In the following post, D’Amore-McKim School of Business Associate Academic Specialist Steven Kursh discusses how technology will influence the future of the financial and insurance services industries.
We stand today on the precipice of significant changes in the ways that financial and insurance services are provided to businesses and consumers. Many of us are already familiar with Apple Pay or Samsung Pay mobile payments solutions. Some of us may have heard about BitCoin, a peer-to-peer technology for managing transactions between parties; Blockchain, a decentralized database that enables transparency with the potential to reduce fraud; or, perhaps, RoboAdvisors, which automates investment management. And you may well have already made some personal investments through crowdsourcing sites like Kickstarter.
These are all examples of what is broadly called FinTech, an evolution in the financial services and insurance industries that will impact nearly all of us, even consumers and enterprises in emerging economies. 
What is FinTech?
FinTech, defined as technology solutions and startups that have disrupted and/or improved the way finance, banking, and insurance industries do business, has become one of the fastest growing sectors in finance, insurance, and technology. The promise of today’s FinTech includes greater security, faster transactions, and revolutionary options for commerce, financial services, and insurance. Additionally, one of the major innovations in FinTech —Blockchain—will affect many other sectors beyond finance and insurance, including health care, manufacturing, and retail.
FinTech generally falls into two categories, either cooperative or disruptive. Cooperative FinTech works with the existing finance infrastructure and streamlines or makes it more user-friendly, like online banking. Disruptive technologies have reimagined finance all together and invented a new way of doing business, like crowdfunding. The industry is also often segmented by the business process it provides such as deposit accounts, payments, lending, wealth management or investing, insurance, markets, and back office operations and the customer segment served such as retail banking, insurance, and corporate banking.
Investments in FinTech are growing rapidly. Just over $4 billion was invested in FinTech companies in 2013; data from 2015 indicates that the investments were well over $20 billion.
Several companies have already made significant investments. For example, JP Morgan Chase has an internal incubation lab to develop blockchain technologies. A consortium of over 60 financial institutions have come together and devoted financial and human resources toward developing the next generation of blockchain technology for the finance and banking sectors. The 225-year-old State Street Bank recently launched a blockchain R&D facility in Ireland, inviting university students to conduct research into new banking technologies. 
Implications For the Future
Obviously none of us can accurately predict the future. Here, however, are some thoughts regarding possible impacts on the financial services industry, insurance, and business generally:
- We can expect to see Blockchain technology have an important role in the financial services and insurance industries, as well as provide key benefits to consumers in emerging markets. Blockchain technology will enable people on a global basis, even without knowing each other, to engage in business activities with each other without professional intermediaries or even financial institutions. This is particularly relevant for the billions of the people around the world who presently are not served by existing financial and insurance institutions.
- Commercial banking—particularly for consumer, small businesses, and mid-sized businesses—will evolve. Already we see the benefits (and downsides) from crowdfunding and peer-to-peer lending. Existing commercial banks have recognized that consumers and small businesses, as well as mid-sized businesses, can be better and more efficiently served by online banks and peer-to-peer marketplaces.
- Investment management will continue to evolve. We’ve already seen the rapid growth of passive management as compared with active management. This trend will likely continue and be accelerated with roboadvisors who will provide more efficient and less costly investment management services to consumers—particularly consumers who have not been traditionally well served by existing investment management institutions.
- Day-to-day business transactions will evolve with more and better payment solutions. While each of us is likely always to have cash in our wallets, we have already begun to migrate to automated payments, including, but not limited to, Square, Apple Pay, Samsung Pay, PayPal, and other payment processors.
- More innovations, surprises, and strategic changes in the financial services and insurance industries. Plus, more regulatory actions by government agencies—particularly in regards to BitCoin. We’ve already seen major financial institutions and insurance companies like Goldman Sachs, Visa, State Street, Liberty Mutual, and others “testing the waters,” and the venture capital community has invested in hundreds of FinTech companies. These trends are likely to continue, albeit at perhaps a slower rate going forward as winners and losers emerge.
What’s Happening at Northeastern University’s D’Amore-McKim School of Business
Looking ahead, here at D’Amore-McKim we are assessing multiple opportunities to bring FinTech into our classrooms, research, and other activities to benefit our students and alumni. The business school is already involved, as are faculty in other schools at the university.
One of our first initiatives will be the FinTech Symposium: New Trends and New Strategies on the evening of Nov. 14 from 5:30-7:30 PM. The Symposium will host a panel of several Northeastern alumni and a leading venture capitalist involved with Fintech. Our panel members will share their perspectives and insights regarding FinTech.
The event is by invitation only. To obtain an invitation, please contact Anne Benware at email@example.com.
 See, for example, World Economic Forum, “Blockchain: what it is, how it really can change the world,” https://weforum.org/agenda/2016/06/the-blockchain/.