Why Finance Is Ripe for Disruption (And What to Do About It)

The financial industry is ripe for change, but what can you do about it?

U.S. Money Reserve
7 min readMay 4, 2023

by Sherry Hao, Controller, U.S. Money Reserve

The last three years have upended everything we know about conducting business — from remote work to supply chains — and have introduced more innovation and disruption than the last 20 years. COVID put a laser focus on the inefficiencies, inequalities, and injustices inherent in the financial system, and it’s proven that the financial space is ripe for disruption.

Here’s what you need to know about why the financial industry needs to change and how you can best adapt to meet this evolving space head-on.

Four Major Shifts Impacting the Financial Space

According to the Deloitte consulting firm, three significant factors are upending the industry: changing technology, a shift in global wealth, and a change in risk management. While that report is from 2016, many of its lessons still hold true. I’ve also decided to add one additional factor financial leaders should be aware of as they consider the future of the industry: the effects of climate change. Here’s what you need to know about each shift.

Changing Technology

Everything from the wider acceptance and use of cryptocurrency to new ways to pay and conduct transactions to the implementation of AI technology to help reach customers where they are all have deep and wide impacts on the financial industry.

The pandemic proved that customers want access to their financial information at any time, from any place. Thus, more financial companies are having to rely on machine learning and AI in order to do everything from basics like unlocking customers’ accounts and updating passwords to more complex tasks like ensuring the safety and security of millions of transactions over a wide variety of networks, in an incredibly short period of time.

As Forbes points out, the pandemic has pushed customers to bank in the cloud, and it has also forced companies to rethink how they handle 24/7 customer service as well as security. Banks can scale rapidly, but they also face more security risks. Balancing the two in a comprehensive way is key to taking advantage of rapidly changing technology.

Finally, there has been a push into cryptocurrency and its backbone, blockchain. Consumers are becoming increasingly savvy about cryptocurrency, and major financial institutions have placed huge bets on the future of crypto. Blockchain, the technology behind crypto, has also had a wide and sweeping influence on the financial space. This secure technology allows for the tracking of transaction and ownership details into perpetuity. Everything about crypto and blockchain has been deeply disruptive in the financial industry and continues to challenge the space.

Global Wealth Shifts

Make no mistake — the global population is aging. According to the World Health Organization, by 2030, one in six people in the world will be over 60, and by 2050, 80% of older people will be living in low- and middle-income countries. As Deloitte points out, “Demographics are a significant driver of economic growth and global financial liabilities.”

Long-term care, healthcare, and housing can be expensive, and few public safety nets are in place to support our aging population. Countries with younger, wealthier, and healthier populations, like China, for example, will begin to acquire wealth. That will change the way we manage our financial institutions as well as where the power of wealth is centered. It may also change the global regulations surrounding transactions and trade as a result of sovereign debt.

A Change in How We Manage Risk

The Deloitte paper also points out that the way financial institutions manage risk has changed. This is thanks in large part to SEC rulings that have held corporate heads, their fiduciaries, and investment advisors as ultimately financially responsible for any missteps a company may make. As a result, there has been a significant uptick in the number of solutions companies can opt into to protect themselves and their employees. With that increase in choice and complexity, combined with further changes in the current global financial environment thanks to COVID, companies need to carefully consider how they manage risk — and what kinds of risk they’re willing to take on, both from the corner office and from the global perspective.

Climate Change Impact

While it may not seem obvious, climate change will significantly affect the financial industry. The Deloitte study didn’t focus on this threat when it was published, but it’s an important factor to take into consideration in the modern era. The Fed put out a paper in 2021 that directly calls out issues the financial industry may face as a direct result of climate change. The underlying factor is how climate change will affect the financial stability of entire nations and countries, as well as areas of the world. Climate risk has become a focus for many companies, especially in light of the way supply chains were so deeply disrupted during the global pandemic. Add in rising sea levels, heating oceans, and greenhouse gas pollution, and the loci of financial power and financial stability in the world are likely to change rapidly.

How to Face and Address These Challenges

Now that I’ve identified the biggest disruptors, it’s time to consider how best to face and address these challenges. While many of them are far more complex than I can cover in one post, use the following tips as jumping-off points to begin cooking up a blueprint to deal with these disruptions.

Get Your Technology Up to Speed

Of all the items on this list, this is probably the simplest hurdle to tackle when it comes to disruptions in the financial industry. First and foremost, it’s vital that you and your top executives understand some of the more technical nuances of possible coming disruptions. That includes understanding everything from how cryptocurrency works to how financial regulations affect buying, selling, and trading in the space. It also includes keeping a close eye on the evolving metaverse, Web3, and the potential for a shift in customer demand as a result.

It also pays to ensure that you have the right knowledge about the changes coming in the financial space and that you have creative solutions on hand. Forward thinking is key to take advantage of technological disruptions by making sure that you and your company are up on the latest tech.

It also pays to think about how your consumers want to be met and where. With the advent of Web3 and metaverse technologies, it’s safe to expect that consumers will want even more access points to get at their money in quick, frictionless, and secure ways. If you can find creative, future-looking solutions to meet your customers where they are, you’re sure to weather the coming disruptions.

Global Wealth Shifts — Focus on a Younger, More Connected Consumer in Places Outside the U.S.

Many of the countries with the youngest population are in Africa. According to the World Altas, Niger tops the list of the youngest population, with more than 50% of its citizens under age 18. Additionally, China has a younger population than the U.S., making it a center for wealth. As these younger consumers move into their high-earning years and the global economy and political environment change, a massive global wealth shift will follow.

Younger consumers care far more about social responsibility, social justice, equality, and the reputation a business has than older generations do. They also tend to do more online research and spend a lot more time shopping online, according to the latest statistics. Additionally, more of the younger generation are shopping on their phones rather than via desktop or laptop. So if you’re looking to capture the attention of younger, up-and-coming, wealth-building buyers, you need to ensure that your online storefront or platform showcases the aspects that are most important to the younger generations — whether they’re consuming your products stateside or elsewhere where there’s a larger number of younger people.

Risk Is Everywhere: Know What You Know

As you can see from the content of this article, risk is everywhere. The financial sector is ripe for disruption, which also means that it’s rife with risk. When managing risk, it’s vital to prepare and know what issues you might face should you run awry of new and changing rules for financial professionals and others. The best way to ensure you’re prepared for disruptions related to risk is to ensure that your compliance systems and teams have few blind spots. I cannot stress this enough — no matter what the size of your business, it pays to invest in comprehensive compliance systems and people who can help you mitigate anything that could be coming down the pike.

Climate Change Management: Know Where You’re Vulnerable

If you have operations on a coast or in any other environmentally vulnerable location, you need to consider the risks you and your company are exposed to in your day-to-day operations. You need to consider environmental events like hurricanes, earthquakes, fires, and tidal waves to prepare yourself and your company for the coming disruptions resulting from climate change. As the climate crisis gets worse, you’re more likely to have to deal with one or all of these issues. It’s also vital to consider whether your company relies on a regular supply of natural components that need to be grown, harvested, or mined. These spaces are exceedingly vulnerable to the ongoing climate change crisis. Ask yourself and your company leaders: What can we do to help reduce exposure to these issues? What can we do to reduce our own impact on the rate of climate change?

The Bottom Line on Why Finance Is Ripe for Disruption and What to Do About It

The bottom line on all of this is that preparedness matters. If you’re worried about the impending financial disruptions headed our way in the coming weeks, months, years, and decades, now is the time to get your head around what the risks are, what the opportunities might be, and how you can best navigate the coming storms. We’ve proven resilient in the face of great adversity, but preparedness matters — and now is the perfect time to get the right knowledge, the right team, and the right mindset around the coming disruptions in the financial space. The sooner you get to work understanding the vulnerabilities that the financial industry has, the sooner you can come up with great solutions that will protect your business’s bottom line and its financial future.