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As the backbone of the Swiss financial industry and a global provider of financial information, SIX must not only understand the potential effects and relevance of the current developments but also the future of financial information itself. Although the future of financial information is perhaps unsurprisingly data, there is a lot more to it than meets the eye. The type and volume of data is set to change dramatically. Beneath the surface, a lot is changing too.
Our Approach and Key Findings
Future Scenarios Developed
In the course of our research, we have identified five future scenarios that we think will be of interest to strategic decision-makers in the financial information infrastructure and service space. Besides, a most likely scenario, we have found several alternative scenarios that could have a substantial impact on the financial information infrastructure and/or may necessitate considerable adaptations in decision-makers’ mental frameworks.
1. Freedom to generate, right to control, and ability to monetize financial information
People have greater freedom rights and ability in their capacity as asset owners, data owners, and investors. This means that anyone can transform the assets he or she owns into investable assets by simply creating rights to them. The number of investable assets has exploded.
Everyone can control usage of their data and create rights to it. Individuals whose personal data had been collected by third parties have full rights over their data. Third parties have access to a vast amount of data that they can process and a lot of data comes from the crowd. The volume and type of available digital data in general and on specific themes is enormous. There is data allowing investors to evaluate investable assets in any dimension, helping them to better tailor their investments to their preferences. Alternative data has established itself alongside traditional financial information as key input for investment decision. Social impact and sustainability considerations play an increasingly important role in investment decisions.
The majority of digital data is hidden or private. Secure and privacy-preserving systems are a foundational technology of financial information infrastructure. And a large fraction of financial information data sources is stored decentrally.
2. Middle- and back-office consolidation in finance
Financial services providers outsource virtually all their middle- and back-office activities to utilities in order to benefit from economies of scale on non- differentiating activities and to access rare skills/capabilities.
3. Extreme consolidation in infrastructure
All platforms providing financial information have a global scale. There is a single global digital marketplace for financial information services and a single global intermediary for data distribution and data access. Niche providers also have global scale wherever scale provides an advantage.
4. Extreme protectionism
Governments want a locally operated infrastructure for financial information to ensure a functioning local market that efficiently allocates capital. Privacy-preserving systems are necessary to allow cross-border access to data without the raw data ever leaving the country.
5. Crypto-assets everywhere
The world of finance runs on permissionless distributed ledgers. Crypto-assets are the dominant form of digital assets and of investable assets. Decentralized crypto-currencies have replaced central-bank-issued currency as the dominant medium of exchange. Commercial digital operations take the form of open-source code stored and executed on top of these permissionless distributed ledgers, known as ‘decentralized applications’ (DApps).
What Could the Most Likely Scenario Mean for Our Daily Lives?
Asset owners can readily transform the assets they own into investable assets by creating rights to them, which they can then offer to anyone around the world.
Imagine selling the usage right to your parking spot that lays empty while you are at work. Imagine selling the usage right to your apartment like ‘Airbnb’ or selling a right to a share of your future income. The possibilities are truly endless.
If you own any type of asset, you can make it available to the market and choose the kind of rights you want to associate with it. After you have given instructions to a digital voice assistant, an algorithm in the background automatically generates the legal documents. You can directly interact with potential buyers/investors from around the world on a digital marketplace without having to go through a middleman.
The volume and types of digital data have continued to explode. Data owners are in full control over the usage of the data they produce.
Everything produces digital data. People wear sensors in all shapes for self-optimization and self-monitoring. Social interactions take place in the virtual sphere. Real world experiences are augmented with a digital layer like voice interfaces and/or augmented reality to provide additional information and to interact with the objects themselves. Cities have become “smart” and are riddled with sensors and cameras. Clothes tell washing machines how to treat them. It is as if whatever we do, digital data is being produced and collected.
The majority of digital data is hidden or private. Service providers have to adhere to high data privacy demands. Raw data should always stay encrypted and should never be used outside of the application or service generating that data. Advances in privacy-preserving systems give data owners, like individuals and corporations, the ability to monetize their data while still protecting data privacy. Data owners can provide access to their raw data for processing by third-parties without ever distributing or revealing this data. The fraction of data that is accessible for processing by third parties has exploded.
Just like with assets, owners of data can easily create rights to any type of their data, issue these rights to a global customer base via digital marketplaces, and interact directly with data users without middlemen.
Investors perfectly tailor their investments to their preferences.
Digital data is available to the wider public. Thanks to this freely available data and significant advances in artificial intelligence and robotics, there are more and cheaper data on a wide array of topics available to investors. Consequently, any investors can tailor their investments and take better informed decisions.
Besides traditional financial information, alternative data has become a key input for investment decisions.
Investors can find all they need on one-stop-shop digital platforms, aggregating across services and service providers. Investors can freely combine (sub)services from different financial information providers and readily switch between them. Investors may for example, use one service provider to give you access to the raw data, another one to buy the usage rights for this data, another one for cleaning and preparing the data, and yet another one to provide the user interface.