It is no exaggeration that accounting and finance will be hugely disrupted by technology. The existing financial system is unsuited for technological advancement in business and finance
– Dr. Ashish Bharadwaj and Dr. Anand Mishra are the dean and vice dean, respectively, of the Jindal School of Banking & Finance, O.P. Jindal Global University, Sonipat
Financial technologies are never new, they keep evolving. From Mesopotamians recording transactions on clay tablets to Roman emperors keeping accounts of state finances, from Chanakya writing arguably the first financial management book for a sovereign, to Italians introducing the double-entry book-keeping system. The latter became the foundation on which Scottish entrepreneurs invented modern accounting and finance between the first two Industrial Revolutions. At the peak of the second Industrial Revolution (1870-1910), the Institute of Chartered Accountants was founded in England and Wales transforming accountancy into an organised profession. However, the 20th century is really when accountancy and finance permeated the domains of business practice and economics in academia.
As businesses evolve, so do commercial transactions which prompt new accounting, financial, business and legal practices. It is no exaggeration that accounting and finance will be significantly disrupted by technology during the next decade. Already industry is witnessing disruption caused by cloud computing, blockchain, artificial intelligence, digital payments, cryptocurrency and robotics. Further disruption is inevitable. But thus far, financial institutions have harnessed technology-induced business disruptions, and enabled entrepreneurial ideas to thrive.
However fundamentally, the existing financial system is unsuited for technological advances in business and finance services at a time when new technologies have become critical for startups and new ventures. For instance, digital money is already ubiquitous and has assumed at least five forms including central bank digital currency, private cryptocurrency, B-money issued by banks, electronic money offered by private business entities, and I-money issued by private investment funds. They pose a regulatory challenge to central banks (such as RBI in India) and an existential threat to conventional financial institutions.
Against this backdrop, there’s urgent necessity for the finance and accountancy profession to reinvent itself like it did in the centuries past. However, reinvention is likely to prove more arduous than before. For example, the term ‘financial reporting’ triggers images of spreadsheets, charts, long tabulations and footnotes generated by armies of accountants and analysts who produce financial statements for corporate leaders, promoters and investors to facilitate business decisions.
But the new reality is that cloud-based systems will render most financial reporting paperless. Financial planning, budgeting, procurement, expense-management are already being automated by cloud-based software-as-a-service (SaaS) technologies which are necessary in fast-moving and early-stage businesses. Robotic process automation will reduce the time required to collate data. Big data and visualisation tools will feed real-time information in easily comprehensible formats. This will enable corporate leaders and entrepreneurs to further devise innovative business practices and transform governance models into automated processes. For startups in particular, deep understanding of new financial technologies specific to the needs of greenfield enterprises, is critical for success.
Contemporary India hosts the third-largest start-up ecosystem in the world with the number of technology startups exceeding 9,000 countrywide. More than 30 enterprises have been conferred the status of ‘unicorn’, i.e, valued at over US$1 billion market capitalisation. These budding entrepreneurs need to understand entrepreneurial financial technologies that form the backbone of all startups and new ventures.
As educationists, we often meet students who aspire to become entrepreneurs. But because of lack of opportunity to acquire entrepreneurship education at the undergraduate level, they take the beaten path of studying commerce, finance and accountancy after completing their school-leaving exams. We also often encounter risk-taking, innovative young school-leavers ready to abandon commerce fearing that cloud and block chain technologies will make traditional commerce and accountancy study programmes obsolete.
Yet conventional commerce and finance undergrad programmes are valuable for foundational learning. But in addition, commerce graduates need to grasp financial technologies and tools required to thrive in 21st century business environments. Aspiring entrepreneurs and those who wish to shape innovative business organisations need skills of the future, i.e, new financial technologies and tools.
Currently, the model is to teach finance assuming students understand entrepreneurship. The alternative model is to teach entrepreneurship taking for granted that students understand finance. Both models are redundant and a new imagination is urgently required.