#FFAsia15

Tom Chatfield is a British writer and digital commentator. Tom presented at the Distribution Summit at FundForum Asia 2015 in Hong Kong on the topic of 'Doing business in the digital age.'


Tom ChatfieldWhen I spoke at FundForum Asia this April, I looked at the opportunities for funds around digital disruption. It's an area in which the very word "opportunities" has to be heavily qualified, given how great the threats and challenges are.

The internet finance boom in China, for example, has in the space of a few years years seen financial service platforms being launched by the likes of Alibaba, Baidu, Tencent and Xiaomi. Perhaps the most famous example is Alibaba's online money market fund Yuebao, which ended 2014 with US$93 in assets and 185 million users – including millions who have never invested before, courtesy of Yuebao's seamless integration with Alibaba's third-party payment system, Alipay. As its "leftover treasure" brand implies, Yuebao's great triumph - beside its bank-beating rates - has been the seamless ease of transferring any spare cash instantly from an Alipay Wallet into the fund. With over 300m Alipay users in China alone, it's a force to be reckoned with – and an astonishing example of the power of convenience and integration.

The whole point about disruption is that incumbents seem at a disadvantage compared to newcomers: burdened by legacy infrastructures, legacy skills; by a lack of nimbleness that can leave them looking like pale imitations of young rivals. But fear and defensiveness are no recipe for success, which is why I have picked out three areas in which understanding digital trends promises great rewards - if acted upon sufficiently boldly.

1. Understanding the profound changes associated with mobile technology.

From smartphones to tablets, mobile technology is becoming a primary point of contact between hundreds of millions of people and every service in their lives: banking, investment, shopping, media, travel, employment. The bywords for success, here, are user experience, speed, responsiveness and transparency. Mobility isn't just about hardware: it's a mentality in which technology intersects life with a whole new intimacy and contextual responsiveness. The airline industry, among others, has already taken on board the importance of moving to a mobile-first model in everything from sales and payment to ticketing and information, and finance can and must do the same – building new partnerships with mobile operators and tech companies; integrating with new payment models, value repositories and ways of thinking about life-planning.

2. Recognising the double importance of data in a digital age.

On the one hand, it's essential to invest in a behind-the-scenes infrastructure able to move with the regulatory tide, and offer real-time access to portfolios, full disclosure and cross-referencing with markets. On the other hand, there's the emerging opportunity to build a truly integrated customer-facing infrastructure, able to track behavorial data across news and social media, spot needs as they emerge, and make timely offerings customized to individual circumstances. Self-broadcasting through social media isn't enough: it's about listening, analyzing, and responding.

3. Ensuring transparency

Finally, and most importantly, there is the chance to build trust through transparency – and explicitly to articulate the value of services via technology. Tech companies repeatedly top modern tables of corporate trust and value, while financial services tend to bring up the bottom. This shouldn’t be surprising, given the gulf in perceptions between the constantly-accessed, ever-helpful presence of tech brands and the opaque, often-criticized and ill-understood realm of finance. But it can and must change - especially given that human skills need more than ever to justify themselves against the backdrop of robo-advisors and automation.

We underestimate the growing sophistication and power of this technology at our peril: it can and will do more than seems possible today. But we also stand to gain most by differentiating human skills from those of machines: via an emphasis on values, social impact, relationships, personal service, truly long-term planning, and the discerning use of technology to support rather than supplant judgement.

 

What do you think are the three most important digital trends that the funds industry must embrace? Tell us in the comments below.