Turn and Face the Strange

Human evolution is a peculiar thing. A constant tightrope between order and chaos. External pressures elicit changes that propel us forward. However, we have an innate tendency to crave order.

By and large financial services attracts left brained individuals. Those that may identify as being logical, analytical and objective. We pursue meaning, derive patterns and seek to adhere to process. Yet, financial services itself has found itself at a strange place. The pillars of order are inviting evolutionary change, much to the dismay (and excitement) of the industry.

Inflection point. I am willing to bet that we have heard this term thrown around a lot in the past 18 months. And for good reason. New technologies influence the market place all the time. Some participants embrace it and prosper. Others face immediate shakeout. Others get involved too late and enter the sunken place, where competitive edge and economy of scale become distant memory. New technologies are not just entering the market place. They are completely reshaping it. Our industry is no exception.

I am part of a generation that has formative memories of analogue technologies but has grown up in the digital space. But, sitting at our Fin-k Tank conference blew my mind over, and over again. The realm of the possible, was made tangible. It was abundantly clear; financial services cannot continue to duck evolutionary change. Nothing reinforced this more than Anna Wallace, Head of Innovation for the FCA boldly telling the room:

“You cannot allow the FCA to dictate your innovation.”

This is exciting, as we often hear the regulator being used as a scapegoat to dismiss exploration into new ideas or approaches. She elaborated, noting that the FCA is adapting its processes to assess the fast-moving technological developments, labelling this stance as a “massive strategic priority”. 

She continued:

“As we have grown and the market has grown, we’ve developed our business model, asking what we need to do to spur innovation. We’ve tried to help firms understand whether they need to be regulated and how they need to be regulated.”

Attitudinally, this is a far cry from the depictions of the FCA (and by association compliance departments) as proverbial boogeymen, there to stifle progress in favour of convention. It provides firms with focus. It was inspiring to hear that open-banking, blockchain and current A.I. are not even 1% into their development cycles. To quote one of our demos, “within five years, the current applications of these technologies will look like lipstick on a pig”. A colourful phrase, but a sobering thought.

Good literary practice would be to end this piece with a challenge, but the FCA has already thrown down that gauntlet. From a young age we are taught to fear chaos, urged to maintain order. As young children we feared authority. As young societies we feared deities. Time, insight and communication have reprioritised how we view all these things. The unknown was not always to be feared. As the underlying structures of financial services change, and the regulator itself invites us to explore better ways to serve our customers, perhaps the most prudent approach is to embrace these changes and evolve.

Mikhail Ismail