Question

In max 3 paragraphs, discuss the disruptive impacts of technology on three sectors of your choice within financial services .

Answer 1

Disruptive impact of technology on sectors in financial services:

The sectors selected are banks, insurance companies & mutual funds.

Banks:

Impact of technology on banks:

The impact of technology on banks is that due to increased use of technology, the relationship & communication between the bank & its customers has come down. People rarely step into the bank for deposits or withdrawal these days due to ATM’s & other technologies. It is always necessary to maintain continuous relationship with the bank people for the latest updates from our side & also for them to serve us better.

The other impact is security reason. Due to technology, the customers’ personal information may be leaked out & we also come across many ATM thefts these days. This is not possible in case of direct transaction as the cash will change hands from the banker to the customer directly at the time of withdrawal. These type of problems at times can affect the name of the bank. If banks go in for very latest technologies like cloud etc., the banks need to spend heavily in order to train their employees on the use of technology.

Impact of technology on insurance companies:

The technological changes must be overcome by the insurance companies. Because the speed of transition is dependent on acceptance by the people as well as the technical capability. Hence it can be difficult for the companies to proceed in case of non acceptance by the customers.

Small insurance companies will be affected because they will not be able to adapt to the new technologies as they may not have the required manpower or sources to bring in the technology. Insurance firms will also have to improve their data storage & processing capabilities which can be expensive. Similarly they will also have to use data from the right sources as some data can be misleading and this is not an easy task for the companies & also involves lot of challenges.

Impact of technology on mutual funds:

The use of technology like artificial intelligence in the form of chat boxes, digital assistants etc. are set to disrupt the industry & eliminate jobs of fund managers & distributors in the coming years. The rise of automation will create problems for regulation of mutual fund companies. Because of technology certain things won’t follow the regulations of mutual fund companies which can be a serious problem. The rise of automated advice has opened large asset & wealth management industry to an entirely new client base while regulations such as DOL fiduciary rule designed to help the investors may be directing the investors towards the automated device.