Fintech Is Evolving, and Traditional Financial Practices Can’t Keep Up Anymore

The failure of Silicon Valley Bank (SVB) in early 2023 ushered in a new reality for banking and the financial sector as a whole.

SVB’s failure marked the first time that a bank “run” was fueled by social media. This unsettling event was a reality check for more than just bankers. Anyone with a significant stake in the financial sector should be sitting up and paying close attention.

While the short-term effects of this and other recent bank collapses are significant, it’s just the tip of the iceberg. These events mark a change of the guard. They are the harbingers of a silent revolution that is taking place within the financial sector, whether we see it or not.

A Financial World Traveling at Warp Speed

Speed is a funny thing. It can get a lot done, and yet, it also makes it easy to miss the little details. I think of the example of driving my car. Miles go by, and billions of details pass by with them — all unnoticed by me. Apply the same concept to an airplane, and the degree of missed details is amplified exponentially.

You can see the same principle at work in the current state of the financial industry. That world, which is historically a slow, steady behemoth, is moving at warp speed at the moment.

The ubiquitous and fast flow of information between people and businesses takes place at a blistering pace. The speed has become so great that regulators and bank employees are unable to adequately respond anymore, and the ripple effect is making many of their traditional institutions unstable.

The thing is, you can’t just point to the past and say, “The old ways don’t work anymore.” Even cutting-edge financial activity is a train wreck. The crash of cryptocurrency and the gyrations of value in that marketplace demonstrate that market participants and guardrails, even on the bleeding edge of fintech, are not capable of keeping up with events and information flows that outpace the stability of the players.

Availability of Information Is the Great Equalizer Moving Forward

Faster tech isn’t the solution in finance. It’s the democratized availability of information that will truly level the playing field.

The stock markets of the world, and primarily the New York Stock Exchange, have for many decades managed and regulated “program trading” and deployed “market stops.” This has helped buffer price actions and activity so humans can catch up to any abnormal activity.

Readily available information is the modern equivalent of these protective measures. The rapid and free flow of information is essential to keep pace with honest and nefarious actors alike who operate at the forefront of the financial world and have the ability to gain an unfair advantage over the average consumer.

Once again, the availability of up-to-date information to everyone who needs it becomes the equalizer here.

We are facing similar warp-speed changes when it comes to artificial intelligence. Yes, at the moment, publicly available AI may not be as proficient (or sentient) as it sounds. ChatGPT is, in essence, a glorified paraphrasing tool that creates the illusion that it understands what it is saying.

Nevertheless, many have raised warnings, and studies are proliferating about how sophisticated technology and systems could allow human beings to lose control of our own world. The information behind the scenes is moving so fast that it’s impossible to keep up. Fintech has a similar “runaway train” feel at the moment.

So, Where Is Finance Headed?

So, what is the takeaway here? Where is this heading? Should we be worried, excited, complacent?

There’s no clear answer. But there are certainly lessons to learn as we go along. Businesses, for example, should glean from events like the SVB collapse that they must not unnecessarily risk financial resources.

CFOs, CEOs, and other C-level leaders must also strive to stay up to date. At the same time, they must remain flexible and ready to adjust when needed. They must also ensure that this adaptability trickles down to their employees.

As with most key areas of business, this starts with the executive hiring process. You must put the right people at the top of your organization if you want it to survive the ever-changing 21st-century business landscape.

“You must put the right people at the top of your organization if you want it to survive the ever-changing 21st-century business landscape.”

This is where working with an experienced executive search consultant is important. We can give you the network, resources, and strategies required to find the best fit for each position.

Investing in elite talent acquisition is the best way to pave the runway for future success. It creates an agile C-suite that is ready to simultaneously lead with confidence, minimize unnecessary risks, and find the silver lining in every situation — all three of which are necessary for a business operating within the current orbit of the high-speed financial world.

About the Author

Peter Deragon is a Managing Director at Stanton Chase Los Angeles. He is also active in the CFO Practice Group and Financial Services, where he started his career. He has 30-plus years of experience as a trusted advisor and manager in B2B environments. In his free time, Peter supports charitable organizations, especially those focused on ocean stewardship.