The Evolution of Finance: From 1.0 to 4.0

Finance has come a long way since its early initial stages. The traditional industry worldwide has experienced swift change due to the digital revolution, augmented by continually developing technology. It is an extensively recognized element that the world has been veteran to four industrial revolutions till now. Finance 4.0 epitomizes a paradigm shift in the financial industry. It is not just about digitalizing dominant methods but reimagining the entire financial environment. With Finance 4.0, financial institutions are accepting cutting-edge technologies to boost customer immersions, improve effective productivity, and drive transformation.

One of the key drivers of Finance 4.0 is blockchain technology. With blockchain, financial transactions can be executed faster, more securely, and at a lower cost. Additionally, it enables the creation of smart contracts, which automate and enforce the terms of agreements without the need for intermediaries. The term “Fintech” is said to have appeared for the first time in the 1980s and 1990s. After the financial crisis of 2007 it was used extensively outside the world of finance to define pioneering, rather new businesses using digital, mobile, AI, etc. skills for financial and banking services to be more competent, economical and faster.

Technological developments have made it possible to reinvent finance and even shake up the established players in the sector by creating new products and new opportunities which allowed FinTech’s to penetrate into customer focused areas neglected by the big players. Fintech services like Banking APIs, Artificial Intelligence, Personal Finance, Retail Investments, Corporate Investments, Asset Management, Money Transfer, Important Data and Analysis, Financial Platforms, Insurtech, Blockchain and Cryptocurrency Technology, Robo Assistants and Next Generation Banking are having enormous impact on individuals by the accelerated use of mobile phones and the Internet.

Although there is impetus behind the conversion to Industry 4.0, Evidently there are certain challenges for its adoption. In retort ‘Finance 4.0’ has been coined to describe financing practices & systems to enable sustainable digital transform the latent diversity of financing options accessible to organizations. When the organizations are facing challenges in transition financing innovations come to liberation.

The journey to digital transformation requires deploying combined hardware and software solutions that can deliver digital data streams of performance data. These data are the key to production optimization, predictive and remote maintenance, and more intelligent manufacturing. Financial solutions will usually be based on a range of options: finance lease, operating lease, rental or hire purchase arrangement. Financiers with a deep knowledge of manufacturing in general and digitalization in particular will adapt the finance arrangement to align with the likely benefits the manufacturer will gain from the technology. Financing agreements in which payments are predicated on the expected business benefits, or ‘outcomes’, that the technology makes possible are being offered with increasing frequency. Cash flow and working capital challenges arise at moments other than just the initial point of acquiring digitalized technology. Digitalization may increase production capacity and productivity, while improving price. Vendor finance can play an important, complementary role to support the sale of digital technology and machines and can encompass complete finance solutions, including maintenance, servicing, hardware and software.

Upcoming future changes in the organisations will be based on the skills and competences of Fin Techs to quickly overcome the new methods of processing ever-increasing amounts of data. Many companies can become partners with FinTech companies and have combined investments in technology projects. Corresponding to the digitization process, it is essential to effectively control the financial framework in order to remove or alleviate risks. The security environment brings new challenges, threats, but also development opportunities for a collective solution to the problems facing the Fintech industry. The demands of different users of financing services and new customers are essentially reduced to the requirements of different generations of users. Nonetheless the credence that the largest users of digital services are the younger generation, which grew up in the digital age, studies have shown that older generations have quickly adopted and mastered digital methods of communication and digital business.

Dr. Navita Gurbani
Assistant Professor

GNIOT Institute of Management Studies
Best College in Greater Noida
Website: www.gims.net.in
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