Effect on the Finance industry
Digitalisation affects the Finance industry in terms of FinTech and in terms of it replacing workers in certain functions. Already one third of jobs [5] in banks are tech related, increasing by 46% in the past three years in the UK and up from just 23% in 2017. This trend is expected to continue as AI (Artificial Intelligence) is used in areas such as trading with
market sentiment monitoring platforms like StockGeist.ai providing traders with analysis of live sentiment from users' social media comments to possibly help predict stock market fluctuations.
In the investment management industry, in particular, Robo advisers are the digital replacement to traditional asset and wealth managers. However, many firms have been able to use it to help existing and new capabilities, rather than having it simply replace old ones. Other firms have decided to partner with FinTech firms, in order to prosper from the increased efficiency and capabilities provided by them. The main impact here though, is on the types of things the industry focuses on investing in.
From some of the previously mentioned points, it is clear how digitalisation has given impetus to certain industries, directing economic growth from manufacturing and agriculture to Big Tech, cloud computing, and data centres used in technology and professional service industries. It has also accelerated economic growth in developing countries, to provide high growth opportunities for investors. It also perhaps affects the clientele of the industry, where younger generations tend to be attracted to automated processes and assistance due to their upbringing in a technological advanced society. It has also made the industry a lot more accessible to potential clients, by providing them with a larger range of services, many of which reach a larger socio-economic group, with lower-cost services and lower minimum investment requirements available to meet their needs.
Issues also may arise due to the immense amount of speculation that now easily enters markets, with all sorts of investors, from an everyday retail investor to a high net worth individual to large multinationals investing money in the same interrelated markets. With the addition of AI and electronic trading, this also does make active investing perhaps less sensible, as security prices become less closely linked to underlying fundamentals. Although, with the plethora of information available, arguably, it makes for a more transparent market and therefore, allows for more informed investment decisions and more efficient markets. Overall, it simply changes the conditions of the market and the nuances as to how investing takes place rather than altering it completely, as well as shuffling about who the winners and losers are.