Towards 2030: Get ready for the megatrends

Michael McQueen analyses two of the eight megatrends that will dominate financial services and society in the coming decade.

Celebrated author and political theorist David Rothkopf once observed that the ability to anticipate what the future holds is something that doesn’t come naturally to most of us.

He suggests that as humans, we operate with a range of biases and we expect the world to confirm them. As a result, we mishear, misread and misinterpret events around us. We live in a world where 85 per cent of the time, today’s weather is the same as yesterday’s weather and as a result, we tend to let the immediate past shape our expectations of the future1.

And yet the future is going to be very different from what any of us have known. London Business School Professor Gary Hamel puts it well when he observes that: “You can’t outrun the future if you don’t see it coming.”

And that’s the purpose of my research report, Towards 2030. My goal is to help you get a clear sense of what the future will hold, so we can start preparing now.

Having spent over 15 years analysing trends and identifying patterns before they even become disruptions, I’d suggest that the coming decade will be dominated by eight seismic shifts. These megatrends will reshape our world, recast our economy and redefine everyday life in ways many of us can scarcely imagine.

So, what are these megatrends?

Trend 1: The Age of Artificial Intelligence.

Trend 2: The reign of blockchain.

Trend 3: The demise of driving.

Trend 4: The triumph of the tiny.

Trend 5: The printable world.

Trend 6: The end of ownership.

Trend 7: The rethink of retail.

Trend 8: The reworking of work.

However, due to space constraints, I will limit this article to the two megatrends that I think are particularly interesting for the financial services industry – Trend 1: The Age of Artificial Intelligence and Trend 2: The reign of blockchain.

Trend 1: The Age of Artificial Intelligence

For many of us, the very mention of Artificial Intelligence (AI) conjures up futuristic notions of Skynet and the malevolent robots that rose up to destroy humankind in the Terminator film series.

In reality, however, AI is already here and it’s not out to kill us. In fact, AI is saving lives and revolutionising the world of healthcare – and that’s just the beginning.

To see the impact AI is already having in the medical arena, consider Toronto-based company Cloud DX, which is leveraging the power of large data sets and machine learning to identify tuberculosis, pneumonia and bronchitis by teaching AI to detect subtle differences in the way a cough sounds2.

While some express concerns about the reliability of AI-powered diagnosis, Japanese researchers recently demonstrated a computer-assisted system capable of identifying and analysing polyps found during a colonoscopy in less than a second with 86 per cent accuracy3.

Beyond the world of diagnostics, AI-powered automation is proving to be a game changer in surgical wards, too. A full 40 per cent of robots currently sold worldwide are designed for surgical purposes. Every year the number of robotic surgeries is increasing by 30 per cent and at the time of writing, more than one million Americans have undergone robotic surgery4.

The da Vinci robot is proving to be an enduring success story in automated surgery. When I was working with a key player in the medical device sector recently, they told me that as many as 80 per cent of prostate surgeries today are performed using some form of intervention by a robotic technology, such as the da Vinci5.

Investment advice from an algorithm

Although AI is ushering in a new age of efficiency and accuracy in healthcare, in many other industries, its impact could be far more disruptive and disconcerting.

Consider the financial planning and advice business for instance. Traditionally a high-trust business, financial advice has been rocked by a series of scandals in recent years, leaving many clients asking whether human advisers and the fees they command are actually a necessary part of the wealth management process.

While advisers, who are expert financial strategists with extraordinary people skills, will remain in high demand for many years to come, those advisers who are stuck in transaction mode will likely find their clients gravitating towards automated ‘robo advisers’.

These automated investment advice algorithms incorporate a client’s goals and risk profile in order to make intelligent wealth management recommendations at a fraction of the cost of a traditional adviser or fund manager6.

Carolyn Colley, chief executive of software firm Decimal, says the range of automated advice platforms is likely to grow significantly in the coming years. In fact, by mid 2017, they were already managing $19 billion of investments in the United States alone7.

In the related field of accounting, similar moves towards automation have been underway for some time now. Automated bank feeds and cloud-based accounting software have all but removed the need for bookkeepers – and accountants themselves could be next in the firing line.

For instance, KPMG recently announced a goal of having 30 per cent of client audits completed by AI-powered robots within a few short years. That’s the bread-and-butter work of a lot of accountants instantly disappearing.

Communication and customer service

While artificially intelligent diagnostic services and investment managers represent big changes, it is the impact AI is set to have on communication and customer service that could most revolutionise our daily lives.

Firstly, we are going to find ourselves communicating fluidly with robots in ways that may have seemed unimaginable just a few short years ago. Amazon’s Alexa-enabled Echo, along with Google Home and, most recently, Apple’s HomePod, are set to transform the way we interact with and rely upon technology8.

Amazon’s Alexa is gaining knowledge at a rapid rate, making it ever more useful, reliable and easy to interact with. As of mid 2018, the voice assistant had gained more than 30,000 ‘skills’9.

While many of us are increasingly comfortable with chatting to smart speakers in our homes, the reality is that you and I have been communicating with and relying on robots conversationally for a while now without even knowing it.

Chatting to the chatbots

If you’ve interacted with any large company online or even over the phone in recent months, there is every chance you were actually speaking with a chatbot, rather than a real person.

Technology research leader Gartner estimates that AI-powered chatbots will be responsible for a full 85 per cent of customer service interactions within a decade10. It’s easy to see why companies are rushing to implement this automated customer service technology – after all, it costs a fraction of what human service assistants do. It’s also far more efficient.

According to Juniper Research, healthcare and banking providers using chatbots are seeing average service interactions being cut by just over four minutes per enquiry – equating to average cost savings in the range of $0.50 to $0.70 per interaction. The research’s author, Lauren Foye, suggests: “As Artificial Intelligence advances, reducing reliance on human representatives undoubtedly spells job losses11.”

While much of the emphasis in using AI-powered chatbots has centred on companies employing this technology to engage with customers, something very significant occurred at a recent Google event. For the first time, Google demonstrated what happens when chatbots actually become the customer.

This new technology, Google Duplex, allows customers to instruct their Google Assistant to make phone calls on their behalf and engage with human beings in an uncannily lifelike manner. Live on stage at the 2018 Google I/O conference, a demonstration was given of the Google Assistant calling a salon to book a haircut – even throwing in the odd “mmhmm” for realism12.

While the ability for Google Duplex to respond to the nuances and complexities of human interaction was impressive, what was more striking was how increasingly difficult it is to tell if you are actually speaking to a computer rather than a human being.

In 1950, the famed computer scientist Alan Turing proposed that if one-third of a group of humans could not distinguish a human from a machine conversation, that would mean the machine is capable of ‘thinking’ – a notion that became known as The Turing Test13. If one thing is clear, it’s that chatbots have seen technology pass The Turing Test with flying colours in recent years and the potential of what lies ahead for AI technology is truly extraordinary.

Trend 2: The reign of blockchain

Recent years have seen cryptocurrencies, like Bitcoin and Etherium, attract enormous attention and fascination. While early investors in these currencies made small fortunes overnight, what the fever-pitched excitement over cryptocurrencies overshadowed was the more important technological transformation being driven by blockchain.

Blockchain technology is complex, but the idea is simple.

For the uninitiated or unaware, blockchain is a global distributed ledger or database running on millions of devices and open to anyone. On the blockchain, trust is established not by traditional intermediaries like banks, governments or technology companies, but through mass collaboration and clever code. Blockchains radically improve transparency, thus ensuring integrity and trust between strangers66.

As a platform for exchange, blockchain has two major advantages. Firstly, because the ledger is shared by many parties, it is therefore incredibly secure and reliable. Transactions are verified in one location and the verification is shared to all parties67.

The second main advantage is efficiency. Because traditional intermediaries are cut out, information and assets can be transferred at faster speed and with lower costs than ever before68.

According to the latest research, the global blockchain technology market is expected to be worth US$20 billion by the end of 2024 (as compared to US$315.9 million in 2015)69.

Blockchain and banking: Friend or foe?

Blockchain could be a great opportunity for banks and financial institutions to improve customer service and efficiency. As evidence of this, in September 2016, Barclays carried out the world’s first trade transaction using blockchain – cutting down the time it took to process the transaction from seven to 10 days to roughly four hours70.

On the flipside, however, it could well be that blockchain becomes a significant disruption by threatening the very revenue banks and financial institutions earn from facilitating transactions.

Bypassing intermediaries in the financial system was, after all, the clear goal of Bitcoin’s creator, Satoshi Nakamoto71. It is predicted that blockchain will reduce settlement and transaction costs by up to $20 billion (revenue that is currently being gobbled up by traditional banking institutions)72.

Despite the potential for revenue loss, around 80 per cent of banks worldwide are actively developing their own blockchain technology74 and at a financial systems level, blockchain is also set to be a game-changer.

In the same way it takes banks days to synchronise their ledgers for currency transfers, when investors want to settle a stock trade, it usually takes three business days from the time the order executes to do the payment and transfer legal ownership of the security.

In order to shorten this transfer time, Nasdaq recently launched a blockchain management tool for shares in private companies called Linq, and some of the world’s largest investment banks are exploring how blockchain could be used to settle and trade bonds without the need of a clearing house at all.

In the entertainment world, operators are rapidly working on blockchain solutions to make the sharing of copyright material fairer and more transparent for content creators.

Since the dawn of the internet, many creators of intellectual property were not properly compensated. Everyone from musicians to playwrights, journalists, photographers, artists, and fashion designers had to deal through record labels, publishers, film studios and large corporations – all while grappling with the rise of digital piracy.

In the music industry, pioneering companies such as Mycelia and Ascribe.io are focusing on producing ‘intelligent songs’ supported by blockchain technology, which enable artists to sell directly to consumers without going through a label, financial intermediary or technology company. Spotify, Apple, Sony Music and other massive media companies stand to lose or gain, depending on how quickly they embrace this technology75.

Looking more broadly than music, blockchain will allow artists to create a registry of their work including certificates of authenticity, condition and ownership – all while enabling them to earn royalties without going through traditional intermediaries76.

The end of cash?

On top of these areas where blockchain will make its presence known, one of the interesting trends that it could accelerate is the demise of cash.

Currency has historically been tied to national sovereignty, with notes and coins bearing the face or insignia of the sovereign. They were also intrinsically linked to the physical world – consider how the very names of currencies such as the peso, shekel and British pound are all derived from terms relating to weight77.

However, the emergence of virtual currencies and the blockchain technology that underpins them, represents the most significant change to financial services in decades and possibly centuries.

Blockchain-based cryptocurrencies are a transnational currency. Even more significantly, transactions using cryptocurrencies don’t involve any physical money – a purchase of cryptocurrency is merely buying a slot in that cryptocurrency’s ledger. Ownership of currency is not verified by anything tangible but rather through a secret ‘private key’ that divorces personal identity from the ownership.

While this degree of anonymity may sound dangerous at face value, the beauty of blockchain-based currencies is that they are entirely traceable and every transaction is logged forever.

Hedge fund owner Charlie Songhurst predicts that the cryptocurrency Bitcoin will be so pervasive in the years to come that the world may end up with only six digital currencies: US dollar, euro, yen, pound, renminbi, and Bitcoin78.

Regardless of the currency used, there is little doubt that financial transactions will involve less and less money in the traditional sense.

While blockchain can be difficult to conceptualise, it’s hard to overstate how significantly it will impact our economy and society in the future. According to Ernst and Young’s technology strategy leader, Paul Brody, blockchain will be the key catalyst that will “drive a productivity revolution across the globe on par with what Henry Ford did with the automobile”.

6 steps to prepare now for what’s next

Naturally, identifying trends and disruptions is only half the battle. The more important question is how organisations, leaders and individuals can prepare for the changes ahead. You can future-proof and bullet-proof yourself and business model by:

  1. Digging the well before you get thirsty

Don’t wait for change to hit before you adapt. Re-invent yourself before you are forced to because if you wait too long, it’ll likely be too late. The status quo may be comfortable, predictable and profitable for now, but visionary leaders recognise that embracing the status quo is a death sentence for any business today.

  1. Thinking revolution, not evolution

When it comes to innovation, many of us make the mistake of adopting an evolutionary approach. While continual process improvement is of some value, it is not going to be enough to prepare for the changes that lie ahead. What’s required is revolutionary change – a fundamental re-think of your core assumptions. As legendary business professor Oren Harari once observed: “The electric light never came from the continuous improvement of candles.”

  1. Failing fast, frequently and frugally

Cultivating an appetite and culture for risk and failure is truly vital for any business hoping to stay at the cutting edge. In the words of Nobel Prize winner Frank Wilczek: “If you’re not making mistakes, you’re not working on hard enough problems.” That said, smart innovation is neither reckless nor reactionary. It is an evolutionary process of constantly taking calculated risks, experimenting, testing and iterating.

  1. Foster healthy paranoia

Staying ever vigilant to the disruptive threats just around the corner will cultivate the two essential character traits of enduring organisations: humility and hunger. The moment arrogance or complacency sets in, the end is near. After all, the moment you think you’ve made it, you’ve passed it.

  1. Focus on friction

The customer experience is everything today and any process or system that creates friction by causing irritation, confusion and frustration, must be dealt with swiftly. Taking customers for granted, even unknowingly, will leave any business especially vulnerable to being disrupted by the next start-up willing to solve a customer pain-point that the incumbents aren’t willing to address.

  1. Spare no sacred cows

Bureaucracy, tradition and red tape are the unholy trinity in business today. Leaders must be willing to ruthlessly address the ‘way things have always been done’, if they hope to foster agility and responsiveness.

Michael McQueen is a social researcher, professional speaker, trend forecaster and a bestselling author. He was the keynote speaker at the 2018 IMAP InvestTech conference.

Footnotes

  1. Rothkopf, D. 2017, The Great Questions of Tomorrow, Simon & Schuster, New York, p. 10.
  2. Swant, M. 2018, ‘How Artificial Intelligence Is Changing The Healthcare Industry’, Adweek, 28 August.
  3. Molina, B. 2017, ‘New Artificial Intelligence Can Detect Colorectal Cancer In Less Than A Second, Researchers Say’, USA Today,

30 October.

  1. Ross, A. 2016, Industries of the Future, Simon & Schuster, New York, pp. 32, 33.
  2. Cormack, L. 2013, ‘Robotic Prostate Surgery: Keyhole To The Future’, Sydney Morning Herald, 5 November.
  3. Schwab, K. 2016, The Fourth Industrial Revolution, Penguin, London, p. 63.
  4. Yeates, C. 2015, ‘Rise Of The Robots Highlights Grey Areas In Financial Service Advice Rules’, The Sydney Morning Herald, 20 September.
  5. Bishop, T. 2017, ‘Amazon Unveils $20 Dash Wand With Alexa For Voice-Enabled Grocery Ordering And Home Controls’, GeekWire, 14 June.
  6. Perez, S. 2018, ‘Amazon will now directly pay top Alexa ‘kid’ skill developers in the U.K. and Germany’, TechCrunch, 30 May.
  7. 2017, ‘Break Through the Hype — Uncover the Reality Of A.I.’, Oracle + Bronto, July.
  8. 2017, ‘Chatbots Will Save Business $8B a Year’, Which-50, 9 May.
  9. Vincent, J. 2018, ‘Google’s AI Sounds Like A Human On The Phone — Should We Be Worried?’, The Verge, 9 May.
  10. Canton, J. 2015, Future Smart, Da Capo Press, Philadelphia, p. 183.
  11. T apscott, D. 2016, ‘The Impact of the Blockchain Goes Beyond Financial Services’, Harvard Business Review, 10 May.
  12. Cochran, S. 2017, ‘The Trustscape - How Blockchain Reshapes Global Commerce’, CLSA Report, 11 July.
  13. Eyers, J. 2016, ‘Blockchain And How It Will Change Everything’, The Sydney Morning Herald, 6 February.
  14. Anand, R. 2018, ‘What Is Blockchain Technology And What Is Its Future Scope?’, Quora, 16 August.
  15. Galland, D. 2017, ‘5 Industries That Blockchain Will Likely Disrupt by 2020’, Forbes, 29 March.
  16. Eyers, J. 2016, ‘Blockchain And How It Will Change Everything’, The Sydney Morning Herald, 6 February.
  17. Schwab, K. 2016, The Fourth Industrial Revolution, Penguin, London, p. 63.
  18. Canaday, H. 2017, ‘Blockchain In MRO Could Happen Sooner Than You Think’, MRO Network, 26 October.
  19. Galland, D. 2017, ‘5 Industries That Blockchain Will Likely Disrupt by 2020’, Forbes, 29 March.
  20. Tapscott, D. 2016, ‘The Impact of the Blockchain Goes Beyond Financial Services’, Harvard Business Review, 10 May.
  21. Ibid.
  22. Ross, A. 2016, Industries of the Future, Simon & Schuster, New York, p. 76.
  23. Ibid, pp. 98-104.
  24. Grace, K et al. 2017, ‘When Will AI Supercede Human Performance?’, Future of Humanity Institute, Oxford University, 30 May.
  25. Knight, E. 2017, ‘Ride an Uber, Drive a Tesla - Just Don’t Invest in Them’, The Sydney Morning Herald, 26 May.

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