Last week, my team attended Finovate London, an event promising to showcase cutting-edge banking, financial and payments technology in a short demo format. We were particularly interested in FinTech solutions and saw some unique concepts which I’ll highlight later in this post. On the way back, I was considering the keynote given by futurist and author Rohit Talwar, entitled “The rise of the machines – The AI revolution: the road to superintelligence”. Not only did he talk about artificial intelligence, but also about a possible explosion from universally available exponential science and technology. Interestingly enough, this is precisely at the centre of the “exponential banking” vision, which is increasingly coming up in our conversations with financial institutions worldwide.
Powered by the exponential growth in technology over the past-half century, we see a natural development of increasingly rapid digitalisation in the financial services industry. Many new trends have emerged, such as mobile computing, the cloud, artificial intelligence, the Internet of Things and augmented and virtual reality. To stay on top of things, but also to compete in an era when technology, industrial, and agribusiness corporations are creating their own banking infrastructures, banks have no choice but to adopt exponential banking methodologies in order to survive.
The good news is: exponential technologies offer tremendous potential across four main pillars: Open Banking, Augmented Banking, Automation Banking and Cognitive Banking, which, when properly combined, can produce the most future-proofed system available for any retail bank of today. Even better: there are many solutions out there for each of these pillars, which are being developed at this very moment.
Let’s start with augmented banking, which moves beyond the term omnichannel, by providing multiple points of contact with their customers – whenever and wherever financial advice is needed. A good example for this sort of thinking is unblu, a FinTech and partner of GFT, who really understand that customer experience is the key to success in the financial sector. They see themselves as enablers in serving customers throughout their digital journey, and in helping banks to engage and collaborate more effectively with their clients.
This is at the very heart of augmented banking: enhancing the customer’s relationship with the bank by delivering personalised advice and services through contextually relevant interactions. In the case of unblu, this could be done by increasing digital adoption and delivering a better customer experience. This would ultimately lead to increased revenues by bringing personal customer interaction and collaboration to digital channels.
We’ve already talked a lot about the need of open banking, which was recently given another push by regulations such as PSD2 or GDPR. But it’s not just regulatory imperatives, it’s also the desire to provide the best customer experience with added value services, new business models and connected marketplace products from third parties that are the drivers for open banking. This means that services from other suppliers will be combined with those of the bank to offer enhanced value to the customers, rather than individual offerings. From the perspective of a bank, this idea would mean distributing their own products, as well as those of third parties, through open APIs and front-ends, so that customers can easily exchange information with multiple suppliers.
We call this vision Bank as a Platform, a term also used by the tesobe open bank project. Their idea is based on an open source API and app store for banks that empowers financial institutions to securely and rapidly enhance their digital offerings using an ecosystem of third party applications and services. In short: they are helping to create a network of FinTechs and banks.
Apart from the human factor – the customer experience – the aspects of better efficiency and processes will be key drivers for banks in the future. Business Process Management (BPM), Robotic Process Automation (RPA) and Artificial Intelligence (AI) will all help to improve the efficiency of many banking processes. This will also lead to better user experience by delivering added value based on personalised customer data.
Automation banking pairs intelligent automation with the bank’s organisational resources to align the way employees work and the work they do with the new customer’s journey. One of many examples we saw at Finovate was a German start-up called aixigo. Their solution actually covers a lot of important ground, from robo-advisory to portfolio management, personal finance management (PFM) and a “bank to go” – a virtual branch accessible from anywhere around the world.
Finally, yet importantly, cognitive technologies will work across the entire technology stack of the bank, boosting a range of services available to customers and maximizing internal efficiencies. A very interesting FinTech working in this field is DataSine, who combines psychology with machine learning and finance. Their approach relies on the idea that our very own personality covers every decision we make, which allows customer segmentation into “introverts” and “extroverts” – based on historical transactions! Another impressive example was the FinTech Be-IQ, doing assessments of risk aversion based on psychological profiling.
Machine Learning, Deep Learning and Natural Language Processing disciplines will provide new opportunities, helping banks to understand customers better and provide hyper-customisation of their portfolio of services and products to meet the needs of the individual customer.
Four areas – one big picture
It is safe to say that some of the hypes emerging in the last couple of years are here to stay. At Finovate, almost all of the start-ups we listened to were working with artificial intelligence. Even if not visible on the surface, most of them have AI integrated into their solutions. Similar to this, many FinTechs talked about Open APIs. This comes as no surprise, as start-ups are able to monetize their solutions, while banks are starting to embrace it to stay competitive.
Other trends are still in the making, but every single one of the pillars – open banking, augmented banking, automation banking and cognitive banking – are visible, ready and booming. The important learning is that they all belong together. By embracing not just one, but all four pillars, banks are able to create one big picture – or as we call it – exponential banking.