Financial services, FinTech, augmented intelligence and the fourth Industrial Age
Mobile World Congress turned 30 in February 2017 and heralded the elemental role of mobile as the primary force behind every emerging innovation. Though the role mobility has played in people’s daily lives cannot be understated, the next iteration of technology’s impact will be far more transformational. Society is at the precipice of the fourth Industrial Age and the rise of the era augmented intelligence and cognitive computing. What does this mean for the financial services industry?
Financial institutions are challenged with innovating a century-old service model. The metamorphosis has been slowed by the dual weight of digital transformation and the broader implications of ever-evolving customers. Accelerating these challenges are the influence of venture investment, the vast amounts of unstructured data, and the associated rise of FinTech addressing traditional financial revenue streams. To remain competitive, there is a growing need to use and master complex AI tools, adapt to new forms of convergence through collaboration and develop meaningful client relationships through new forms of customer centricity.
As data becomes more complex, AI becomes a catalyst
Analytics tools have evolved, as have the types of data we must consume. Static data modeling efforts based on hundreds of inputs have transitioned to an infinitely more complex set of thousands of variables. Though banking has a long history of resisting modern methodologies — agile development, cloud computing, advanced analytics, predictive onboarding, open platforms, hypertargeting and external data harvesting — AI is one area the industry simply must embrace.
The ability to apply data science to a broader set of business problems is critical to viability. Global financial entities and leading startups are developing and deploying AI — applications that make use of artificial intelligence, machine learning, deep learning, pattern recognition and natural language processing among other functionalities. These work together to simulate human thought processes within a mechanized model, accelerating the user’s capability to process complex patterns of data from increasingly diverse sources.
As banks have discovered, using these advanced tools can act as a catalyst for business reinvention. Examples of this include efficiency gains in customer onboarding/know-your-customer (KYC), automation of credit decisioning and fraud detection, personalized and contextual messaging, supply-chain improvements, infinitely tailored product development and more effective communication strategies based on real-time, multivariate data.
Convergence, collaboration and platforms are areas of unique opportunity
The increased attention to AI tools comes at a time of great convergence. One way to view the convergence is the cross-pollination of business models and data sharing between traditionally separate industries — or even between incumbents and nimbler challengers. Personal information collected by retailers, healthcare, social networks, manufacturers and the growing landscape of IoT providers could only be enhanced by financial data.
Innovation and collaboration initiatives have become table stakes for global financial firms. The most successful deployments of advanced analytics will be those firms with the most open partnership models. As financial activity becomes more unbundled, partnerships with startups across the spectrum of services become more critical. Partnership opportunities through financial platforms come in all shapes, such as the following:
- Payments and money movement: TransferWise, Venmo and Alipay
- Alternative credit: Lending Club, Affirm and Kabbage
- Savings and wealth: Digit, Acorn and Wealthfront
- Advisory platforms: MoneySuperMarket, Credit Karma and NerdWallet
There are several lessons derived from FinTech platforms, such as attention to growth through business model flexibility, devotion to speed-to-market and a focus on creating new forms of customer value. Through these lessons, one can better learn how to expand customer relationships more effectively. To maximize customer value, it’s important to develop partnership opportunities across FinTech and beyond financial services.
As digital choices evolve, creating customer value becomes critical
If the FinTech industry fails to be more open to building new forms of customer value, efforts toward leveraging broader platforms will simply fail to materialize. Customers have access to more transparent financial choices today and will simply seek alternatives that provide better value. This is the incumbent’s dilemma — how can it best meet the future needs of the changing customer base if the company is not changing itself?
The only constant is that customer relationships and their connected data streams are growing more complex every year. Financial applications still lack personally predictive properties. If FinTech companies have failed to deliver insights and value from first-party data within their own systems — the first principles of the customer relationship — the ability to predict the future will only get worse.
FinTech mobile devices and apps, payment choices, connected platforms and social platforms tell unique stories, and customers create terabytes of data every day. A simple trip to the grocery store on an online shopping site delivers a treasure trove of secrets. How can you best leverage that which is readily available?
With modern analytics, it becomes possible to provide a hyper-personalized, fully integrated and contextual relationship with the customer. How one communicates must demonstrate a deeper understanding of individual constraints and opportunities. Creating segments, personas and customer journey maps is less meaningful when you can build a one-on-one relationship derived from intimate forms of data. Though you may choose to build virtual agents, chatbots or voice-driven experiences, how empathetically you interact with customers matters most.
Where to go from here
Financial services firms need to become true customer advocates. They must build new ways to save customers money through an integrated set of savings and smart spending tools. They need to proactively provide access to credit through always-on offers and help them avoid negative credit outcomes. FinTech companies can assist with access to education that triggers multigenerational wealth creation.
Leveraging AI, convergence and customer centricity, they must also face broader challenges, such as identity management, growing workforce instability, challenges of global mobility, property ownership, the broader implications of poverty and the diverse needs of the global underbanked. Advanced tools now provide the industry with more capabilities to provide intelligent, personalized advice to offer new forms of customer advocacy beyond traditional services.
What is your financial services firm doing to be part of the future? What are you waiting for?