Fintech to remove person from ‘personal finance’

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This article was published 23/06/2018 (2827 days ago), so information in it may no longer be current.

The 1968 film 2001: A Space Odyssey’s talking spaceship computer, HAL 9000, was somewhat prophetic. The malevolent, but mild-mannered rendition of a “chat bot” was about 50 years ahead of its time.

Nearly ubiquitous on mobile phones, chat bots are cutting-edge in the financial industry as companies large and small look for ways to leverage talking software and artificial intelligence to their advantage. According the tech news and resource site DZone, Capital One, MasterCard and hundreds of other firms are working on developing virtual financial advisers.

Broadly speaking, robots will be taking many of our jobs in the future — from cab and truck drivers to surgeons. And, yes, even financial advisers, accountants and financial writers will be supplanted by thinking machines. In fact, it’s already underway.

Technological advances in the financial industry have been eating away at jobs for decades — long before we started referring to these innovations as “fintech.”

Just think of the ATM, which requires no explanation. Tellers remain in brick-and-mortar banks, but no one would think you’re crazy for questioning their longevity, says Craig Asano, founder and CEO of the National Crowdfunding & Fintech Association of Canada.

“How many millennials are going to a bank?” The answer is not many among this tech-adept generation, which is largely doing financial transactions by mobile phone, tablet and laptop, Asano says.

“Fintech is a broad term that has evolved over the years, encompassing everything from payments and wealth-management services, to mortgages and insurance.”

It’s everywhere, he adds.

Even cryptocurrency and blockchain are part of the revolution. Altogether, these technologies are eroding the foundations of the financial establishment and many jobs along with it. According to the former head of Citigroup, Vikram Pandit, advances in technology will eliminate about 30 per cent of all current banking jobs in the next five years.

Yet, unlike the dystopian vision embodied by 2001’s HAL, those involved in the industry argue that while the advances are indeed disruptive, they are ultimately beneficial for the average, increasingly tech-savvy consumer.

“There is a lot of opportunity to make financial services better and easier for consumers using technology,” says Andrew Graham, co-founder and CEO of Borrowell — an online financial marketplace offering free credit scores, and connecting consumers with everything from loans and credit cards, to mortgages and savings accounts.

“We’ve seen huge changes in commerce, retail and travel, and now we’re starting to see it in financial services as well.” Graham says

Borrowell is among dozens of Canadian fintech companies making waves in how Canadians carry out their financial lives.

“In terms of being disruptive, offering something for free that used to cost money, and then helping consumers find financial products that suit them” fits the description pretty well.

Call it a robo-broker for loans, among other products.

Borrowell uses AI and other advanced software processes to match its clients — using their credit scores and additional information — to appropriate financial products.

“It’s democratizing financial services,” Graham says of fintech.

And it’s loosening the grip large corporations — like the Big Five banks — have on Canada’s financial landscape.

Particularly for small business, fintech advances in crowdfunding, with startups like FrontFundr for raising equity capital, and Lending Loop for borrowing, are providing economic growth in areas the banks typically underserve, Asano says.

“When the term fintech hit the market, banks and fintech companies were like oil and water, but times are also evolving,” he says.

These days, Canada’s largest financial institutions are investing more in fintech startups — though implementing these new technologies is challenging for them.

“The problem with the banks is that they are limited to their legacy systems,” Asano says. New ideas don’t often mesh well with existing technological infrastructure, which can be several years old.

Yet many startups’ technologies can fit well with old-school financial institutions. Take financial advice, says Jad Chehlawi, founder of Systelos — interactive software which allows clients and advisers to communicate better.

“What I find funny today, is we can track a $10 car ride or a delivery of food,” he says. “But when it comes to things like your financial future and investment assets, there’s no real, functional way to track the people who are managing those things.”

His firm’s technology aims to do just that by empowering investors working with advisers to be able to understand in real time what’s happening with their portfolios, financial plans, insurance applications — you name it. If it’s a financial task involving a professional, Systelos’s platform aims to help consumers keep track of it.

“We have seen a lot of interest from big financial institutions,” he says, adding one major Canadian wealth management firm is currently using the service on a trial basis. “The demand is real, because financial institutions are recognizing they need to future-proof advice.”

If they don’t, financial institutions will continue to see their business worn down by low-cost exchanged-traded funds, do-it-yourself investment platforms and robo-advisers — all of which have evolved from fintech innovations.

OK… maybe your financial adviser won’t (entirely) be a robot in the future.

Instead, your adviser might be a cyborg — part machine, part human… at least, when it comes to the job description of today. As ridiculous as that sounds, it’s likely the future. And Canada needs to up its game, or fall behind other countries with much higher rates of fintech use, Asano says.

“There’s a broader trend here that Canada needs to catch up with.”

He points to a 2017 EY study which found Canada had increased its fintech adoption rate (number of people using two or more fintech services in the last year) to about 18 per cent, up from eight per cent in 2015.

But it still lags far behind China at 69 per cent, India at 52 per cent and the U.K. at 42 per cent. (The U.S. rate is 33 per cent, the global average.)

While entrepreneurs — thanks to the advent of crowdfunding — are more able than ever to launch new fintech companies without big money, Canada’s sector still requires more help from business, universities and government, Asano says.

It’s almost a do-or-die proposition. Sure, our financial industry is strong, but technology like blockchain and cryptocurrencies — along with tech companies jumping into banking — represent an existential threat to even our biggest and strongest players.

“You have to envision that Apple Bank, Facebook Bank… and Amazon Financial Services could be category killers,” Asano says.

The big banks have taken note, and funding accelerators are devoting departments to fintech advances. And while upstarts like Borrowell do chip into their multibillion-dollar profits, these innovative companies also represent opportunity — new ways for the big fish to reach customers.

“I think what we’re finding in fintech is there are a lot of frenemies — friends that could be a threat later on,” Graham says.

And as for robots taking all the jobs in the industry, he says, that may largely be the case, but people still want to talk to a real human from time to time.

Here, Graham once again compares fintech to the travel industry.

“There are still travel agents out when you need help putting together a complicated trip,” he says.

“But if you’re trying to do something more straightforward, you can go online and book the trip, and we’re going to see that done more with financial services.”