Innovation in Finance – Shaping Tomorrow's Business Models
The financial industry became the most rapidly changing industry exposed to high levels of volatility in terms of its results and reputation. Innovations are being launched at a pace that other parts of the economy can only dream of. All this develops in today’s environment characterized by immense challenges from the monetary policy, the regulatory and the technological side.
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The meaning of the term "financial innovation" has changed several times over the past years. At the very beginning it was associated with keywords such as the debit card, the ATM, and online banking. Financial instruments like interest rate and credit default swaps, options and futures quickly followed. Warren Buffett skeptically pondered, that the ATM probably was the only value creating innovation brought forward by the industry.
Financial innovation has become multifaceted, driven by new business models rather than speculation. A customer centric approach recently became the norm when innovating. To name just two of countless examples, mobile payment systems and blockchain technology truly added value for the customer. Furthermore, social motives gave an impulse for innovation, when looking at crowdfunding, microfinance as well as microinsurance. Last and most importantly fintechs are turning the world of finance upside down and are posing serious challenges to established financial services providers.
Innovation adds value as well as complexity. Which business models will survive? How will they integrate into the world economy from a macro perspective? How ethical are financial innovations? How much regulation is appropriate to protect the consumer without hindering development? Who are the players driving innovation? These questions have to be dealt with in a responsible manner by all parties involved and carefully considered while deciding on a long-term strategy.
Reaction and timing of established players in the financial sector to new trends will decide on their success today and their ability to innovate tomorrow. Let us discuss the process and the dynamics of innovative financial solutions and work on the relevant factors for future success, bringing together the entire spectrum of players shaping tomorrow’s business models.