A word from Davos: a revolution is coming

Whenever you engage with someone who has been to the World Economic Forum in Davos, the general consensus is that the experience is interesting and worthwhile. That is to be expected when you get the world’s top economic and political minds gathered in one place.

This year was no different. From Pope Francis, to Israeli Prime Minister Benjamin Netenyahu, the world gathered at Davos. And there was a common theme to most of the discussions: how will the world cope with the so called Fourth Industrial Revolution.

FAnews spoke to Nicolaas Kruger, CEO of MMI, to get his experiences from Davos and how it will affect the financial services industry. 

From robo cops to robo advisers

Artificial intelligence has advanced in leaps and bounds over the past few years. Gone are the days that you can rely on a computer to only perform certain tasks. Computers are replacing humans in the work place at a rapid rate, and it looks like this will increase even further in the future.

Pope Francis raised this issue by pointing out that computers can be used to perform basic functions within the workplace while humans would then need to be used to complete the process. He encouraged world and business leaders not to ignore this and to formulate strategies to deal with the impact of unemployment that would follow in its wake.

Will this impact the financial services industry? “There are some examples within the industry where computers can take over some functions. However, it is important to note that computers can only operate by following a set of rules. The human element is needed when it comes to cases where discretion is involved. There is also the empathy element that only a human can provide,” says Kruger.

Intermediary integration

The rise of the machines has been an issue which has been existing on the fringes of the industry for a while now. Kruger agreed with the Pontiff’s sentiments that the technology issue cannot be ignored.

He even went so far as to suggest that technology can benefit the intermediary. “Computers can be used to great effect when completing repetitive jobs. Imagine the role of the computer in capturing information when it comes to a record of advice; surely standardisation of this function can only benefit the industry?”

Kruger added that intermediaries need to be open minded when it comes to technology and the role it can play in their business.

Desert storm

Netenyahu raised a completely different, yet not unrelated, concern. He made an impassioned speech about cyber risks and the problems they pose. He also suggested some ways in which the problem can be combatted.

“There is no doubt that cyber risks are increasing in prominence,” says Kruger, “Cyber criminals are smart and are finding new ways in which to infiltrate businesses. The scary thing is that they can often just disappear without a trace once they have got what they wanted.” He added that it is believed that cyber-crime costs the industry an estimated $25 billion/y in the US.

Netenyahu showed a way to combat this. He pointed out that the Israeli government has partnered with technology start-ups who specifically focus on combatting cyber-crime. “This is a new way to work in the world,” says Kruger, “young entrepreneurs enjoy working at start-ups because they enjoy a flexible working environment, they don’t want to be tied down. However, larger companies simply do not have the skills to combat cyber-crime. We may see a lot of partnerships between large corporates and small technology start-ups going forward.”

Wealth enablers

A lot of the focus at Davos was the fact that Christine Lagarde looks certain to be appointed for a second five year term as the head of the International Monetary Fund. But she also had some strong words for the leaders of the world.

She said it is becoming increasingly unacceptable that the cumulative wealth of the world is held by less than 10% of its population. In 2014, an Oxfam report showed that 1% of the world’s population held 48% of global wealth.

Financial inclusion is a major issue. It is something that needs to be looked at as a matter of importance, and the financial service industry has a major role to play in this. But insurers have been wrestling with the challenges of how to best design products for the lower income market for some time now. “We are making progress. Large corporates just need to apply their minds across the board to come up with a solution. A possible way to do this is to look at the overall distribution model and using technology to best serve this purpose.”

Editor’s Thoughts:
Mankind will be judged by their actions more than their words. Davos is an interesting experience, but it can only be a worthwhile experience if the discussions that took place in the snowy Swiss Alps are put into action. Who needs to take the lead in this? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].

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