What Bankers Should Know About Conversational AI in 2019

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omnichannel-12-21-18.pngWe’ve come a long way since filmgoers watched nervously as the computer “Hal” struck out on his own with the bland yet threatening response, “I’m sorry Dave, I’m afraid I can’t do that,” in Stanley Kubrick’s “2001: A Space Odyssey.”

Today, humans are comfortable interacting with machines. Twenty-five percent of customer service and support operations will integrate virtual customer assistant (VCA) or chatbot technology by 2020, up from less than 2 percent in 2017, according to Gartner, Inc. And in some cases, consumers seem to prefer machines to humans. Therapy bots like Woebot are successful in part because users don’t experience the fear of judgment that may exist speaking with another human.

The technology that enables machine-to-human interactions is known as conversational AI. It powers virtual assistants across apps, websites, messaging and smart speakers. In 2018, we saw virtual assistants take off in banking – finding their way into the apps and websites of the world’s largest banks. Pilots turned into production, and virtual assistants started engaging with real consumers at scale.

This technology is a growth engine for banks by servicing customers more efficiently, engaging customers to boost brand loyalty and acquiring customers to increase their lifetime value. But all conversational AI solutions are not the same.

Here are three key trends for banks implementing conversational AI in 2019.

Think omnichannel, not multichannel
Consumers’ expectations for banking are evolving from siloed multichannel experiences to deeply personalized omnichannel experiences. They expect the experience with their bank to be consistent and informed, no matter which channel they interact on, and they expect to move smoothly between channels. Banks implementing conversational AI should support “channel traveling” and never lose sight of who the customer is – not just their unique ID, but their preferences, history and more.

Make sure your solution supports sophisticated customer journeys and hand-offs between channels. Your customer should be able to start a conversation with your virtual assistant on Amazon Alexa, and the virtual assistant should be smart enough to follow up with more related details in the mobile app. The virtual assistant knows the optimal interaction model for each channel and generates the right response for the channel of choice.

Conversations that explain “why”
By now, consumers are accustomed to automated assistants that respond to them. A virtual assistant that answers questions has become table stakes. In 2019 and beyond, we’ll see consumers gravitate toward services that can give them answers to questions and explain their finances. People will come to expect answers to “why” in addition to “what.”

For example, customers will want to know their balance, but also why it is lower than expected. Or, they may ask if they can afford a vacation now, and if they could still afford it in six months. They’ll want to know their FICO score, and why it is lower than last year.

Banking customers already know chatbots can give their balance and move their money. In 2019, their expectation will be that conversational AI will do more to help manage their money with context and insights.

The era of available data is here
After years of waiting for banking data to be available, the future is finally here. Inspired by regulations such as PSD2, or the Payment Services Directive, in the European Union, large banks around the world are adopting open banking standards and launching modern developer portals that enable a new world of banking services. This is good for conversational AI, because its real value comes from personalized, actionable experiences—experiences that require data and services. With financial institutions such as Wells Fargo, Citi, Mastercard and Standard Chartered streamlining access to APIs, building meaningful conversational experiences and integrating them with the banks’ other services will be much easier and faster.

In 2018, we’ve seen conversational AI is here to stay, and in 2019, we need to make virtual assistants do more than respond to FAQs and complete simple tasks. Banks implementing conversational AI should remember consumer expectations are growing every year. To meet those expectations, leverage the abundance of available data via APIs to create omnichannel customer journeys that can understand your customers and explain the context to them.

The Secret to Lifelong Relationships With Generation Z

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customer-12-14-18.pngGeneration Z consumers are positioned to be a significant force in the financial marketplace. This population group will soon begin graduating from college, earning disposable income, and making decisions about managing their finances.

This opportunity is of interest to many financial institutions that will compete for the loyalty of Gen Z customers for the next several years.

Banks that have been active in education lending have well-established relationships with the Gen Z market as customers already, which offers them an advantage. While being a trusted student loan provider is a start, financial institutions that wish to create lifelong customers must build on the initial relationship with technology-enabled products and individualized experiences the Gen Z consumer has come to expect.

The Gen Z Opportunity and Challenge
The impact of Gen Z on the financial services marketplace must not be underestimated. There were approximately 61 million members of Gen Z in the US in 2015, or about 19 percent of the U.S. population. This percentage is expected to grow to 25 percent by 2020.

While both the Gen Z and millennial generations have grown up in an environment shaped by technology, these groups are very different in their approach and use of financial services.

Gen Z has never known a world without smartphones, social media, or on-demand delivery of products and services. Adobe, Inc. has estimated that nearly half of Gen Z consumers are connected online for 10 or more hours per day and their preferences are strongly influenced by social media.

They are likely to conduct many of their daily activities on mobile devices. Also, while Gen Z members reportedly recognize that large financial institutions can offer products and services using advanced technology, they are less trusting of traditional banks than older customers. Approximately 75 percent of the Gen Z population surveyed said they trust traditional banks (as compared with digital payment solutions) – still a strong preference, but less than the 92 percent reported by baby boomers.

How To Win Gen Z Consumers
To win the loyalty of Gen Z, banks should focus on the following areas:

Invest in digital products and a best-in-class user experience. Gen Z consumers are accustomed to conducting business via mobile devices. So any services you offer—credit and savings products, investment services, or access to account information—it must be available online 24/7.

Some day, chatbots based on artificial intelligence (AI) will likely be an important way to connect with Gen Z consumers.

Focus on the right products. Understand which financial products and services resonate with Gen Z consumers. Research by Javelin, a strategy and consulting firm, shows 51 percent of Gen Z-ers do not plan to apply for a credit card, but they do start thinking early about retirement, according to a 2017 study by the Center for Generational Kinetics. For these reasons, your institution may make more headway by cross-selling savings accounts or retirement programs to your student loan customers.

Use social media. Gen Z members rely heavily on social media, so target your digital marketing to genuine influencers on those platforms like Twitter, Instagram, Snapchat, etc.

Foster a spirit of community. Research shows Gen Z members seek community. Being involved in your community through philanthropy, hosting career fairs and educational events are ways banks can appeal to Gen Z consumers.

Market in an age-appropriate manner. Make sure your marketing campaigns are designed and written in a way that will resonate with the Gen Z audience. Since Gen Z values experiences, one idea to consider is a travel rewards program layered on a promotion for a savings account or debit card.

Credit unions, banks and other financial institutions have originated approximately $90 billion in private student loans. That represents a lot of potential for Gen Z borrowers to become life-long customers if you build on those relationships with the right products and services, technology, social media and marketing.

Brace Yourself For An Unstoppable Tech Wave

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technology-12-10-18.pngBanks across the country are wrestling with the challenge of transforming current banking systems—the foundations of which were conceptualized in the Middle Ages—into systems designed to serve the needs of the digital age.

This marks a critical moment for banks. Some industry data suggests we’re in a golden age of banking, including a growing economy, increased loan demand, technological efficiency and higher levels of profitability. However, these factors could only be masking more important developments that signify even more change.

Much of the world is already living with both feet firmly planted in the digital age. Author Brett King, who is the CEO of the mobile banking startup Moven, notes between 2010 and 2030, an estimated 2.5 to 3 billion people worldwide will come into the financial services space. Of those billions of people, King says some 95 percent will have never visited a bank branch.

International Banking Systems
There are hundreds of examples around the world of what the digital age of financial services looks like. Kenya’s mobile money service, M-Pesa, counts nearly 100 percent of adults in Kenya as customers and also transmits nearly 50 percent of the country’s gross domestic product.

China-based Ant Financial Services Group has been valued at $150 billion, a market cap higher than Goldman Sachs. Ant Financial has the world’s largest money market fund, processes trillions of dollars in payments each year and can profitably make small- and medium-sized enterprise (SME) loans as little as $50 in a matter of minutes.

Examining international banking systems helps provide directional insight into various successful financial systems and institutions developed to serve the digital age—without the hindrance of legacy regulatory and organization systems.

Evolution of Client Expectations
It’s no longer good enough for banks to have a digital strategy that only aims to keep pace with their peers. Banks must have a forward-thinking strategy for the digital age, as their customers have become used to accessing world-class, technology-enabled services from their financial services providers.

A recent BKD survey of the employees of an advanced, progressive community bank found that more than 70 percent of the bank’s own employees had two or more credit cards beyond the cards offered by the bank, and more than 80 percent of the bank’s employees had a banking relationship outside of their employer. Even employees who think highly of their bank have relationships with other financial institutions, exposing them to the best services the financial services industry has to offer. As customer expectations climb exponentially, banks are challenged with keeping up.

Banks may find comfort knowing some people prefer digital interaction with a financial services company for routine, immaterial transactions, but prefer the one-on-one experience of sitting with a banker and receiving guidance for major financial decisions.

There likely will always be a place for high-touch client service in community banking. However, we’re entering an age where people are comfortable visiting a doctor by video, and IBM’s Watson outperforms doctors in some areas of health care diagnostics. If people are comfortable trusting their health to someone over the phone, and artificial intelligence is becoming better than humans at providing health care services, a disruption and transformation of the banking industry in the U.S. can’t be far behind.

Moving Forward
As technology across all industries advances rapidly and relentlessly, the inhabitants of a digital age will expect nothing less from their financial services provider. With intense transformation facing the banking industry, consider asking these important questions of your institution:

  • Are we ready to be ambient? Can we completely surround our customers on all sides, no matter where they go or which device they use?
  • Are we ready to provide end-to-end mobile account opening, with no paper forms or signatures?
  • Are we deploying machine learning and artificial intelligence?
  • Are we preparing to authenticate accounts and payments with facial recognition technology? 

Even answering these questions affirmatively isn’t enough.

Some prognosticators say it’s too late for banks. While that’s simply not true, banks do have to move more aggressively and rethink their approach to the market. Neither consumers nor regulators are going to materially slow technology’s rapid advancement within the financial services industry. There’s no turning back the clock on the digital age.

Driving Efficiency Through Automation

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Automation makes it possible for banks to gain efficiencies and help their employees be more effective. But how can bank leaders ensure they’re getting the most out of these solutions? Richard Milam, the CEO of the software company Enablesoft, explains that people—not technology—will drive success in these efforts, and culture plays an important role.

  • How Banks Use Automation Today
  • Successfully Deploying Automation
  • Advice for Bank Leaders

Zelle Costs Bankers Money, Venmo Can Make Bankers Money

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payments-11-29-18.pngZelle, the personal payments platform developed by a consortium of large banks, is poised to become the most used P2P app by the end of the year—outpacing PayPal’s Venmo service, according to the market research company eMarketer.

But does that make Zelle a must-offer capability for the banking industry? Not necessarily.

eMarketer projects the personal payments market to grow nearly 30 percent in 2018, to 82.5 million people—or about 40 percent of all smartphone users in the U.S.

Zelle was developed by the likes of JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. to compete with Venmo, Square Cash, also known more simply as just “the Cash app,” and other up-and-coming third-party P2P services.

You can think of Zelle as the banking industry’s containment strategy—just like France’s vaunted Maginot Line in World War II that was supposed to keep out the German army.

The network of banks offering Zelle has grown to 161, but is a closed system where consumers at participating banks can send personal payments—for free, and in real time—to anyone at another Zelle bank.

One factor that probably accounts for Zelle’s fast growth was the decision to include it in each participating bank’s mobile app. So, if a customer’s bank belongs to the Zelle network, they are automatically a potential user.

While Zelle is a weapon that banks can use to beat back Venmo and Square Cash, the third-most frequently used P2P app, it does have its drawbacks. While Zelle is both free to the user and instantaneous, it costs the participating bank between $0.50 to $0.75 per transaction. So as Zelle’s transaction volume increases, so will each bank’s costs.

Charging users a transaction fee to offset that cost probably isn’t realistic since Venmo and Square Cash are free, although Venmo does charge $0.25 for instant transfers. A good analogy is online bill pay. It costs banks something to offer that service, but most banks don’t charge for it. They offer it for free because all their competitors do, and because it’s a hassle for customers to disentangle their finances from one bank’s online bill pay service and connect with another bank’s service, which can be a disincentive to switching.

Free online bill payment has become table stakes in retail banking, and P2P may go that way as well. But P2P transaction volume has yet to build to such levels that there’s a sense of urgency for all banks to offer Zelle today, lest they find themselves at a competitive disadvantage.

“Urgency means I immediately need to get Zelle. I don’t necessarily think that’s the case,” says Tony DeSanctis, a senior director at Cornerstone Advisors. “Why am I better off offering a product where I’m going to pay 50 to 75 cents a transaction to move money … and also pay the fixed costs to [integrate] it?”

There is, in fact, an argument to offering Zelle and Venmo, or maybe just Venmo. If a bank allows its consumers to include the Venmo app in their digital wallet and prefund the account, Venmo will pay them an interchange fee on every transaction. So while Zelle costs its participating banks money, Venmo offers them a small revenue opportunity to offset their costs.

Zelle is also a private network (which means other people can’t see your transactions) that is marketed to all demographic groups. Venmo, on the other hand, is a social payment network popular with younger generations who are among its biggest users. Richard Crone, CEO of Crone Consulting LLC, says banks are missing out on an important opportunity in social payments.

“A social network is not about [being] social,” says Crone. “It’s a marketing platform and it’s the most effective marketing out there because it’s word-of-mouth. It’s a referral. It’s peer pressure. And that’s how Venmo grows virally.”

Embracing Zelle and other non-bank payments options like Venmo, Square Cash, Apple Pay Cash and Google Pay could be described as a ubiquity strategy. Both DeSanctis and Crone argue that banks should accommodate a variety of payment options within their mobile apps that are linked to their debit and credit cards, just to stay relevant in the evolving payments space.

The problem is that when it comes to payments, most banks really don’t have a strategy. And hiding behind a virtual Maginot Line probably isn’t going to work.

Indeed, history is instructive. The invading German army easily flanked the Maginot Line, which now serves as a metaphor for a false sense of security.

Correction: An earlier version of this article stated that transfers sent over the Zelle app do not occur in real time. This is incorrect. We regret the error.

Building Partnerships That Work

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More banks are exploring relationships with technology companies, but there are distinct differences between a vendor and a true partner. Steve Brennan, the senior vice president of lending technology at Validis, explains what banks should seek in a partner and in turn, shares how banks can be good partners.

Ultimately, partners should work toward being successful together. This video outlines how a bank can ensure a good outcome results from these relationships.

  • What Banks Should Seek in a Partner
  • How To Be a Good Partner
  • Fostering Technology Adoption

Prepare Your Portfolio for an Economic Downturn

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portfolio-11-12-18.pngAs we reach the 10-year anniversary of the inflection point of the 2008 financial crisis, it’s the perfect time to reflect on how the economy has (and hasn’t) recovered following the greatest economic downturn since the Great Depression. If you’ve paid the slightest attention to recent news, you’ve probably heard or read about the speculation of when the nation’s next economic storm will hit. While some reports believe the next downturn is just around the corner, others deny such predictions.

Experts can posit theories about the next downturn, but no matter how strong the current economy is or how low unemployment may be, we can count on at some point the economy will again turn downward. For this reason, it’s important that we protect ourselves from risks, like those that followed the subprime mortgage crisis, financial crisis, and Great Recession of the late 2000’s.

In an interview with USA Today, Mark Zandi, chief economist for Moody’s Analytics, explained, “It’s just the time when it feels like all is going fabulously that we make mistakes, we overreact, we over-borrow.”

Zandi also noted it usually requires more than letting our collective guard down to tip the economy into recession; something else has to act as a catalyst, like oil prices in 1990-91, the dotcom bubble in 2001 or the subprime mortgage crisis in 2006-07.

As the number of predictions indicating the next economic downturn could be closer than we think continues to rise, it’s more important to prepare yourself and your portfolio for a potential economic shift.

Three Tips for Safeguarding Your Construction Portfolio In the Event of an Economic Downturn

1. Proactively Stress Test Your Loan Portfolio
Advancements in technology have radically improved methods of stress testing, allowing lenders to reveal potential vulnerabilities within their loan portfolio to prevent potential issues. Technology is the key to unlocking this data for proactive stress testing and risk mitigation, including geotracking, project monitoring and customizable alerts.

Innovative construction loan technology allows lenders to monitor the risk potential of all asset-types, including loans secured by both consumer and commercial real estate. These insights help lenders pinpoint and mitigate potential risks before they harm the financial institution.

2. Increase Assets and Reduce Potential Risk While the Market’s Hot
If a potential market downturn is in fact on the horizon, now is the best time for lenders to shore up their loan portfolios and long-term, end loan commitments before things slow. This will help ensure the financial institution moves into the next downturn with a portfolio of healthy assets.

By utilizing modern technologies to bring manual processes online, lenders have the ability to grow their construction loan portfolio without absorbing the additional risk or adding additional administrative headcount. Construction loan administration software has the ability to increase a lender’s administrative capacity by as much as 300 percent and reduce the amount of time their administrative teams spend preparing reports by upwards of 80 percent. These efficiency and risk mitigation gains enable lenders to strike while the iron’s hot and effectively grow their portfolio to help offset the effects of a potential market downturn.

3. Be Prudent and Mindful When Structuring and Pricing End Loans
As interest rates continue to trend upward, it’s crucial that lenders price and structure their long-term debts with increased interest rates in mind. One of the perks of construction lending, especially in commercial real estate, is the opportunity to also secure long-term debt when the construction loan is converted into an end loan.

Due to fluctuations in interest rates, it’s important for financial institutions to carefully consider how long to commit to fixed rates. For lenders to prevent filling their portfolio with commercial loan assets that yield below average interest rates in the future, they may find it more prudent to schedule adjustable-rate real estate loans on more frequent rate adjustment schedules or opening rate negotiations with higher fixed rate offerings (while still remaining competitive and fairly priced, of course).

Though we can actively track past and potential future trends, it’s impossible to know for sure whether we are truly standing on the precipice of the next economic downturn.

“That’s one of the things that makes crises crises—they always surprise you somehow,” said Tony James, Vice Chairman or Blackstone Group, in an interview with CNBC.

No matter the current state of the economy, choosing to be prepared by proactively mitigating risk is always the best course of action for financial institutions to take. Modern lending technology enables lenders to make smart lending decisions and institute effective policies and procedures to safeguard the institution from the next economic downturn—no matter when it hits.

Future Banking Leadership Formula: Talent, Technology and Training

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talent-11-1-18.pngIt’s an old phrase but still rings true today: An organization thrives when you get the right people in the right jobs.

That’s easy to say, but not always easy to do. Future leadership in banking is of great concern to boards today. And while there are myriad methods of finding good people, three key considerations in finding the right people include talent, or a transitioning generation in leadership; technology, or a heightened need for new and better ways to get the job done; and training, or existing employees looking for that golden career opportunity.

Talent: Transitioning Generations
Understanding generational differences is critical if a bank is seeking to attract young talent. Failure to understand these differences will only result in frustration. For example, boomers and millennials may not see eye to eye on a number of things. Older workers talk about “going to work” each day. Younger workers view work as “something you do,” anywhere, any time. If you’re looking for younger talent, whether on your board or within your bank leadership group, take the time to understand these generational classes. The more you know about their needs, expectations, and abilities, the easier it will be to attract them to your organization, resulting in growth that thrives on their new talent.

For younger talent, the hiring process needs to be short and to the point, with quick decision making. Otherwise, they’re quickly scooped up by competitors. Another key area is a greater focus on company culture. Millennials, for example, are sensitive to the delicate balance between work and life. Some may easily turn down a decent paying job for one that provides more control over his or her schedule and life.

Take the time to read, learn, understand, and seek out that younger talent you believe will move your organization to the next level.

Technology: An Opportunity to Rethink What People Do
In the time it takes to write, publish and read this article, the technology target for banks has moved exponentially. Keeping up requires a great deal of focus, investment and thinking outside the box. And because of the pace of change in technology, a chief technology officer (CTO) is a critical part of today’s banking leadership team.

The qualities needed in an effective CTO include the ability to challenge conventional wisdom, move decisively toward objectives and flexibility. Since long-term growth and expense management quite often are dependent upon the right technology, the CTO plays a major role in management’s long-term strategic planning for the bank. Even now, technology is performing the work entire departments used to do just a few years ago.

An effective CTO will help ensure the bank is ready to move into new growth phases of the business, including internet banking, enhanced mobile banking, cybersecurity, biometrics, and even artificial intelligence.

Training: The Value of Existing Employees
While utilizing online recruiting systems can help you find good people, there could be gems right down the hall. Growing talent from within is too often overlooked. Traditionally, boards have felt this is a job for the CEO or human resources. But some have argued that a lack of leadership development poses the same kind of threat that accounting blunders or missed earnings do. This lack of leadership development has two unfortunate results: 1) individual employees seeking to make a greater contribution never get the opportunity to shine and 2) the bank loses a potential shining star to the competitor down the street.

Lack of an effective development program is shortsighted and diminishes the value of great employees. Today’s boards must take specific steps in becoming more involved in leadership development. First, encourage your executive team to be more active in developing the leadership skills of direct reports. Second, expand the board’s view of leadership development. Take an active role in identifying rising stars and let them make some of the board presentations. In this way, the board can assess for itself the efficacy of the company’s leadership pipeline. And meanwhile, the rising stars gain direct access to the board, gleaning new perspectives and wisdom as a result.

As boards consider their duties and responsibilities, identifying future leadership should be at or near the top of the list. Organizational growth depends on it and the bank will be better able to embrace an ever-changing generational, technological and business environment.

Considering Conversational AI? Make Sure Your Solution Has These 3 Things

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AI-10-9-18.pngThe pace at which consumers adopt new technologies has never been faster. Whether it’s buying coffee, booking travel, or getting a ride, or a date, consumers expect immediacy, personalization, and satisfaction. Banking is no different. According to a study by Oracle, when banks fall short of their consumers’ digital expectations, a third of consumers are open to trying a non-bank provider to get what they want – and what they want, increasingly, is a digital experience that’s smart, intuitive, and easy to use.

Conversational AI—a platform that powers a virtual assistant across your mobile app, website, and messaging platforms—is core to providing the experience consumers want. Whether you choose to build or buy a conversational AI solution, it needs three key things.

Pre-packaged Banking Knowledge
A platform with deep domain expertise in banking is what gives you a head start and accelerates time to market. A solution fluent in banking and concepts such as accounts, transactions, payments, transfers, offers, FAQs, and more, is one that saves you time training it about the basics of banking. Deep domain expertise is also necessary for a virtual assistant or “bot” to hold an intelligent conversation.

Your conversational AI solution should already be deeply familiar with concepts and actions common in banking, including:

  • Information about accounts – so customers can check balances and credit card details such as available credit, minimum payment and credit limit.
  • Information about transactions – so customers can request transactions by specific accounts or account types, amount, amount range (or above, or under), check number, date or date range, category, location or vendor.
  • Information about payments – so customers can move money and make payments using their bank accounts or a payment service such as Zelle or Venmo.

Human-like Conversations
Most conversational AI systems answer a question, but then leave it up to the customer as to what they should do next. Few conversational AI systems go beyond answering basic questions and helping customers accomplish one simple goal at a time, and that’s sure to disappoint some customers.

A conversational AI platform should be able to track goals and intents so bots and virtual assistants can do more for consumers. It should go beyond basic Natural Language Understanding and combine deep-domain expertise with the ability to reason and interpret context. This is what gives it the ability to help customers achieve multiple goals in a fluid conversation – creating a “human-like” conversation that not only understands what the customer is texting or saying but tracks what the customer is trying to do, even when the conversation jumps between multiple topics.

Platform Tools
Under the hood of every Conversational AI platform are the deep-learning tools. Effective analysis of data is at the core of every good conversational AI platform—understand how it collects and federates, builds, trains, customizes and integrates data. This will have a huge impact on the accuracy and performance of the virtual assistant or bot.

After you deploy the system, you want to be empowered to take full control of the future of your conversational AI platform and not be trapped in a professional services cycle. Make sure you have a full suite of tools that allow you to customize, maintain and grow the conversational experiences across your channels. You’ll need to measure engagement and continually train the virtual assistant to respond to ever-changing business goals, so you’ll want an easy way to manage content and add new features and services, channels, and markets.

Above all – is it Proven in Production?
There is a huge difference between a proof of concept or internal pilot with a few hundred employees to a full deployment with a virtual assistant or bot engaging with customers at scale in multiple channels. A conversational AI platform is not truly tested until it’s crossed this chasm, and from there can improve and grow with additional use cases, products and services and new markets.

During the evaluation, ask for customer engagement metrics, AI training stats, and business KPIs based on production deployments. Delve into timelines related to integration – are the APIs integrating with your backend systems fully tested in production? Understand how the system is trained to extend and do more. What did it take to roll out new features with a system already deployed?

If the platform has been deployed in production several times with several different financial institutions, you know it has been optimized and tested for performance, scalability, security and compliance. You can have confidence the solution was designed to work with your back-end and front-end ecosystem, channels and infrastructure. Only then has it been truly validated and proven to integrate and adhere to many leading banks’ rigorous and challenging regulatory, IT and architecture standards and technologies.

There’s just no way to underscore the value of production deployments as a way to separate the enterprise-ready from the merely POC-tested solutions.

What’s At Stake In A Tech-Driven World

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technology-10-2-18.pngTechnology is driving a wave of disruption across the entire financial services landscape. Financial services companies are increasingly finding themselves both competing with and working alongside more agile, highly entrepreneurial technology-based entities in a new and evolving ecosystem.

There are a number of global trends creating opportunities for financial services companies:

  • China’s population is growing at about 7 percent annually, roughly the equivalent of creating a country the size of Mexico every year.
  • At the same time, China and other emerging, fast-growing economies are raising many of their people above the poverty line, creating a new class of financial services consumer.
  • In more developed countries, people are retiring later and living longer.

These trends are driving a growing need for financial services. However, the story does not end with demographics and economics. Changes in technology are reshaping the ways these services are being delivered and consumed.

Consumers expect simplicity and mobility. Smartphones provide a wide range of financial services at our fingertips. With the rapid growth in artificial intelligence and machine learning applications, savvy financial services companies are adapting to the new ecosystem of digital service delivery and customer relationship providers. Gone are the days when customers have to visit the local bank branch to get most of the services and products they needed. The shakeup in providers will make for a vastly different landscape for competing financial services organizations in the near future.

While the adoption of blockchain technology is still in its infancy, it will potentially reshape the financial services landscape. Much of the transaction processing, matching, reconciliation and the movement of information between different parties will be a thing of the past. Once regulation has caught up, blockchain, or distributed ledger technology, will become ubiquitous.

Financial services companies need to understand where they fit in this digitally fueled, rapidly evolving environment. They need to decide how to take advantage of digital transformation. Many are starting to use robotic process automation to reduce their costs. But the reality is the spread of automation will soon level the playing field in terms of cost, and these companies will once again need to look for competitive advantage, either in the products and services they offer or the way they can leverage their relationships with customers and partners.

When companies leverage technology and data to achieve their business goals in this new environment, they also introduce new risks. Cybersecurity and data governance are two areas where financial services companies continue to struggle. The safety of an ecosystem will be dependent on its weakest link. For instance, if unauthorized breaches occur in one entrepreneurial technology company with less mature controls, those breaches can put all connected institutions and their customer information at risk. Further, automation can result in decisions based solely on data and algorithms. Without solid data governance, and basic change controls, mistakes can rapidly propagate and spiral before they can be detected, with dramatic consequences for customer trust, regulatory penalty and shareholder value.

Strategically, financial services companies will need to decide if they want to be curators of services from various providers—and focus on developing strong customer relationships—or if they want to provide the best product curated and offered by others. Investing in one of these strategies will be a key to success.