At the 2019 World Economic Forum (WEF), leading personalities from politics, business and other sectors of society discussed current global and regional issues. Rahul Singh, President of Financial Services at HCL Technologies, in an interview with World News Monitor explains how new technologies in finance can make the world a better place and what dangers are looming.
World News Monitor: Mr. Singh, what is Finance 4.0?
Rahul Singh: The term is derived from Industry 4.0. This refers to current technologies such as the Internet of Things, artificial intelligence, cognitive process automation and the public cloud. These overcome the boundaries between the physical and digital worlds. Industry 4.0 is changing all industries, from utilities and healthcare to media and mining. Financial service providers are no exception, as they are being transformed by technologies such as Robotic Process Automation (RPA), blockchain and biometrics. The strongest evidence of the impact of Industry 4.0 on finance is the increasing use of RPA to prevent human error. But cyber-currencies and peer-to-peer transactions also play an important role. These developments lead to Finance 4.0.
World News Monitor: What are the four generations of finance?
Rahul Singh: The founding of the first central bank in 1668 marked the first generation. The rise of the credit and stock markets followed, followed by online banking. Now, new mobile, highly intelligent and autonomous technologies in real time are creating Finance 4.0 for a world where business and retail are globally distributed. With the growth of tradable reserve currencies and increasing regulations forcing the introduction of peer-to-peer shadow systems, a multipolar environment has emerged in which Finance 4.0 can succeed.
World News Monitor: What impact will Finance 4.0 have?
Rahul Singh: It will trigger the fastest and most dramatic change in financial systems to date. The technologies will lead to Fintech's centuries-old traditions and institutions challenging us to redefine confidence in the banking system. Based on crowdsourcing, collaboration and self-serving, they are developing new services that meet the significantly increased expectations of customer service. The pace of change is enormous. Futurologist Ray Kurzweil, who is known for his law on accelerating returns, says: "We won't see 100 years of progress in the 21st century - it will feel more like 20,000 years of progress. According to this, even the rate of exponential growth itself is growing.
World News Monitor: What dangers must be taken into account?
Rahul Singh: Many people and companies are already excluded from financial inclusion. The advantages of digitization have not had a uniform effect. According to a study by Mastercard in 2018 - used by the World Economic Forum to discuss and promote financial inclusion - every fifth bank or mobile account is inactive. This means that a large part of the world, especially from the agricultural and SME sectors, has no digital access to important services. These include suppliers, buyers, purchasing history, market networks, electronic invoicing, faster payments, availability of capital, cheaper credit, affordable tax services, business and property insurance, debt management or structured savings plans for better financial security. Therefore, pure connectivity is meaningless if there is no access to financial services. New technologies are widening the gap and thus the inequality. This challenge must be met.
World News Monitor: What consequences can such discrimination have?
Rahul Singh: Economic inequality inevitably leads to social instability. On a larger scale, this means that Finance 4.0 can increase the volume and speed of transactions and the availability of financial services. Whether this will contribute to or avert a financial crisis remains to be seen. One of the early indicators of actual development is that new technologies, investments and innovations are being introduced primarily in non-traditional financial services and thus outside the regulated environment. There is no clear answer as to whether financial institutions need to worry about this. However, the trend will certainly occupy regulators, who will have to be constantly concerned about the proper use of new technologies.
World News Monitor: Will we experience a better future?
Rahul Singh: There are undeniable advantages, but there are also dangers from finance 4.0. A recent report by the McKinsey Global Institute shows that the introduction of a digital financial economy could increase the GDP of all emerging countries by 6 percent, or a total of 3.7 trillion dollars, by 2025. This would create up to 95 million new jobs around the world. We cannot afford to miss this incredible opportunity to rebalance the world. But much depends on whether and how governments, technologists and businesses ensure that the benefits reach the lowest level - across political and economic boundaries.