finance industry.
“Artificial intelligence and blockchain will have almost as much impact as the internet itself, said Miguel Noguer. He considers that the financial revolution began when the internet emerged and was instigated by the new generations. “The consumer habits of millennials are very different from ours, and this will affect the world of finance enormously, he said.
Today’s financial arena is changing, and the way our businesses are managed has had to adapt to the digital world. This has enabled facilities and convenience because the internet has the advantage of reducing entry barriers and lowering costs. Adapting to the digital world brings returns but lots of challenges too, particularly the search for new types of marketing to catch consumers. “People do not change financial providers easily. Consumer adoption is easier than it used to be but is still tough because they tend to be brand loyal, explained Noguer.
Artificial intelligence is a fully-fledged part of how banks operate because it enables a much faster and more efficient form of data management. However, at the interface, their algorithms are not sufficiently developed to enable fluent dialogue, making it difficult to answer queries. This issue is currently an advantage for high-street banks whose officers have enough knowledge to interact with customers.
Once customers are completely loyal to a digital brand, they may want to use its platform for all their transactions. This is what Noguer calls “platformisation, which happened in retail and is now encompassed in the world of finance.
Satoshi Nakamoto, the creator of the bitcoin protocol and the benchmark software, was regarded as a hero, particularly by younger generations who saw a great opportunity to invest and compete with large companies and obtain a large amount of capital – all thanks to blockchain, a database that enables secure transfers without intermediaries. Noguer explains that “each transaction has a mathematical formula solved by miners, very complicated calculations that provide transaction confirmation. The one who confirms it is the one who collects the bitcoins – a truly formidable achievement.
However, the immersion of the bitcoin in the financial world has entailed considerable technical discussion which has triggered two problems: miners use a great deal of electricity when doing the calculations (which would replace or increase the cost of the transaction and intermediaries) and the lead time for transaction confirmation is considerable (about thirty minutes). These issues are pending adjustments to make them run more smoothly.
The latest trends, analysed at the World Economic Forum, reveal that today’s scenario features a form of asset management whose economies of scale enable cost reductions; the automation of processes in financial activities; a change of habits in different generations; and also that the marketing industry is doing a great job in increasing customer loyalty.