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Financial technology (FinTech) is morphing into a larger field of the Internet of Things (IoT) and will be transformed exponentially in the coming decade by quantum computing. New asset classes and technologies are being created that will alter current business practices. Financial engineers are combining data from mobile phones, social networks, and billions of new sensors to create new industries.
For instance, AI can generate a high-quality results note before analysts have viewed an income statement. Sentiment analysis firms can look at thousands of articles and get a snapshot of current sentiment on a stock in just a few minutes. Insurance companies like Zhong An (with 400 million customers gained in 30 months) have no agents and can, overnight, undermine the centuries-old structure for insurance agents. The traditional business models of ratings agencies can become redundant.
A company like Alibaba can grow rapidly in e-commerce and serve as the backbone of banks through profitable offerings from its cloud business, where billions of digital data on customers are stored. Ant Financial can have a value of $60 billion and offer credit ratings on 800 million people and 20 million small- and medium-sized enterprises (SMEs), challenging traditional ratings agencies. They can do a credit assessment on any Chinese person in three seconds. Investment banks that do not change their spots fast enough face an existential threat as well. A company like Equichain can bypass traditional capital markets and offer initial public offerings (IPOs) to exchanges on blockchain without broker/dealers.
The previous business model was building a business center from which data flows. The new business model is building a data center from which business flows. Many traditional banks are akin to a tall building that was built without an elevator. In a world where elevators are standard, why would people use stairs all day to get around? It is not desirable, and installing elevator systems is not practical. A new architecture is emerging now.
The IoT offers instant and easy access to mountains of public information for institutions with financial engineers who can handle hundreds of millions of datasets. Quantum computing is around the corner and will increase the speed of computation exponentially. Those who do not create data centers as the nuclei of their business--this includes...