The pandemic has turbocharged digital transformation initiatives across sectors, as businesses seek to keep up with fast-changing customer expectations and improve operational efficiencies.
The finance sector is no exception.
Here, industry outsiders such as FinTech firms and e-commerce platforms are continuing to raise the bar with innovative new digital capabilities and services, from mobile banking and digital payment solutions to embedded finance offerings and more.
Established players are responding with their own digital transformations and launching new online tools.
All this means it is a particularly exciting time for forward-thinking finance professionals looking to move into new terrain.
But what kind of roles are opening up and how do they relate to the key trends disrupting finance today?
And what can finance professionals do now to take advantage of these shifts and accelerate their careers?
We sat down with Kynan Lee, Assistant Director and Financial Services Specialist, INSEAD, to find out.
Let’s start with embedded finance. Can you describe that trend and the impact it’s having on the finance sector?
Kynan: Embedded finance – where a nonbank provider integrates financial services such as payments, credit or insurance into its range of offerings – is fast becoming one of the most disruptive forces in banking. Forecasts suggest it will offer a market opportunity of USD$230 billion by 2025.
A very wide range of enterprises is seeking to capitalise on this opportunity, from large technology companies (think Google with Google Pay) to ridesharing firms such as Uber and Grab, e-commerce marketplaces such as Amazon and more.
In Asia, innovative offerings have included digital wallet service WeChat Pay, pioneered by super-app WeChat.
We’re also seeing a plethora of buy now, pay later offerings where consumer-facing businesses offer shoppers the option of paying for purchases in instalments without needing a credit card.
Banks, too, are getting in on the action, leasing their infrastructure to nonbank clients via banking-as-a-service software products.
Companies offering embedded financial tools need finance professionals with the skills to operate as digital product managers.
At its most basic, that means acquiring a deep understanding of how an e-commerce platform functions and how an offering such as an embedded finance tool can operate within that.
The skillset required here is really a complex combination of more traditional finance function expertise – such as calculating payment periods, setting variable rates charges, developing any necessary risk profiles and so on – with a sound understanding of user interfaces, site functionalities and more.
In short, winning in this environment is really about grasping how the financial aspects of a digital product relate to the technological aspects, and vice versa.
A pure finance approach won’t cut it.
How about the rise of a different finance trend – SPAC-driven deals?
Kynan: Over the past year, we’ve seen record levels of merger and acquisition (M&A) activity as corporates seek to position themselves to recover from the pandemic. Organisations are streamlining operations through divestitures and spinoffs, for example, or raising capital to invest in new technology platforms.
In the US alone, the aggregate value of M&A transactions in 2021 was USD$2.6 billion, an 82 per cent increase over 2020.
An increasing amount of activity in this space is being driven by special purpose acquisition companies (SPACs), shell companies formed solely to acquire a privately held company, or ‘de-SPAC’.
Typically, once a promoter or sponsor merges a shell company with a de-SPAC, they proceed to list it. Many also draw on a portion of the SPAC IPO proceeds to fund the de-SPAC’s next level of growth.
The big advantage SPACs bring is speed. Because these outfits have no assets or operating history, listing can be a much simpler and quicker process than with the traditional IPO approach.
That’s a key reason why the volume of SPAC-driven deals is growing so rapidly. For example, 2021 saw SPACs in the US price 613 IPOs, a 147 per cent increase on 2020.
As companies seek to undertake more SPAC transactions, more roles in this investment space will likely be on offer to finance professionals with the requisite expertise.
Here, accounting and financial reporting, financial planning and analysis, and other core business skills are obviously a bedrock requirement.
But finance professionals should also consider boosting their ability to develop sophisticated financial forecasts in areas such as leveraged buyouts, valuations and discounted cash flow analysis, to help them take advantage of this growing trend.
Can you also discuss the use of blockchain applications in finance?
Kynan: Cryptocurrencies such as Bitcoin often grab all the attention when we talk about blockchain.
However, the underlying distributed ledger technology that these currencies are based on can be implemented in a huge range of ways to facilitate financial transactions.
For example, many banks already use blockchain applications to help them verify digital identities, improve the efficiency of clearing and settlement processes, manage the lifecycle of loans, create smart contracts for use in trade finance and more.
Other applications that have recently emerged include blockchain asset registry and tracking, which can also facilitate supply chain management.
This is a particularly fast-growing area. Forecasts estimate that the global blockchain technology market will expand at a compound annual growth rate of 85.9 per cent from 2022 to 2030.
As more banks start to adopt blockchain innovation, the demand for blockchain consultants is rising.
Here, finance professionals work with organisations to develop their growth strategies, giving financial advice on how moving more banking processes online using blockchain technology can optimise business efficiency.
More specifically, the process can also involve working with technology teams to develop a blockchain application. Providing risk management and advice on the financial implications of deploying the solution are also key elements of this role.
Given this rich array of options, what can finance professionals do now to keep pace?
Kynan: Finance professionals should work proactively to plug any knowledge gaps by upgrading their skillsets in line with market changes and the industry’s evolving needs.
That may involve external training or higher education, where they can gain a formal qualification such as INSEAD’s Executive Master in Finance (EMFin) to hone leadership and management skills and deepen finance sector knowledge.
Signing up for a degree programme such as the EMFin can also deliver other benefits besides a world-class qualification.
Those include gaining access to an international and indispensable network of contacts – there are over 64,000 business leaders in INSEAD’s alumni network, for example, as well as expert faculty members.
INSEAD also offers essential thought leadership resources – including blogs, knowledge articles and podcasts – giving insight into leadership and other trends that will drive the finance and investment management industries of the future.
INSEAD's Career Development Centre, meanwhile, offers practical advice, coaching and support to help participants in their professional and leadership ambitions.
At the same time, INSEAD programme participants can take advantage of a range of mentorship schemes designed to further accelerate their professional and personal development.
Taking action to develop their careers in these ways will help finance professionals gain an early mover’s advantage.
As the trends we’ve discussed above grow more mainstream, it’s those people with the requisite skillsets who will be well positioned to distinguish themselves from other candidates when new career opportunities come along.
