How deep tech is transforming the future of finance

4 min read

Innovation is one of IE University’s core principles, which is why we always stay up-to-date with the ideas that are modernizing our world. Rooted in the latest advancements in science, technology and engineering, deep tech innovations are already having a profound impact across various industries. Today, you can see their effects in sectors like payments, energy, robotics, security and many other emerging application areas.

The finance industry hasn’t been immune to the influence of deep tech. In fact, there is a growing interdependence between the industries: on one hand, finance is a key driver of deep tech growth through capital investment and talent; on the other, deep tech presents unique opportunities and tools to help professionals navigate the challenges of the modern finance world.

What is deep tech?

Deep tech—short for deep technology—is an important tool in the digital revolution. The term “deep tech” refers to technology solutions based on groundbreaking scientific discoveries or engineering innovations that have the potential to create significant, long-lasting disruption across a variety of industries.

Deep tech involves cutting-edge research and development led by some of the world’s greatest minds. The resulting innovations don’t just produce small, cumulative improvements to existing products or services—they completely transform the status quo. That’s why some believe deep tech could be the key to addressing our most pressing global challenges, including climate change, sustainable energy and healthcare.

The applications for deep tech are endless, but let’s examine a few:

• Artificial intelligence and machine learning technologies are at the forefront of deep tech, with applications in natural language processing, computer vision and predictive analysis. They enable computers to learn from data, find correlations and make predictions. It is used pervasively in all fields of our lives.
• Quantum computing utilizes the fundamental principles of quantum mechanics to perform complex calculations that traditional computers cannot run today. Quantum technology could potentially transform the fields of cryptography, communications, optimization, material science and health care.
• Blockchain creates a powerful ecosystem that enables secure, reliable and transparent business processes through its distributed computation. It is used in finance, commerce, logistics, healthcare and legal services to provide end-to-end transaction visibility and traceability​​.
• Biotechnology is a field in which biological systems and processes inspire innovative products and solutions by integrating natural and engineering sciences. It presents exciting opportunities in personalized medicine, synthetic biology, as well as improving crop and gene editing.
• Advanced materials research involves the design and fabrication of new materials with advanced optical and electronic properties using nanotechnology to engineer and manipulate materials at the nanoscale. It has great potential in aerospace, transport building and health care.

A symbiotic relationship: deep tech and the finance industry

In the last few years, the relationship between deep tech and the financial sector has grown closer than ever before. These symbiotic linkages have manifested in several ways:

1. Investment and funding

Deep tech startups need regular injections of capital to fund their research, development and scaling activities. That’s where government grants, corporate investors and venture capital step in, providing funding and much-needed expertise.  For finance professionals, the challenge lies in weighing the risks and potential returns of investing in deep tech ventures.

2. Valuation

Deep tech imagines what the future could be, and may present solutions that seem fantastical or impossible. So it’s no surprise that valuing such startups could present unexpected difficulties. However, financial analysts are already developing effective methods to measure their intrinsic value based on factors like intellectual property, competitive positioning and overall market potential.

3. Mergers & Acquisitions

Established tech, healthcare and manufacturing companies are interested in acquiring deep tech startups to gain access to their advanced proprietary technologies and talent pool. M&A experts often weigh in on the financial aspects of these transactions.

4. Risk management

Before they even hit the market, deep tech innovations face lengthy development cycles and high levels of uncertainty. Finance professionals develop or apply risk management strategies that can mitigate any potential losses.

5. Stock markets

When deep tech companies go public, they cause a rumble in stock markets around the world. Their impact on marketing dynamics and indices cannot be understated, creating a dynamic environment for both investors and finance pros.

6. Regulation and compliance

Deep tech still faces considerable pressure from complex regulatory frameworks, particularly in healthcare and biotechnology. As deep tech innovations become more prolific in the public sphere, finance experts must keep up with the evolving ethical and safety standards to ensure compliance.

Are you ready for the deep tech revolution?

Deep tech is delivering advanced solutions that could change the shape of finance forever. We can see many of these changes already in operation today:

• Payments are now almost completely contactless, enabled by near-field communication (NFC) technologies and peer-to-peer payment platforms like Bizum.
• Robotics, through AI-driven automation, has resulted in natural user interfaces that use voice to communicate. In finance, this has led to the rise of:
  • digital assistants, who provide information and perform tasks automatically, thus boating operational efficiency, and 
  • robo-advisors, which gather data on individual investors before using AI-powered algorithms to develop accurate investor profiles and manage investment portfolios.
• Quantum algorithms are essential to creating and developing financial products like derivatives or portfolio management.
• Machine learning and big data are used to analyze massive amounts of information for patterns or inconsistencies, thus combating fraud and keeping our accounts secure.
• Blockchain provides an unchangeable ledger for tracking transactions, cutting the number of third-party intermediaries and ensuring transparency and integrity.
• Drones are now used during the loan application process, carrying out on-site inspections, assessing infrastructure or properties, and sharing real-time images.

The Master in Finance at IE University

Deep tech’s considerable impact on finance is only expected to grow in the coming years. That’s why we’ve designed our Master in Finance to help professionals navigate this dynamic, ever-evolving landscape. Rooted in innovation, the program combines theoretical and practical expertise with the latest industry insights and cutting-edge technologies to shape purposeful, well-rounded professionals with a clear vision of their future path.

Attribution and special thanks to Elena Yndurain for her insightful contribution and the valuable content shared in this article.