Shaping the Future of Financial and Monetary Systems
Davos, Switzerland - When it comes to shaping the future of financial and monetary systems, the environment cannot be left behind, a delegates heard at the World Economic Forum on Tuesday.
With disruptive technology dropping price points across the financial services industry, especially in insurance, companies also need to consider the future implications of climate change, and from where the funds to ensure a sustainable environment will be sought.
There can be no doubt, said Mario Greco, Chief Executive Officer of Zurich International, that the financial industry - including insurance - is changing, a change that is being driven by customers using technology. There has been a call for industry to provide completely different service levels, and disruption in retail has been massive.
The sector, said Greco, will be dominated by different companies altogether in the next few years, or by the same brands that have transformed themselves. He added that digitisation is threatening the traditional way of doing business, which will have to shift to services and adding value.
However, Jeremy Allaire, CEO and founder of the digital currency company Circle and Chairman of the Board of Brightcove, believes that financial services’ transformation is at an earlier stage than media and retail. He said the sector is now shifting from making changes at the periphery to making changes at the core, which affects intrinsic systems and ways of doing business.
Allaire said financial services is now at an inflection point, where the very nature of the system is being changed through, for example, cryptocurrency. However, it needs to deal with the challenges that are presented when it comes to crime, and tax, for example. He suggested, however, that the world needs to look beyond blunt enforcement.
Michael Corbat, CEO of Citigroup, added that we are in the very early stages of writing the next chapter of banking, and that chapter is digital. He said, while we are seeing changing business models, customer interfaces, and the cost to serve customers, the industry can only move as fast as customers and clients are willing to move.
Corbat added that the challenge is not about being the best bank, but about being the best possible life experience for customers. He expects the journey to accelerate.
Can’t leave the environment behind
At the same time, there is a need to make sure that the planet is sustainable over time. Both will require huge investments and transformation of the business model, said Greco.
Currently, said Greco, pricing models are not incentivising companies to invest and improve transformation, and global initiatives - such as the Paris Agreement – to counter climate change, for which there is a general lack of funding.
Greco explained that the current business model is based on short-term profit motives, while not enough attention is placed on longer term needs, such as climate change, or the need to avoid another economic disaster.
Keyu Jin Keyu, Professor of Economics at the London School of Economics and Political Science, climate change is a long-term objective that requires international cooperation and agreement. She said the world needed more green technology adopters, and political leadership, at the same time as bringing about individual change.
Allaire added that people are starting to rethink the corporate form, and companies have to go beyond short-term profits to long-terms sustainability. Corporates should also be measured on climate change goals, a move that he hopes capital markets will accept over the longer term.