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FinTech Discussion Neocova Jimmie Lenz

Digital Convergence in Media and Finance

The digital revolution has transformed traditional media. The move from analog to digital — facilitating new formats and ease of editing — has created a democratization that could not have been predicted twenty years ago. Consider the pace of technological change:

It used to take a crew, an expensive microphone and a $70,000 camera to shoot a story for television. Transmitting that story to your audience required a multimillion-dollar broadcast facility and sophisticated editing gear. That is a thing of the past.

As I like to tell my business students, now anyone can shoot a story in HD-quality video using their mobile phone. They can then “broadcast” that story almost immediately worldwide via the internet, essentially for free — an impossible task in the pre-digital world.

And while it might seem like it took decades to get here, I would argue those barriers changed in the blink of an eye. In his 1995 work Being Digital, tech visionary Nicholas Negroponte predicted the profound changes that digitization would bring for television:

“Broadcast television is an example of a medium in which all the intelligence is at the point of origin. The transmitter determines everything and the receiver just takes what it gets. But computers designed to filter, sort, prioritize, and manage multimedia on our behalf allow to have intelligence live in both the places: transmitter and receiver.” [1]

Sounds a lot like Netflix, Hulu, or some other internet-based, on-demand video service many of us routinely use now wouldn’t you agree? And the switch from analog to digital represented more than just a change in format for traditional media. It also fundamentally altered the business model, creating opportunities for companies that made the leap, and obsolescence for those that did not.

Consider newspapers with their vast repository of content. A case study in the Harvard Business Review notes that newspapers “initially resisted going online because they did not want to lose subscription revenue by cannibalizing print circulation.” [2]  In the end, newspapers would lose that revenue and much more by being too slow to adapt.

Today, we are seeing that same type of rapid change occurring in traditional banking and transactional finance, collectively dubbed fintech. While digital technology is certainly not new in banking, it is — much like what transpired in legacy media —  having a profound effect on both the business model and the industries’ relationship with its customers.

Some of the most profound changes are taking place in areas not traditionally served well by brick-and-mortar banks. Face-to-face financial relationships are nearly impossible in large landmass continents, like Africa and Asia. However, mobile phones are ubiquitous, even in areas without reliable electricity, allowing people to carry out a variety of financial transactions.

Digital adoption and diffusion is also bringing about major cost savings for the financial institutions themselves. Fewer physical branches and, in some cases fewer employees due to artificial intelligence (AI), have cut costs. As the research notes:

“A new study from Juniper Research has found that the operational cost savings from using chatbots in banking will reach $7.3 billion globally by 2023, up from an estimated $209 million in 2019. This represents time saved for banks in 2023 of 862 million hours, equivalent to nearly half a million working years.” [3]

Some of these savings are being passed along to consumers in the form of lower lending fees, mortgage preparation fees and other ancillary costs. Advancements in core banking technology are also cutting consumer costs. And with more development in technology on the horizon, like quantum computing, the game is likely to advance even more as the adoption curve steepens.

Extending the traditional media comparison further, it is important to note that while the technology used to gather and deliver the news has changed, the industry’s essential service — accurately reporting the news — has not. The institutions that lost sight of this lost their customers’ trust and so failed to adapt as much as the ones that failed to anticipate the digital revolution.

As we incorporate and plan for technology’s evolution in fintech, we must be aware that the basic service for banking remains the same — it’s the method of delivering the service that must continue to move with advancements in technology. Confidence in the banking institution is still the backbone of the industry and maintaining that trust will always involve more than the remarkably innovative digital solutions we are witnessing.

I’m referring to the human component that, if the news reporting industry is a guide, can be all too readily overlooked in the push for lower operating costs. Transactional errors occur; financial markets experience volatility. For that reason customers also need the immediate assistance and, most importantly, reassurance that only actual human engagement can provide, be it with a bank teller or a financial advisor.

A community bank absolutely needs to keep pace with technology for the delivery and refinement of its financial products. Most importantly, however, it needs the customer, whether that’s an individual or a business, to always know that the bank understands the financial trust being placed in it to guarantee smooth transactions and protect assets. For now and the foreseeable future, there’s no app for that.

 

Written by: Jack Speer

Jack Speer, member of the Neocova Strategic Advisory Board, is a newscaster at NPR in Washington, D.C. where he reports, writes, edits and produces live hourly updates during NPR programming. Jack has been honored with multiple industry awards, and he contributed to NPR winning a Peabody Award for coverage on the 9/11 terror attacks.

 


 

[1] Negroponte, Nicholas. 1995. Being Digital. New York: Alfred A. Knopf.

[2] “The Newspaper Industry in Crisis,” Harvard Business Review, Case Study (January 12, 2010): 1-24

[3] “Why AI is Revolutionizing Financial Services,” Whitepaper, Juniper Research-http://www.juniperresearch.com