2/5  BIS central bankers' speeches  However, the evolution of finance must also be managed appropriately to avoid displacement and exclusion. This would include underserved groups and segments that are currently deemed too ‘risky’ by traditional risk metrics. Advancements of any sort always come with trade-offs. For one, with the rapid progress of genetic sciences, it is only a matter of time before chronic diseases such as cancer and diabetes can be predicted even before birth, thereby potentially denying affected individuals of insurance coverage. Automation and artificial intelligence may also result in the displacement of certain segments of the workforce or some segments of society being denied medical protection. Finance, when used properly is an enabling tool. But if abused, it can be a destructive tool with devastating consequences. Finance without ethical considerations will magnify the negative aspects and lead to lasting consequences as the global financial crisis demonstrated. Technological progress would mean excesses can be magnified even further, spreading the risks to a wider segment of the society. Regulators, therefore, stand at the nexus between magnifying the benefits of access to finance and managing the excesses of finance. There are moral and ethical considerations that regulators and policymakers will have to confront as we go forward. Four possible future scenarios Let us conceptualise these themes into four scenarios, an approach that could provide a peek into what is in store, as we visualise the future. The first scenario is “Tech-Savvy Incumbents” a.
Regulators around the globe are very mindful of this trend and are willing to take calculated risks on innovative ventures, going beyond the banking system for solutions. There is thus, a more level-playing field and more business opportunities for non- traditional companies that are responsive and effective in meeting the financial services needs of consumers. For example, new robo-advisory businesses are now providing high quality investment advice at low cost, while payment technology companies are making cross-border payments cheaper, 1/5  BIS central bankers' speeches  quicker and more efficient. TransferWise, a cross-border payment company is now moving to offer ‘borderless’ bank accounts for businesses that operate across border. This is a challenge for many incumbents. The second observation is that data could be the ‘king-maker’ of finance. Companies that are able to control and leverage on data to deliver superior customer experience will possess the greatest advantage. Successful startups over the past decade such as AirBnb, Grab, Snapchat and Uber have all utilised technology and data to improve business models and customer interactions. For the financial sector, this could potentially mark a highly interesting shift of mantra in the future from “cash is king” to “data is king”. The arms race of the 21st century is really big data. Firms on Wall Street and the City of London are now employing data scientists en masse. They are the new breed of ‘bankers’. The bankers of the future.