The Digitization of the Financial Industry 

by Philip McGinty

What is Digitization?

Digitization is the process of converting information into a digital format . 

According to Professor Hilbert this entails the merger of communication, storage and computation technologies onto the bit.

Since the dawn of the internet, evolving software, personal computers and other technologies; the financial industry has changed drastically. As shown in the slide before, the NYSE trading floor is currently outfitted with hundreds of computers in the 2014 picture, while the amount of humans dominate the 1972 picture!

There are several characteristics of digitization that are evident with the transformation of the financial industry.

The following are the ones I will cover:

  • Digital Footprint
  • Timeless Time
  • Death of Distance
  • Algorithmic A.I.

Digital Footprint

Digital footprints is also a key tool for financial institutions.

It provides banks, hedge-funds and other various e-commerce companies the ability to track your credit, finances, loans and even past employment. This allows financial institutions to use digital footprints as a barrier, whether it is for offering you services or employing you.

Be careful with what breadcrumbs you leave behind!

Timeless Time

According to Manuel Cantells, timeless time refers to: “the social practice that aims at

negating sequence to install ourselves in perennial simultaneity and simultaneous ubiquity."

This gives us the ability to communicate using synchronous and asynchronous methods.

Thanks to timeless time, there are many financial tools you may access on your own time. It isn't necessary anymore  to have to find time to visit a physical bank during business hours to deposit a check, check your accounts or transfer funds instantly (synchronous). If someone else received a transfer from you they do not even have to check it immediately, they can do this on their own time. Even employment can be done around timeless time. You can submit an application to say J.P. Morgan at 2 am, but perhaps it doesn't get reviewed until 36 hours later (Asynchronous). This makes things more convenient for the financial industry.

Death of Distance

Frances Cairncross coined the phrase "the death of distance," suggesting that distance may no longer be a limiting factor in people's ability to communicate. This includes sometimes eliminating the need to travel, in order to carry out various tasks.

Perhaps you just created an E*Trade Account but you have no idea how to buy a stock. Now you can do it all from your computer due to information being readily available online, no physical appointment necessary!

Death of distance eliminates the need for people to physically have to pay their mortgage in person, purchase a call option on the actual NYSE trading floor and receive their check via snail mail!

This leads us into the next category, mostly because death of distance creates a competition between financial institutions based on speed and ease of use. 

Algorithmic A.I.

According to Professor Hilbert, algorithms are used to make decisions and computations for various purposes on the digital paradigm. 

Banks are constantly using algorithms to have the most efficient and user friendly apps for mobile banking. Ensuring that a user is able to do as many banking tasks as possible with very low to zero lag time as well as with as little bugs as possible.

Speed has completely changed the stock exchange and other various financial markets. More advanced algorithms that can detect a downfall or a rise in the market faster than any other algorithm can result in millions of dollars of profits. Having the ability to purchase or sell before anyone else ensures that you are able to maximize your return.

Article explaining how speed and technology are effecting the market.

To conclude this presentation on the digitization of the financial industry, it is important to note that these characteristics of digitization are all interconnected.

  • Financial institutions use your digital footprint as a barrier of some sort. This barrier allows them to offer you services which can be accessed via timeless time.
  • Timeless time allows us to perform various financial tasks synchronously or asynchronously.
  • These tasks can be carried out almost anywhere in the world thanks to the notion of death of distance.
  • Death of distance inspires the financial industry to constantly invest in and utilize Algorithmic A.I.

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by phlpmcginty


Public - 7/13/16, 3:52 AM