The document discusses the impact of the Fourth Industrial Revolution on the banking and finance sector. It describes how each industrial revolution has changed production, with the Fourth Revolution using smart technology to increase productivity. The Revolution is changing how people live, work, communicate and relate. It is also expected to boost growth in emerging economies. While it presents challenges like security risks, building trust, and increased competition, it also provides opportunities such as enhanced customer experiences through data insights, increased efficiency and security with blockchain, and added flexibility through hybrid cloud infrastructure.

1. The Fourth Industrial
Revolution: The potential and
Risks of Banking & Financial
Sector

2. As with all industrial revolutions, the fourth
industrial revolution is set to change everything:
from the way we live and work to the way we
communicate and relate to each other.

3. The first revolution mechanized production with water and steam.
The second created mass production with electricity.
The third automated production with IT and electronics.
The fourth one is set to increase production productivity with smart
technology.
With all industrial revolutions, the fourth industrial revolution is set to
change everything: from the way we live and work to the way we
communicate and relate to each other.

4. Finance 4.0 (a subset of the fourth industrial
revolution) expected to grow emerging
economies by 6% by 2025.

5. What is the fourth industrial revolution & where did it come from?
Officially christened the “fourth industrial revolution” back in 2016
by Klaus Schwab (founder of the World Economic Forum),
Industry 4.0 (as it’s also known) is characterized by technological
innovation. Powered by the internet, software consulting services,
and software development, the fourth industrial revolution enables
us to do things like order taxis, book hotels, buy clothes, listen to
music, and turn lights on and off with either a voice command or a
click of a button.

6. The fourth industrial revolution is becoming known as “the
transition from a time when people worked with computers to a
time when computers work without humans” and is digitally
transforming industries through the power of digital automation.
Take digital fabrication technology for instance. CAD (computer-
aided design) data drives the manufacturing equipment to cut
shapes out of material. Or look at the companies who are starting to
explore the possibility of using drones as a cost-effective
distribution channel.
Computers working without humans is in full swing!

7. What impact is the fourth industrial revolution having on the
finance sector?
“The process of digitalization in the banking sector is, besides the
great advantages for banks and their clients, also bringing with it
certain challenges that banks need to take care of.” – ResearchGate
The finance sector is divided when it comes to the fourth industrial
revolution. Some say that “technological innovations will be at the
heart and blood of the banking industry for many years to come”
(Brett King) and others fear that “the big banks that are using big
tech will use their lobbying muscle to avoid regulation and play by
different rules.” (The Guardian).
So, which is it?
This section will look at the good, the bad and the ugly sides of the
fourth industrial revolution to determine what challenges and
opportunities it’s handing to companies within the world of banking

8. 3 major challenges the fourth industrial revolution is
bringing to banking & finance
From online payments and digital loans to cryptocurrency
and online forex trading, the fourth industrial revolution
promises to revolutionise the way the banking and finance
sector operates.
But, with that comes several challenges…

9. Fourth industrial revolution challenge #1:
Security risks and cyber-crime
“Cyber risk refers to the threat of financial losses,
disruption and/or reputational damage from a malicious
breach of an entity’s information systems.” – RBA
If concerns over cyber-crime is a red-hot topic in most (if
not every) industry, it’s a white-hot burning one in banking
and finance.

10. Cyber-threats are getting more and more sophisticated, with terrifying tales of
ransomware, phishing, information leaks and data breaches in the news every day.
And, with the fourth industrial revolution bringing an increased use of technology into
the banking and finance industry, the risk of companies suffering from a cyber-attack
is growing.
For instance, 34% of financial businesses are affected by insider threats every year
and phishing attacks account for 14% of all data breaches. A cyber-attack is not only
financially crippling for an organisation, with the average cost of a cyber-attack
approximately $18.3m (£12.9m), it can also cause irreparable damage to its reputation.
Remember what happened with Equifax? The consumer credit reporting agency was
targeted by cyber-criminals and, as a result, 15.2 million customer records were
exposed, 10,000 credit card numbers accessed and over 15,000 customers had their
usernames, passwords, security questions, phone numbers, and email addresses
hacked.
As soon as the news broke, the share values of the company dropped by 14%.

11. Fourth industrial revolution challenge #2: Building trust & rapport
Trust in banking is imperative: 95% of customers say that trusting a company increases their
loyalty to it. But trust is hard-earned. It takes time, effort and a human touch to build rapport,
earn trust and build strong, long-lasting relationships.
“Businesses have historically won trust by signalling strength and reliability with their physical
presence.” – Salesforce
But, with the fourth industrial revolution and the move towards a world where everything is
digitalized and nothing will involve human contact, building that trust will start to become
more and more difficult. Computers and connected technology can’t offer customers much
emotion, creativity, imagination, empathy or intuition.
Banks will have to find new and innovative ways to bring a human element and a personal
touch into their online offering. Chatbots based on artificial intelligence could be the new
normal.

12. Fourth industrial revolution challenge #3:
Increased competition
“Banks are at risk of loss which can be almost a third of their
profit. The next, even more, rigorous phase of digital
transformation will further reduce the banks’profit in the
upcoming years, which will be a consequence of even greater
competition and the continuation of the decline in banks’
margins.” – ResearchGate

13. The fourth industrial revolution and the accelerated progress in digital
technologies have inevitably led to an increase in competition in the
finance sector. It’s forced banks and financial organisations to re-
examine the way they operate. They’re having to step up and compete
with innovative digital services, connected online offerings and mobile-
friendly systems etc… Customers are expecting better experiences,
seamless transactions, on-demand assistance and completely connected
digital offerings from their banks and financial services. And, if
they can get more, they will.
Organisations within the finance sector will need to transform
themselves from traditional financial institutions into dynamic digital-
focused platforms which offer competitive products and services and a
seamless user experience, based on customer data analysis.

14. 3 fantastic opportunities the fourth industrial
revolution is bringing to banking & finance
Despite the major challenges the fourth industrial
revolution is bringing to banking and finance, it isn’t all
doom and gloom. The opportunities it presents are equally
as game-changing.

15. Fourth industrial revolution opportunity #1: Enhanced
customer experiences
Technology is making it possible for companies to enhance
their customers experience tenfold. It’s making it possible for
them to offer intuitive, personal and connected experiences.
With big data, companies have more access to in-depth
insights into how their customers behave, what they like, what
they don’t like, and what they want than ever before.

16. And the huge advances in AI have given them the ability to
tailor their customer’s experiences, reach them at crucial
touch points and change their products and services
accordingly, without much effort.
It’s worth noting that when choosing a banking or finance
company, 70% of customers see connected processes as a
key requirement and 59% see tailored and contextualised
engagement based on previous interactions as key.

17. Fourth industrial revolution opportunity #2: Increased security and
efficiency
Digital money (or cryptocurrency) is an inevitable consequence of the
fourth industrial revolution, and one of the biggest trends to come out of
it is Blockchain.
“Blockchain is a secure, decentralized, and transparent way of recording
and sharing data, with no need to rely on third-party intermediaries.” –
Salesforce
Just like the internet changed communications forever, Blockchain will
change banking forever. Blockchain technologies record all transactions
in a transparent and safe way: It allows people to send money (almost)
immediately, to anywhere in the world, at a low cost. And because it
doesn’t use any third parties, and each transaction is cryptographically
protected, it drastically minimizes the risk of hacking.
“While there is no system that cannot be hacked, blockchain comes very
close.” – WeForum

18. Fourth industrial revolution opportunity #3: Added flexibility
Thanks to the fourth industrial revolution, organisations across all industries are
under more and more pressure to respond to customers and situations instantly,
24/7. As the banking sector is constantly evolving, this means that banks and
financial organisations need to be as flexible and as agile as possible. A tricky
concept to pull off if you’re a large, cumbersome financial corporation.
They need to be able to address problems and change direction quickly.
“High performing banks have discovered that the most cost-effective way of
achieving this is through an enterprise-wide hybrid cloud.” – Wowsome
The Hybrid cloud is an IT infrastructure that connects the public cloud to private
cloud spaces to create a single, flexible cloud environment. It not only gives
organizations the benefit of having both a public and a private cloud space, but it
also addresses issues surrounding data security, governance, and compliance,
along with the ability to organize resources in minutes.
.

19. Refference:
https://www.globalbankingandfina
nce.com/the-fourth-industrial-
revolution-the-impact-on-
banking-finance-challenges-
opportunities/