This week, experts from Westminster Business School’s department of Accounting, Finance and Governance tell us about the changes set to impact the world of finance over the next few years. First, department head, Dr Harry Thapar sets the scene…
“In 2016, the financial sector and related professional services industries contributed 12% of the total UK economic output.
In the wake of the 2008 crisis, the industry was subjected to intense government scrutiny and regulatory pressures. To mitigate systemic risks, regulation and government policies were designed to curb “markets’ exuberance”: a term used for markets over-valued due to excessive risk-taking and greed. Regulation re-focused attention on building trust and integrity. Active management policies have given way to defensive and ethically sound business culture norms. The quest for generating wealth through high return (and high risk) investments and complex financial products has been replaced by more conservative risk management practices.
As global interest rates have remained close to historical low levels, surviving firms have mainly protected their market share and concentrated activities on core business interests, consolidating balance sheets through cost reduction and growth measures.
Finance, Brexit & Trump
Meanwhile, Brexit and proposals by the Trump regime in the US to roll back the 2010 Frank-Dodd Reform Regulation have added to uncertainties in the sector. Although these continue to promote a defensive culture, the global nature of the business and intense competition in this sector has left many firms with no options but to adapt and innovate to fend off threats of extinction.”
Euro clearing relocation policy
Dr Ka Kei Chan – Senior Lecturer in Finance
At the moment, the London Stock Exchange (LSE) either dominates or at least has a large share for the clearing of euro-related derivatives and some other financial securities. This gives a unique advantage to LSE and the City of London in financial transactions, and provides tens of thousands of job opportunities in the financial sector.
If, as a result of Brexit, Euro clearing relocation policy changes, we will see job losses in the UK financial sector in UK ,and large employee relocation schemes to other EU countries, weakening the competitiveness of London as a global financial centre. The effect could further affect other sectors; e.g. the demand for higher education (in business areas) in the UK.
Dr Ka Kei Chan is a Senior Lecturer in Finance at the Department of Accounting, Finance and Governance, Westminster Business School. He received his PhD in Finance from Cass Business School (City University London) and holds BSc and MSc in Money and Banking, both from National Chengchi University in Taiwan. He previously worked in Loughborough University and the University of Derby, and participated in two research projects with external funding provided by the Institute and Faculty of Actuaries (UK) and Sloan Foundation (US).
Big data and predicting human behaviour
Dr Kristina Vasileva – Senior Lecturer in Finance
My area of expertise is behavioural finance and I think it will mostly continue to be impacted by the volume of data that is silently accumulated by all institutions and organisations. This will be used with increased importance to learn more about how we behave and predict human behaviour not just in finance and financial services but in many other areas such as transport.
For example, all banks collect an increasing amount data from their clients and customers that needs to be processed and findings applied. This will lead to new ways in which to deliver and conduct financial services in all areas from cyber security to risk profiling.
Furthermore, new technologies such as blockchain are being considered as it is hoped they can lower banking operational costs in a significant way.
Dr Kristina Vasileva holds a PhD in Finance from Cass Business School. She joined Westminster Business School in 2011 and is currently a Senior Lecturer in Finance and employability champion for finance. She teaches both undergraduate and postgraduate modules in the area of finance. Kristina has previously worked as a visiting lecturer at Cass Business School and Regent’s College London delivering various modules in the area of finance and econometrics.
Dr Abdelhafid Benamraoui – Principal Lecturer in Finance
The one change that I think will have an impact on my area of specialism is technology as it is continuously evolving and integrated into the finance subject area. Information technology in particular is becoming a very important skill for those who work in the field of finance as new and more sophisticated models are developed to deal with significant financial data.
Research in the field of finance is also highly influenced by these new technologies as they have made financial data more accessible and easy to compare and analyse. This has allowed researchers to attain more robust findings and to reach more concrete conclusions. Such findings are very important for financial industry professionals in analysing different markets and organisations.
Information technology will make the teaching and learning in the field of finance more interactive, which will help students apply what they have learnt and have better grasp of the financial concepts. It will enable researchers to use sizeable financial data and apply new ways to test various finance theories which ultimately result in new knowledge. It will also enable those who work in the financial industries make quicker and more accurate decisions. And, last but not least, better financial decision-making will help create more wealth which, in turn, will result in more economic and social prosperity.
Dr Abdelhafid Benamraoui joined Westminster Business School in January 2006. He has a First Class Honours degree in Finance from the University of Constantine and a PhD in Finance from the University of Greenwich Business School. He has developed and taught various modules in accounting and finance, including Financial Accounting; Managerial Accounting; Corporate Finance; and Financial Markets at the University of Greenwich Business School, European Business School and University of Westminster. Abdelhafid supervised many undergraduate, postgraduate and executive research projects. He has also involved in the validation of MBA and postgraduate courses.
Retail banking, apps and more efficient transactions
Dr Sudha Mathew
People want easy access, simple, quick ways to transact. As a result, banking as we know it – especially retail banking – is changing even faster than before. The recent wave of technology is replacing cards, financial advisers and traders with apps, making transactions faster and more efficient and, in some instances, generating better returns and enabling people to raise money via crowd-funding platforms.
Many bank branches are closing down due to poor footfall. In the developing world, retail banking apps such as M-Pesa (Kenya) or Paytm (India) which require only a mobile phone, are used to deposit and transact and hence have a wide reach. These apps are replacing retail banks.
Institutional banking is also seeing competition from the rise of technology backed finance (or Fintech) companies such as
– Algomi, a social network for the bond market where people can buy and sell bonds online
– Seedrs, a crowdfunding equity investment platform that allows people to invest in start-ups
– Nutmeg which provides investment management services.
The number of firms starting up in Fintech is growing exponentially with private funding as well as countries such as Singapore focussing on this industry. As a result, traditional banking and finance jobs will reduce in number and those that remain will increasingly require people who are well-versed in information technology.
Dr Sudha Mathew joined the Department of Accounting, Finance and Governance, Westminster Business School, as a senior lecturer in August 2014. Previously, she taught at Kingston Business School, Kingston University. She also has previous experience in banking software development and management.
AI and Blockchain – main forces for change in the financial services sector
Dr Harry Thapar – Head of Department, Accounting, Finance and Governance
The main forces for change in the sector are the use of Artificial Intelligence (AI) and machine learning systems and the development of blockchain. These disruptive technologies have far-reaching implications and will enable financial services customers to access information and carry out a variety of financial transactions quickly and securely anywhere in the world at lower cost.
Digitisation, machine learning and cognitive computing trends are improving decision-making processes and transforming the banking sector. Large data sets can now be mined and analysed even faster to improve decision-making and deliver effective banking and investment solutions and products.
There are “robo-advisory” firms that have become one of the most notable disrupters in the investment and stock market space. Analysts forecast that these advisors who use machine learning systems will manage Stg 6.23 trillion in global assets by 2020.
These Robo-advisors are utilising three different approaches to generate value for investors:
- They use algorithms to make stock selection decisions and to manage portfolios more efficiently. These firms provide cheap access to markets for consumers with small amounts of money.
- Some use a combination of algorithmic and machine learning systems with human intervention to deliver a service with a personal touch. This approach is directed at investors and consumers who seek an on-demand advisory service.
- High technology dependent firms use advanced financial theory and more complex algorithms to create and actively manage portfolios. These firms target high-net worth individuals.
Meanwhile, blockchain uses an open-source distributed database featuring state-of-the-art cryptography to protect customer accounts and transactions. It offers the potential to cut costs by tens of billions of pounds every year by 2020 as it can accelerate and automate routine transactions, create multiple copies of a ledger and enhance transaction security.
Dr Harry Thapar is the Head of the Department of Accounting, Finance and Governance at Westminster Business School. He joined the University of Westminster after having worked as a Treasurer and manager in a major Japanese Citibank and as a Chief markets analyst/strategist for a US company. He has around thirty years combined experience in the financial services industry and in academia. He has experience on MBA and MSc Finance level courses in the following speciality areas of finance: Treasury management, corporate finance (mergers and acquisitions), financial derivatives, equity portfolio management, fixed income investments, portfolio management and risk management.