On June 1 2017, I was asked by Pega and Capgemini to host a Twitter chat titled “The Future of Financial Services”. It was a great success: 60 experts joined the discussion, which generated about 1,000 tweets and retweets and about 16.5 million impressions. Here are the key insights from the chat:
Q1. Providing exceptional customer experience is the key to avoid “commoditization.” What should financial services do to engage better with customers?
Essentially, you must provide a consistent experience across channels with an end-to-end approach (from back office to front office). Even more, financial institutions should not think in terms of channels and should put the customer at the very center of their strategy:
yes customer first, not technology / channel first #FSFuture
— Sebastien Meunier 赛宝 (@sbmeunier) June 1, 2017
Financial services should be all about personalization, context/location-aware engagement, and self-service. The ability to connect with a customer’s emotions was also cited by several participants. Ultimately, participants felt a well-designed customer experience should be invisible.
Q2. With API markets, developer hubs, and other related technologies growing in popularity, is Open Banking an opportunity or a threat for incumbents? What are the benefits for banks?
Open banking is the creation of Open APIs that third-party developers will use to build applications and services to integrate products and services with those of the financial institution. It is a threat to the banking status quo because new entrants (such as FinTech startups and tech giants) could leverage customer data to offer financial services. On the other hand, it can be considered as a new distribution channel for incumbents and a way to create new partnerships and deliver innovative services:
— Kirk Borne (@KirkDBorne) June 1, 2017
Markets are moving at different paces, depending on the local regulations. The second Payment Service Directive (PSD2), which regulates payment services and providers in the European Union, is driving a faster adoption in Europe compared to other regions. The implementation of this directive is not trivial. Firms need to take a strategic view to leverage open banking to maximize value.
— Sebastien Meunier 赛宝 (@sbmeunier) June 1, 2017
Q3. What are the key success factors involved when deploying Robotic Process Automation (RPA) in financial services?
First the difference between RPA and Robotic Desktop Automation (RDA) was highlighted:
— D. Scott Andrick (@PegaScott) June 1, 2017
Participants said the key successes for RPA are prototyping, management buy-in, continuous delivery, system integration, and holistic governance. Additionally, it usually requires extensive workflow mapping to find the relevant points of improvement.
Finally, several participants insisted that RPA was only one tool of many useful for gaining a short-term benefit on the long path that is digital transformation:
A3. Robotics has its best use cases for labor intensive manual processes needing automation TIED to a Business Transformation goal #FSFuture
— Sree Vadakkepat (@vadakkepat) June 1, 2017
Q4. What are the most promising applications of machine learning and cognitive computing in financial services?
Applications in regulatory compliance, such as Anti Money Laundering (AML) screening, were mentioned by participants the most:
— Peter Collins (@PCinTheCloud) June 1, 2017
A4 AI has huge potential to help banks work smarter and faster through their large number of AML/CTF and Sanctions investigations #fsfuture
— Thomas Hook (@MrTJHook) June 1, 2017
The second topic was investing and trading. One example is the investment firm Cargometrics, which mapped the available maritime fleet data at its disposal to extract insights on commodities, and then launched its own hedge fund. However, Pega’s Head of Product Strategy for the Pega Platform, Office of the CTO, Ying Chen pointed out that the “blackbox” aspect of Artificial Intelligence (AI) can be an obstacle to adoption in capital markets. Getting clean useful data is also another major obstacle to implementing AI in financial services.
Finally, organizations can leverage AI to strengthen their customer support services and their marketing, typically to identify behavioral patterns and extract customer insights:
— Susan Visser (@susvis) June 1, 2017
Q5. Will blockchain technology significantly transform financial services or merely improve business processes with cryptography?
I asked this question because many Proof of Concepts (PoCs) that I see remain centralized or semi-decentralized. In this case, Distributed Ledger Technology (DLT) only brings incremental change in the form of accountability via time stamping and authentication.
The most promising applications mentioned in the chat were:
- KYC passporting (i.e. sharing of “certified” customer identity information)
- Cross-border payments
- Multi-party accounting (avoiding reconciliations)
Some participants were confident that DLT could eventually transform financial services after the technology matures, and they gave additional examples:
— Jim St.Clair (@jstclair1) June 1, 2017
— Bill Sullivan (@WFSULLIVAN3) June 1, 2017
Q6. Does FinTech create any potential compliance issues? How does RegTech fit into the dynamic?
Everyone recognized the importance of RegTech to help stakeholders (including both incumbents and rising FinTech firms) comply with laws and regulations in an efficient and consistent way.
The most frequently topics discussed were KYC on-boarding, AML screening, security, and data privacy:
A6: GDPR and data privacy is a central point to resolve – CT #FSfuture
— Capgemini (@Capgemini) June 1, 2017
— Pegasystems FS (@pegaFS) June 1, 2017
In other industries, some innovative solutions succeeded because they broke existing rules (Uber, Airbnb, etc.). However, in the finance industry trust is key: incumbents are usually more trusted than new entrants.
Regulators must find the right balance between creating a favorable environment for innovation and a secure environment. Countries like the U.K. and Singapore are getting ahead of the game by creating startup-friendly regulations. In the U.S., the FinTech industry is pressing for the Office of the Comptroller of the Currency (OCC) national charters.
Q7. Existing tech firms enter financial services, but should banks enter other industries? What non-financial products and services could they offer?
Financial institutions have already expanded beyond their core offerings; for instance, some banks already provide concierge and lifestyle services, distribute products from other industries, offer insurance or real estate related services.
There is an opportunity for Financial Institutions to expand and evolve their business models by becoming central to their customers’ lives:
A7 – With the data they have, banks could offer a myriad of personalized products. It takes imagination and innovation however… #fsfuture
— Mark Taylor (@TaylorM) June 1, 2017
Two other opportunities were mentioned:
- Provide identity services
- Launch e-commerce platforms – this is already the case in China, as highlighted by @FintechChinaW!
On the other hand, banks should pay attention to not stretch their business model too much:
A7: #Banks are too fragmented already
Q8. Describe the bank of the future in less than 5 words
We got some very interesting answers, so pick your favorite!
- All mobile all the time
- Customer centric, digital, advisory, personalized
- Digitally pervasive enablers of life goals
- Not a bank
- Intel chip of business activities
- The bank in your pocket
- Personalized concierge service, always
- Human, personal, ubiquitous
- Virtual banking ecosystem providers
- One-stop shop for life
- Total focus on customer experience
Thank you, Everyone, for your contribution ?