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Group: E




Prepared for:


Prepared by:


Submitted date:
11 April 2019

1.0 Introduction Impact of Fourth Industrial Revolution (4ir) On the
Financial Market and Institution

2.0 A Brief of The Related Literature Review

3.0 Main Issue Impact of Industrial Revolution 4.0 On Financial Market

and Institutions

4.0 Advantages/ Disadvantages of Fourth Industrial Revolution On

Financial Market And Institution

5.0 Policy Recommendation

6.0 Conclusion

7.0 Reference

In the regularly growing universe of mechanical globalization, innovation is continually

being pushed towards the point of confinement. New advances are always being presented by
global organizations in each and every day. As these new innovations are being incorporated
into the ordinary utilization of creation of items for organizations, we have seen the loss of
occupations that was the consequences of this "mechanical transformation". This alleged
insurgency is known as the "Fourth Industrial Revolution".

What is the fourth mechanical upset (4IR)? The fourth modern upset is most generally
known as the web of things. It is the most recent pattern of computerization and information
trade in the assembling of advancements. The 4IR is structured dependent on four guidelines
specifically interconnection; the capacity of machines, gadgets, sensors and people to associate
with one another through the web. Next is the data straightforwardness; straightforwardness
given by Industry 4.0 innovation gives administrators a lot of helpful data expected to settle on
educated choices. Network enables administrators to gather a lot of information and data from
all focuses in the assembling procedure, along these lines helping capacities and recognizing
key territories that can profit by advancement and improvement.

Aside from that is the specialized help; the capacity of an emotionally supportive
network to help people by conglomerating and picturing data exhaustively to settle on educated
choices and tackle pressing issues. Besides, it needs the capacity of the physical framework to
physically bolster people via completing an undesirable, excessively tiring, or dangerous
assignment for their associates. Ultimately is the decentralization of choices; the capacity of
the frameworks to settle on choices all alone without the help of people, aside from complex
basic leadership process.

The First Industrial Revolution uses water and steam capacity to deal with generation.
Second utilize electric capacity to deliver large scale manufacturing. Third innovation and data
innovation used to mechanize generation. Presently the Fourth Industrial Revolution
manufactures the Third, an advanced insurgency that has occurred since the center of the only
remaining century. It is described by a blend of innovations that obscure the lines between
physical, advanced, and natural circles.

Based on the journal The Impact of the 4th Industrial Revolution on The South African
Financial Services Market, 4th industrial revolution wider the selection of financial product
and service and broader the market. Access to finance also being improved to lower income
and SMEs. The structure of the financial market not been as disruptive as in other country.
However, the focus of innovation within banks has largely been on digitizing existing services
as a way to become customer-centric organization rather than generating new revenue streams.
New risk arises as the infusion of technology into financial services.

From the journal Fintech – The Digital (R)evolution in The Financial Sector, indusrial
revolution also give the impact on banking sector since it change the consumption behavior of
customers and bank struggled to integrate their fintech service and securing the consumer data.

The journal The Fourth Industrial Revolution: Impact on Financial Services also state
that The Fourth Industrial Revolution is disrupting and reshaping existing businesses,
redefining the high street, and irreversibly changing the way business across all industries is
conducted. As the technology entrants taking over traditional industries, financial service
functions could eventually end up in a wide range.

3.1 Government’s emptying coffers

The whole point of automation is that, unlike Ken, Nexus will never negotiate a labour
contract with Luke. Indeed, it will receive no income and will pay no income tax. The only
way to simulate an income tax on behalf of Nexus is to use Ken’s last annual income as a
reference salary and extract from Luke’s revenues income tax and social security charges
equivalent to what Ken paid.

There are three problems with this approach. For starters, whereas Ken’s income would
have changed over time had he not been fired, the reference salary cannot change, except
arbitrarily and in a manner setting the tax authorities against business. The tax office and Luke
would end up clashing over impossible estimates of the extent to which Ken’s salary would
have risen, or fallen, had he still been employed.

Second, the advent of robot-operated machines that have never been operated by
humans means there will be no prior human income to act as a reference salary for calculating
the taxes these robots must pay. Finally, it is hard philosophically to justify forcing Luke to
pay “income” tax for Nexus but not for the harvester that Nexus operates. After all, both are
machines, and the harvester has displaced far more human labour than Nexus has. The only
defensible justification for treating them differently is that Nexus has greater autonomy.

But a lump-sum tax on robots would merely lead robot producers to bundle artificial
intelligence within other machinery. Nexus will increasingly be incorporated within the
harvester, making it impossible to tax the robotic element separately from the dumb parts that
do the harvesting. Either the robot sales tax should be dropped or it should be generalised into
a capital goods sales tax. But imagine the uproar against a tax on all capital goods. Woe betide
those who would diminish domestic productivity and competitiveness.
3.2 Replacing human workers with automated kiosks

some of the largest food-service and retail companies have announced initiatives
centered around providing customers with a more seamless shopping experience. Cowen's
Andrew Charles, the analyst calculates the jump in sales at McDonald’s as a result of the
company's new Experience of the Future strategy which anticipates that digital ordering kiosks
(shown above) will replace cashiers in at least 2,500 restaurants by the end of 2017 and another
3,000 over 2018.

This trend will only continue to accelerate. McDonald’s, an early pioneer of

automation, is already replacing human workers with automated kiosks. They expect a 5% to
9% return on investment in just the first year; in 2019 they expect this return to balloon to
double digits. And this is only one sector: PricewaterhouseCoopers estimates that 38% of US
jobs will be in danger of being replaced by automation by 2030.’s nearly $14 billion acquisition of Whole Foods Market has spurred (long
overdue) calls from a handful of Congressional Democrats for an investigation into Amazon’s
business practices on anti-trust grounds. Over the past few years, the company’s push for
speedier delivery times (it offers same day delivery in certain markets through its Amazon
Prime service) and an increasingly expansive away of products is devastating smaller retails
and brands.

Some smaller retailers, having ascertained the existential threat Bezo’s blatantly
monopolistic business practices pose, have started to push back, setting the stage for a full-
scale battle between Amazon and its smaller rivals. In an email sent to authorized retailers, the
CEO of Birkenstock USA threatened to cut off any retailers who violate the company’s strict
policies surrounding reselling by turning over their stock to Amazon. The e-commerce giant
has allegedly been reaching out to individual Birkenstock retailers, offering to buy out their
entire stock at full price. Amazon has denied these claims. Already, retail bankruptcies have
surged 110% in the first half of this year, according to a report by Fitchas retail surpasses
battered energy as the most distressed industry in the US.
3.3 Increasing unemployment in country

One of the major concerns regarding the fourth industrial revolution is the risk of a
drastic increase in unemployment. As machinery comes to replace manpower, many branches
will no longer need to employ people. According to a recent study by Ryerson University in
Toronto, 42% of Canadian workers are likely to lose their jobs within twenty years due to the
acceleration of automation technologies. A similar estimate applies to the U.S., where 47% of
current jobs are in the risk-zone of being abolished.

The growth of automation is predicted to stimulate business management and improve

the overall efficiency of manufacturing. Nonetheless, the shifting logistics of workforce will
inevitably erode the appeal of human labor, if machinery can do the same job more efficiently
and for a lower cost. Thus. technological advancement must be synchronized with a policy
agenda that alleviates its disadvantageous repercussions on the labor market.

A universal basic income may have the capacity to balance out the unemployment
triggered by the third and fourth industrial revolution. The prominent entrepreneur, Elon Musk,
is one of many advocates insisting on instituting a basic income program to cope with the
effects of automation. A basic income allocates all citizens, regardless of their financial or
employment status, a fixed amount of money every month to cover necessary costs of living.
It is supposed to be a government-funded initiative, with the purpose to provide people a
fundamental sense of security and reduce job-related anxiety.

3.4 Cashless Journey

According to H. Thomas, A. Jain, M. Angus (2013) as Master Card advisor, "Cashless

Journey" study measures the progress of countries towards a more modern and efficient
electronic payment mechanisms by looking at the current share of cash versus non-cash
payments for consumers (Share), how this Share has shifted in the past five years (Trajectory)
and whether conditions exist for cash payments to move to electronic. Cashless society can be
defined as the economy of a country, where financial transactions are not used in the form of
banknotes or physical coins but transfers through digital information systems as a
representation of money between the parties to the transaction.
Based on the table above, there has been an increase in the use of credit cards, charge
cards, debit cards and E-money that do not require cash transactions by Malaysia in 2014 to
2015. Assuming that in 2018, the use of cashless transactions will increase with rapidly from
2015. This is because the younger generation is exposed and influential by cashless transactions
due to the 4th industrial revolution. This statistic is evidence that the 4th industrial revolution
dominates the financial sector today. However not everyone is exposed and experts use
technology for financial transactions. As we know, the generation of baby boomers is also
involved in financial markets and it is very difficult for them to use modern technology like
this. We want to emphasize that this is the main issue of the 4th industry revolution. Cashless
transactions affect the use of physical money by the baby boomer generation. It will take longer
for them to adapt to the revolution of technology.

The role of money has now been replaced by other instruments which are the
technology of physical money to digital money (E-money) cash. So the problem for this
cashless transaction, money in physical form is rarely seen in the world today. So for a
generation that can be categorized as a parent it is difficult to adapt to today's changes to learn
something new from the beginning including in education for students.

4.1 Advantages of Fourth Industrial Revolution (4IR)

There are various advantages that we can get from the Fourth Industrial Revolution
(4IR). In Fourth Industrial Revolution (4IR), many jobs that will be replaced with the use of
robots or increasingly advance automation assets. Autonomous robots or automated robots are
robots capable of operating independently with minimal input from humans or without direct
human intervention. Automated robots differ from ordinary robots which most often still need
some human guide, the automated robots are more interacting with fellow robots or systems.
For examples of automated robots as the financial advisor. Nowadays, financial advisor
services take place through relationships between the two parties. Sometimes it does have bad
effect that may result of lack of knowledge of the financial advisor itself. Thus, with the
replaced of the automated robot it can reduce the problem. Therefore, with this robot it can
increase the financial market and institution within the country.

In financial services, technology itself enabling the development of new products and
services that can meet consumer needs more efficiently, and more cheaply. By technology
nowadays can help reduce the cost and improve the efficiency of product and service delivery
across the financial sector. Besides that, it also can empower customers who will be able to
deal directly, more seamlessly, and flexibly with product and service providers, and empower
businesses to deliver a better value proposition and customer experience to their customer base
through improved data analytics, giving a better understanding of customer behaviour and
customer needs.

Equally important the advantages of Fourth Industrial Revolution (4IR) is Big Data.
Big Data can be described as data in large size. Currently, financial companies are already
using the Big Data system to collect their customer data to store the information. This large-
scale data analysis is controlled by big data analytic. This analytical system will collect, store,
process, analyse and locate data patterns. So, it will give a good impact to the financial market
and institution.
4.2 Disadvantages of Fourth Industrial Revolution (4IR)

The 4IR will on a very basic level adjust the manner in which individuals live, work,
and identify with each other. In its scale, degree, and multifaceted nature, the change will be
not normal for anything mankind has encountered previously. The development of worldwide
ventures in the fourth modern transformation is both energizing and startling. Life will change
with the 3D printing, the Internet of things (IoT), and the combination of advancements. There
are a few key challenges that lay ahead the Fourth modern upset.

The disadvantages of 4IR are greater disparity and disturbance of work advertises. The
scarcest and generally significant asset in a period driven by computerized advancements will
be neither common work nor standard capital; or maybe it will be those individuals who can
make new thoughts and advancements. Later on, ability, more than capital, will speak to the
basic factor of creation. Individuals with thoughts, not laborers or speculators, will be the
scarcest asset. Low gifted and low pay occupations will be supplanted by PCs and digitization.
The more generously compensated occupations requiring more aptitudes are less inclined to be
supplanted. This expanded dichotomization can prompt an expansion in social pressures.

Besides that, 4IR also give an effect to cyber security, hacking, chance evaluation. A
larger amount of alarm is raised up when human lives become broadly associated with different
gadgets, from mobile phones, vehicles, and light switches to home security cameras, and smart
speakers. privacy will be the fundamental issue in the new era. These days everything is
associated and there is no returning.

It also can manipulation and moral issues. In era featuring artificial intelligence (AI),
mechanization, robots, and hereditary designing, there are new moral concerns rising. Robots
have become more intelligent and more autonomous but the limit from there self-governing,
yet despite everything they come up short on a basic element the limit of good thinking. This
restricts their capacity to settle on great or moral choices in complex circumstances. Further,
the most basic inquiry is whose ethical guidelines robots should acquire. Moral qualities vary
enormously from individual to person, crosswise over nations, religions, and ideological limits.

Nowadays, customer expectations have changed, and people are more empowered than
ever. We now live in a world with technology and social media at our fingertips. Therefore the
Fourth Industrial Revolution (4IR) is exist. This technology created nowadays also have
connection with economy of a country and also in financial market and institution. The
financial institution and market must adapt to this revolution. This is because this revolution
will give big impact to the financial market and institution especially in term of customer-
facing and interaction. Fourth Industrial Revolution (4IR) must give many impact to many
sector in a country such as people, government, and also financial institution. Investment and
lending also include in this Fourth Industrial Revolution nowadays. If this component are
involve in this Fourth Industrial Revolution, it will automatically affect some of the policy in
economy that is related with financial market and institution.

Firstly, the largest beneficiaries of innovation tend to be the providers of intellectual

and physical capital are innovators, shareholders, and investors which explains the rising gap
in wealth between those dependent on capital versus labour. When this technology arise, it will
lead to the unemployment. The unemployment will increase if this technology take over the
worker portfolio as a worker in a company. With the unemployment increase, it will affect the
financial market and institution. We think that the people or the depositor for financial
intermediary will decrease because the unemployment is increase. People do not have extra
money to keep in the bank.

Technological disruption also has implications for monetary policy. To support price
stability means to ensure that the price of an average basket of consumption goods is gradually
increasing, at least enough to compensate for an underlying trend of a higher quality of goods.
Central banks tend to approximate this to an average increase of the consumer prices in the
vicinity of 1-4% per year with a slightly higher rate of inflation for emerging markets.

Consumer prices will be affected by the digitization of retail sales. In some areas,
bookshops, travel agencies, music companies and news print are applying this. These things
are happened. Operational costs for online retailers are substantially lower than for traditional
businesses, and increased competition from low-cost alternatives are undermining pricing

Besides that, globalization in the fourth industrial revolution also not limited to free
trade. Openness is still the fundamental driving force of competitiveness: the more open the
economy, the stronger the innovation and market competitiveness. However, the definition of
openness should not be limited to trade, but should also include the free exchange of people
and the barrier-free communication of ideas.

Our conclusion is that inflation propensity most likely has been dramatically reduced,
with implications for central banks. It will take a longer time for resource utilization to feed
through to consumer prices. When low unemployment and wage increases are putting pressure
on prices, consumers are likely to respond by accelerating the migration to online shopping.

In a digital world, currency depreciation could imply that the profit-margin squeeze is
accelerating. If we look at the limited impact of the recent dollar appreciation on inflation in
some of the emerging markets, this could be at least one underlying factor.

In conclusion, Fourth Industrial Revolution(4IR) give many impacts to the policy in the
economy that is also affect the financial market and institution in economy. In financial services
sector, we believe that this technology will get involve onto the financial services and give
more impact to the financial market and institution.

Information is the “raw material” of the Fourth Industrial Revolution. The way it can
be managed is being deeply transformed by the new cybernetic tools and the cryptographic
ecosystems. Such digital technologies continue to revolutionize the processing of information
and its impact on the financial system under a two-staged process: first, a quantitative change,
with computerized processes and faster system response speed; and second, a qualitative
change. In this stage, there is not only an increase in the information transmission speed, also,
innovation entails changes in the market structure with the emergence of a new specialized

The development of these information technologies is paramount to understand the

emergence of FinTech industry that is changing the market through Blockchain by enforcing
amendments to the institutional and legislative framework set before and after the international
financial crisis of 2008, an institutional and legislative framework unaccustomed to dealing
with the complexity paradigm enhanced by the new information and communication
technologies applied to the financial system.

In this regard, FinTech is key to understand the EMH general validity and its ability to
explain today's world economic context. Market tends to efficiency and, precisely, the
emergence of Blockchain provides some progress in this respect by technically decentralizing
the financial system given that it eliminates transaction costs while preserving the security and
reliability of transactions. This is due to technology sophistication based on computing,
encryption and networks.

In parallel to the foregoing, this new scenario under FinTech industry and the
emergence of multiple products and services at Blockchain does not entail that risks and
failures of the financial market will disappear. According to the Behavioural Finance theories
and their heuristic methods, the inescapable presence of human mind in investment decisions,
despite process automation, conveys the need of foresee the consequences of both human
irrationality and information management in complex environments.

These new circumstances are driving the emergence of an early RegTech trend capable
of accommodate companies and institutions to the new technological changes that are
overturning global economy. This new scenario highlights the substantial importance of Law
as guarantor of legal certainty for all the players in the financial market, by providing
transparency, setting legal mechanisms that play a part in the effective reduction of transaction
costs, restriction of information asymmetries, consumer protection for electronic financial
products and services and look after public interests at stake. Therefore, technological
revolution on finance (FinTech) must give way to a legal revolution (RegTech) which enables
Law to modernize and to provide ideal solutions to new scenarios characterized by database
systems and decentralizing electronic platforms which do not need central authorities or public
notaries or registries and agents as we know them.

Legal certainty as traditionally perceived is revamping via cybersecurity. Hence, we are

faced with a paradox: on the one hand, the emergence of new technological advances makes
legal certainty a concept which needs to be modernized; while on the other hand, such new
digital technology is now capable of providing certainty, although is not regulated at this
moment. Present cryptography-based cybersecurity systems enable to apply many uses and
functionalities that are changing the traditional theories on money and contracts. Thus, the
conflict between old centralizing forces and new decentralizing forces (FinTech-Blockchain)
shall give rise to a complete overhaul of the market about which Law cannot remain unaware.
Governments and international organizations might lose their supervisory capacity to face the
digital economy turmoil. There is also an ambivalent tendency towards delegation or
externalization of their watchdog role. Regulation is being decentralized and introduced into
the DNA of companies. This supposedly should contribute to an improved business
administration in general and, particularly, to better risk management.

Another paradox is that while the banking sector in the world's leading economies
continue to be hyper regulated and promoting concentration and mergers of entities as a legal
solution to this liquidity and solvency crisis, at the same time we witness the emergence of a
powerful decentralizing technology (Blockchain) and of new players (FinTech industry), and
a new concept of money and trading (cryptocurrencies, smart contracts) bound to lead an
overhaul in the financial system. The success of the Fourth Industrial Revolution shall depend
on how lawmakers understand all these new digital technologies and trends.

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