Business People Planning While Standing At Industry
Business People Planning While Standing At Industry

We have Industry 4.0, why not Finance 4.0?

Manufacturers have been talking about Industry 4.0 for about a decade. Advances in sensors, networking and artificial intelligence (AI) have enabled them to track and optimise production facilities, cutting lead times, reducing waste and improving safety. But interest isn’t limited to manufacturers: retailers, healthcare companies and many others are looking at how these technologies could improve operations. That raises the question, are these ideas and technologies behind Industry 4.0 relevant to finance transformation?

What is Industry 4.0?

The terms Industry 4.0 and the Fourth Industrial Revolution (4IR) are often used interchangeably. Industry 4.0 refers more specifically to the trend of automation in manufacturing, while 4IR is more about the blending of the physical, virtual and biological worlds.

The potential of this technology is enormous, with many predicting a global economic impact in the trillions. Back when Industry 4.0 was first coined, 4G was new and AI was something still confined to the lab. Now with pervasive cloud computing, AI commonplace, 5G becoming a reality, and other technology advances, it is poised to radically transform many industries and functions.

 

What might Finance 4.0 look like?

AI and robots?

When people think of the future of manufacturing, robotics is likely to be one of the first things that comes to mind. Many manufacturers are already using robotics and automation to cut lead times, eliminate errors and reduce costs. There’s also a growing field of cobotics, where humans and robotics work in tandem, extracting the best of both.

While there’s not much scope for using robot arms and automated guided vehicles in the typical finance department, the ideas of automation and humans and machines working together do apply. Many financial services companies and finance departments are using robotic process automation (RPA). There are many, many applications for RPA, from the processing of invoices to handling customer enquiries.

As the use of AI and machine learning (ML) increases, the possibilities are growing — with cobotics, many of the most interesting applications are not about replacing humans, but combining the abilities of both. Automation can free staff from mundane, repetitive tasks, which humans aren’t great at but where computers excel. This can help increase capacity cost-effectively, extend service hours and reduce errors. Then staff can focus on resolving anomalies and issues — areas where humans still have the edge.

Connected devices?

Connecting devices, often called the Internet of Things (IoT), is a key part of Industry 4.0. Sensors can monitor everything from the watering of vines to the driving of a truck, vibrations in a piece of machinery to the location of mining equipment. This is enabling manufacturers to see into processes in real-time, helping them to increase efficiency, improve quality and increase productivity.

Here, the opportunity is not about finance implementing the same ideas or technology as other areas of the business, but making use of the data that Industry 4.0 technology generates. Organisations are able to gather incredibly granular data, which is helping them to understand where their money is made, reduce risk and identify new opportunities.

From a bank perspective, the sheer amount of data and predictive insights produced by the broader Industry 4.0 development offers a lot of interesting opportunities.

Ville Sointu, Head of Emerging Technology at Nordea

Ville Sointu, Head of Emerging Technology at Nordea, says, “From a bank perspective, the sheer amount of data and predictive insights produced by the broader Industry 4.0 development offers a lot of interesting opportunities.” The finance function can use the data it collects to provide greater insight into what’s going on and aid strategic decision making.

One way organisations are using this data is to create digital twins to run scenarios and model outcomes before making investments or changing processes. By using vast amounts of data gathered from sensors and AI, these models are able to predict outcomes to unprecedented levels of accuracy. This is enabling them to evaluate alternatives and avoid costly mistakes without disrupting operations.

Real-time data?

Another aspect of Industry 4.0 is the move from looking at historical information — that might just mean yesterday’s figures, but it’s still out of date. In the past, gathering data from multiple systems, collating it and presenting it in a helpful format took time.

Similar to how we used to get most of our news from a daily newspaper or news bulletin, many businesses still rely on reports compiled by hand. But today, we’re used to every nugget of news, even the trivial, being communicated within minutes — businesses can have the same. As information technology (IT) and operational technology (OT) merge, it’s enabling data to be delivered to the people that need it in real-time.

All that data could be overwhelming, but AI can help identify the key things to look at and patterns to investigate. This is something that the finance function has been doing for decades. There’s a huge opportunity for the finance team to become a centre of excellence for gathering data and using it to make more informed decisions. This will take data skills, reporting skills and collaboration with many other functions across the business, but the benefits could be huge.

Are you ready for Finance 4.0?

Businesses that don’t innovate can get left behind. Customers want new and improved services and organisations need to adapt to meet these changing demands. The realisation of the Fourth Industrial Revolution means that we are going through a period of unprecedented change.

As people move from owning things — from hedge trimmers to jet engines — how companies track and report assets must change. At the same time, there’s a huge growth in the importance of intangible assets. Today, one of the most valuable things a business possesses can be its data. This is changing how businesses are valued.

At its core, banking and finance is about risk management and facilitating the secure transfer of value between transacting parties. When industrial companies become fully digital, these key responsibilities of banks also evolve.

Ville Sointu, Head of Emerging Technology at Nordea

Businesses need to understand what data they have and the work that needs to go into preparing it to be used for AI/ML. They need to consider how new business models and pricing structures will impact cashflow, risk and other critical factors. “At its core, banking and finance is about risk management and facilitating the secure transfer of value between transacting parties. When industrial companies become fully digital, these key responsibilities of banks also evolve,” Ville says.

The expertise needed to understand, prepare and make better use of all this data often lies within the finance function. Ville explains, “banks that have the willingness and ability to connect digital ecosystems have a wealth of information at their fingertips. AI-powered machines can help provide better predictability for better risk control. Lower risks mean lower cost financing and reliable real-time economic data means faster flow of cash.”

Finance 4.0 has the potential to enable great things, but it’s vitally important organisations invest in robust technology that delivers what the business needs today, but is flexible enough to adapt as the technology develops and the business evolves. Now is the perfect opportunity for the finance function to forge a new, more strategic role within the wider business. It needs to become the driver of change, or it could find itself side-lined.

This is a topic explored more in our recent report, Treasury 2025.

Read more Transaction Banking-related articles and sign up to receive monthly TxB insights.

Learn more about Industry 4.0 on Insights:

Industry 4.0 – Evolution, revolution or something else?

Podcast: Ever heard about Industry 4.0?

Industry 4.0 is a business model revolution, not a technological revolution

Industry 4.0 describes how companies will stay competitive in the digital era

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