While delivering key note address on “Innovation, Disruption and Transformation in Financial Markets”, Prof. (Dr.) J.D. Agarwal, Sr. Professor and Founder Chairman, Indian Institute of Finance (www.iif.edu) and Editor-in-Chief, Finance India said that Innovations needed in Transformation of Financial Markets to achieve desired results in todays technology driven complex world, despite disruptions. He said, Innovations cause disruptions & result in transformation of Financial Markets. In turn disruptions necessitate Innovations & Transformation of Financial Market for better results. Innovations are motivated by desire to change, redesign, reengineer, redo, discard the existing system, procedure, or method of operations, designing the new methods, systems, procedures, products, markets said Prof. Agarwal at a two day conference organized by IBS, Mumbai – a premier business school headed by Professor Y.K.Bhushan – an eminent management Guru.
While addressing a large audience, Prof. Agarwal said that Innovations are required to reduce volatility, maximise market value, meet challenges in financial markets, maximise growth, facilitate operations & liquidity, mobilize resources and maintain transparency & to control scams.
Speaking on key disruptive trends in payments, Dr. Agarwal stressed the need for cashless world. According to him, emerging payment rails of crytographic protocols; P2P transfers, emergence of Fintechs and Mobile Money are new innovations in payments sector. Speaking on disruptive trends in insurance sector, he stressed the need for insurance disaggregation; disaggregated distribution and 3rd Party Capital. He further advocated the use of connected insurance through smarter cheaper sensors; wearables ; and standardised platforms.
Speaking on other key disruptive trends, Prof. Agarwal highlighted the need for alternative lending through P2P lending, lean automated processes, alternative adjudication, aggregators and their changing roles. He also advocated the need for empowered investor and processes externalisation while discussing the disruptive trends in Investment Management.
Speaking on Market Provisioning, Dr. Agarwal highlighted the need for Smarter and Faster Machines through the use of Machine Accessible Data and Artifical Intelligence.
Prof. Agarwal advocated the innovative need of analysis of Financial Markets through technical Analysis i.e. Predicting future trends based on Market trends and Random Walk Hypothesis. “How to predict volatility in the financial markets still remains a big question despite several studies based on technical analysis and Random Walk Hypothesis” said Dr. Agarwal.
According to him, Mobilizing savings, good earnings with liquidity, industrial growth, national growth, facilitating use of funds, capital formation, price determination of financial securities; marketability & liquidity of financial assets and transparency in market price have been the primary role & functions of Financial Markets.
Financial Crashes push away investors said Dr. Agarwal. According to him, the major causes of stock market crash includes a drastic shift in price earnings ratio, alteration in earnings and changes in dividend apart from financial Scams
There have been two major limitations of Traditional Banking System i.e. speed and service availability said Prof. Agarwal. With new innovations, now, it is matter of few hours to complete a financial transaction. Connectivity and Functionality enabled by communication and computing technologies have allowed consumers to exchange messages, place orders, make comparisons, take instant decisions, obtain digital payments and engage in activities in real time today.
It is a fact that more than 2 billion people have no access to any financial services today. About 59% Men and 50% women in developing countries have an account with a regulated financial institution; 60% of the World Population is still Offline and only 7.4 Billion total Population has access to information and communication Technologies poses serious problems before digital world. Most important challenges before Innovations in Financial Markets include the need for better connectivity, safe internet, regulatory uncertainties; congestions on digital platforms and vested interest continue to create concentrations in different segments of the industry. Digital divides of age, gender, income, education, financial literacy continues to haunt the accessibilities of innovation and cause concerns.
Despite increased investment in financial security software and system there are increasing number of online frauds and Cyber Attacks; Massive Theft of important financial information; Money Laundering; Terrorist Financing; Illegal Money (Smuggling/Drug Trafficiking/Flesh Trade) transfers and Proceeds of other Illicit financial flows (Tax Evasions / Corruption ) transferred easily with innovations in the financial markets these days felt Dr. Agarwal.
According to Prof. Agarwal, as disruptive innovations increase speed, safety and transparency, they continue to fall prey to scams, insider trading, problems even in the most robust and advanced economies.
Prof. J.D. Agarwal appreciated the government decision of Cash Subsidy Transfers; Jan Dhan Yojana and Mobile/Aadhar based banking enabling Financial Inclusion touching the lives of a common man. New innovations in digital payments such as Wrappers; Mobile Money Systems such as Bharat Interface for Money (BHIM); Unified Payment Interface; RuPay Cards; Aadhar Enabled Payment System; Bharat Bill Payment System and Digital Currencies have eased the processes of financial transactions to a large extent in the country today.