With the passage of time, mankind has sought new and better ways to lead life and in process three industrial revolutions resulted which transformed our lifestyle. Now, we have stepped into the 4th industrial revolution (4IR) which banks on technologies such as artificial intelligence, robotics, augmented reality, genome editing, 3D printing, etc. The 4IR has already influenced almost all the industries in different ways but in significant manners. It has also impacted the financial sector by introducing of blockchain, API, AI and so on. The introduction of technology in the financial sector in developing countries like ours has its pros and cons. Firstly, it will be discussed regarding the ways in which technology has changed the traditional approach of the financial sectors and later its impact and challenges will be discussed.

Technologies of the 4IR in the Financial Sector

Blockchain is a distributed database which is shared among the computers through nods. Since it is a form of database, it preserves data in electrical form. It results in the speed and efficiency of business deals. It is already fastening the process how Financial Institutions (FIs) can perform transaction overseas. One of the renowned foreign banks of our country has successfully completed the country’s first blockchain transaction by issuing a letter of credit.

Artificial Intelligence (AI) is a technology that is able to perform tasks which require human intelligence. Examples of such tasks include speech recognition, visual perception, decision-making, and translation between languages. AI has revolutionized the information technology sector and is a sub-field of computer science which includes the creation of intelligent machines and software that work and react like human beings. However, FIs in Bangladesh are yet to adopt technologies of AI. If, they do so, it will unfold many potentials including record high speed data, valuable insights, better risk management and so on. AI will enable banks to perform five important tasks more efficiently, chatbot, robo advice, predictive analytics, credit scoring, cyber security and so on.

API stands for Application Programming Interface. It will enable banks and FIs to digitalize their service and merge with other digital service providers.

As cloud computing develops further, it will become more sophisticated and it will enable banks to be a cost saver for marginal systems like procurement, HR, etc. It will also enable the banks to introduce more flexibility compared to age old on premise system.

Impact of 4IR in the Financial Sector

The 4IR will impact the financial sector significantly. With the total transformation of tech in the banks and FIs, more transactions will be processed in a given set of time and so more services will be provided. With proper implementation of AI, risk management will be easier and more effective. Moreover, with the combination of these technologies, we will be able to do better analytics and hence forecasting will be easier and more accurate. Further, it will enable us to provide service at a low cost.

Challenges

One of the significant challenges is lack of technical skills. As financial sector gets automated, the need for highly skilled workers had also risen. But, in a developing country like ours, skilled workers with the required technological skills are still limited in comparison. Hence, we have to prepare a set of skilled workers before diving into the revolution.

When we will introduce tech in most of the phases of the financial sector, the concern for cyber security will increase manifold. As the data will be stored in clouds and servers, it will require proper security. So, banks and FIs must adopt a well-secured system prior adopting the revolution.

4IR poses major threats for unskilled and low-skilled workers who might lose their jobs, as they might be replaced by technology. Therefore, in order to maintain the socio development indicators and to uphold the living standard, we will need to arrange alternative employment opportunities and train these set of workers who might lose their jobs in the process.

The youth are open to tech and innovation. But, we have a set of people who are in their 40s and 50s and they are reluctant to change. When they will see such a tremendous shift in this sector, they might be unwilling to adopt the changes swiftly and there may be some hurdles created by them.

Conclusion

Competition among financial institutions in Bangladesh is fierce. Customers are constantly expecting better services, quick decisions regarding their loan applications, seamless transactions, on-demand assistance, etc. Hence, adopting the technologies of 4IR is the need of the hour. However, we can see that the Fourth Industrial Revolution and its technologies can exhibit positive impacts on society along with its negative impacts as well. Hence, while adopting this new technologies, we have to be prepared to face consequences of the negative effects too. Therefore, we need a legal policy framework to mitigate the challenges associated with these technologies and compensate the affected parties in case of a fatal error so that the serious threat to humanity could be curtailed.