Fintech is exactly what the name says: technology in the world of finance. With most of the attention on software development, the Economist described Fintech as “the magical combination of geeks in T-shirts and venture capital that has disrupted other industries has put financial services in its sights.”
Investment in venture capital backed Fintech companies has grown from $3 million in 2013 to $14 million in 2015. There has been technological development in nearly all areas of finance. For instance, Fintech can be high frequency trading or cryptocurrencies like Bitcoin. Banks see it as the decrease in the number of feet in branches while enhancing its online presence. The Insurance industry has not been left behind with Insurtech redefining insurance as we know it. Insurtech includes everything from real-time data collection using smart watches, drones and other diagnostic tools, to data analytics applied in attempts to reduce fraud.
I would go as far as to compare the current age of Fintech to the industrial revolution. Since the first Industrial Revolution, the greatest impact of technological advance has always been reduction in man hours, which in effect equals cost reduction. A new world of possibilities is opening in the finance sector at a fraction of the cost and time. General efficiency will improve not only because we can now produce results faster and more accurately, but also because more data can now be analysed and reaction time will now be less than ever before.
It is now all about innovation and technological expertise applied to meet unique customer needs. Customers are no longer satisfied with a one size fits all approach in financial services and are now demanding personalised financial products. The gist of it is data analysis. With real-time and bigger than ever before data available, analysts are now able to apply their skills to gain a better understanding of customer needs. They are consequently able to produce individual products to meet unique needs in a shorter amount of time and quite frankly, traditional insurers are struggling to keep up.
So what does Fintech mean to the actuary? Will software eventually take over the job of the actuary? The answer is a definitive no. The future actuary will nevertheless look somewhat different. No longer will countless hours be spent on meticulous calculations. It will now rather be invested in interpretation, forecasting and development, since even though a computer can do the number crunching, it will never have the insight of an expert.