Fintech Predictions for the Not-So-Distant Future, with Frank Rotman
Jan 3, 2024
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Frank Rotman, Chief Investment Officer at QED Investors, discusses long-term predictions for the fintech industry. Topics include the impact of AI on the stock market, restructure of financial institutions' costs, modernization of intrabank settlement process, and the potential of stablecoins in money movement.
The stock market will undergo a complete overhaul in the next 5-10 years due to the accelerating trend of AI in trading, creating a disadvantage for retail consumers and requiring a rethinking of how it works.
Financial institutions will completely refactor their cost structures in the next 5-10 years, with AI co-pilots potentially replacing or significantly changing many jobs, leading to a shift toward digital-only infrastructure to provide better products and experiences.
Deep dives
Prediction 1: Overhaul of Stock Market
Frank predicts that the stock market will undergo a complete overhaul in the next five to ten years due to the accelerating trend of AI in trading. He explains that the current system of buying and selling stocks is flawed, with new information coming in less frequently than stocks are traded. He believes that AI bots will take over trading, creating a disadvantage for retail consumers. This, coupled with the collapse of trading costs, will destabilize the stock market and require a rethinking of how it works.
Prediction 2: Refactoring of Financial Institutions' Cost Structures
According to Frank, financial institutions will completely refactor their cost structures in the next five to ten years. He highlights the large expense associated with the current workforce in the financial services and insurance industries and predicts that AI co-pilots or AI agents may replace or significantly change many of the jobs in these sectors. With the reduced cost of AI-based solutions, he expects a refactoring of work processes and a shift toward digital-only infrastructure to provide better products and experiences.
Prediction 3: Perfect Discovery in Financial Services
Frank predicts that perfect discovery will become the norm in the financial services industry. With the rise of AI agents and increased access to information, customers will have better visibility into the products and services offered by financial institutions. Companies will be required to earn customers' business every day, as customers will have access to perfect information and not rely on incomplete research or customer inertia. Frank emphasizes the importance of a company's ability to offer valuable products and the need for a consumer-centric and fiduciary mindset.
Prediction 4: Stablecoins Revolutionizing Money Movement
Frank predicts that stablecoins, powered by blockchain infrastructure, will revolutionize money movement within the next five to ten years. He points out the existing friction and inefficiencies in the current system with banks relying on their own ledgers and intra-bank settlement processes. Stablecoins, acting as a currency on a set of rails, will eliminate the need for currency conversion and intra-bank settlement, simplifying cross-border transactions and reducing costs. He envisions stablecoins becoming a common form of currency for global money movement, with various currencies adopting stablecoin solutions.
We know, we know… Prediction episodes are so cliché. And somehow, experts have an incredible way of dramatically overestimating what we, as an industry, can accomplish in the next year while also dramatically underestimating what we can do in the next ten.
So, let’s reframe the way we do predictions; how about that?
Frank Rotman, the Chief Investment Officer at QED Investors who dislikes end-of-year predictions with all of his heart, gamely gives Alex his 10-year estimate of what the fintech landscape will look like… and can we just say — his answers are absolute dynamite!
He maps out what rapidly progressing AI capabilities mean for the stock market, why financial institutions will be forced to completely restructure their costs, and how the intrabank settlement process will, at long last, be modernized.
And one last, final prediction? This episode will age like a glass of fine wine. Hopefully.
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