By Parth Desai
Surveying the lists of ‘key trend’ predictions for banking and payments at the start of each year often produces an interesting shopping basket of buzzwords – with some proving to have a rather shorter shelf-life than their exponents initially predicted.
In many respects, 2018 was no different: lists highlighted a range of largely technology-based trends that indisputably will impact the banking ecosystem. These included distributed ledger technology – will blockchains revolutionise international payments? – forecasts that Instant Payments will become the ‘new normal’ for Corporates, and of course the expansion of biometrics – are the days of the password numbered as our face/iris/thumb become our primary identity authenticator?
All of these, and other, technology and infrastructure advances will certainly have a measurable impact on established payment processes and existing services.
The confluence of wide technology and cultural shifts, along with regulatory mandates such as PSD2 and OpenBanking, do however represent an inflection point for the banking ecosystem – one that is not solely about a single ‘new’ technology, but more fundamentally impacts how banking and payments services are provided for businesses and consumers. While this transformation will threaten existing long-established revenue streams, it also represents a significant new opportunity for banks to grow and innovate.
The Data Challenge – Customer Cognisance
The collective impact of Open Banking represents a pivotal change. It will increase the number and types of businesses that can offer financial services, and gives organisations unprecedented access to account, transaction, and purchase data. These authoritative records of everything spent, lent or borrowed, when, where and to whom – data which banks so far have done relatively little to understand – will be available to innovative and dynamic third parties to utilise and reason over. Existing business lines will be vulnerable to the new products and services that are able to leverage and aggregate across-domain exchange of data.
Banks should not underestimate the value – and volume – of data they currently hold. Open Banking clearly brings with it competitive challenges, but for those who are ready to seize it, it also brings unprecedented opportunity. For banks to thrive in this era of change, the focus needs rise above a business-as-usual mindset of cost-reduction and efficiency gains, to one of truly understanding the needs of customers through access to disparate data sets that provide a hugely valuable insight into customers’ financial habits, interests and needs – what can best be described as Customer Cognisance – to truly know your customer.
So, the first significant challenge for banks is how to obtain this Customer Cognisance? How can they effectively reason over this data? Both the existing customer data that is largely unexplored, siloed and passive, and the potentially sizable volume of data that is given with consent from outside the bank? If current systems fail to adequately reason over existing data repositories, how can they understand exponentially greater volumes of often unstructured and unformatted data?
It is only by utilising the Artificial Intelligence (AI) disciplines of Machine Learning (ML) and Natural Language Processing (NLP), that these extensive customer data sets can be transformed into actionable business insight and intelligence. With AI, banks can obtain real customer awareness, or cognisance: the ability to reason over data and to truly understand the needs of customers.
Customer Centricity & Engagement
This leads to the second fundamental challenge that banks must overcome – Customer Centricity. With the ability to reason over data and truly know your customer, the challenge then is how can you truly serve your customer? The ability to translate customer data into meaningful, enhancing and hyper personalised services and benefits to your customers will be the true differentiator between businesses that thrive and those that struggle. For banks, transforming insight into beneficial services and products must become a primary focus.
The third key challenge for banks is Customer Engagement -adopting the capabilities required to engage with customers across the wide range of intelligent platforms and ambient devices consumers and businesses increasingly rely on, utilising voice and other emerging interfaces. A number of banks already support the mainstream voice AI platforms (Alexa, Cortana, Siri, etc) to provide balance enquiry and transaction initiation services for customers.
Again, it will be through the deployment of AI disciplines that these highly customer centric, truly engaging service capabilities can be deployed and communicated to customers. Such systems involve voice recognition, natural language processing, context management, machine learning, rule based heuristic processing all combined together and working in sync.
The ability to intelligently engage in a highly connected ecosystem of devices will be entirely dependent on a bank’s ability to transform and provide the intelligent financial digital assistance service that will be seen as the norm. In such a transformative environment, a business-as-usual approach is simply not viable option if banks wish to remain relevant and to prosper.
So perhaps the fourth challenge, is how can banks develop these highly technical and domain specific capabilities? While there will be many different approaches and innovations, leveraging AI disciplines will be the essential business enabler. To make sense of the data you have and understand your customers will require AI. To design new personalised services that engage your customers across the full range of touch points and channels will require AI. How banks develop and deploy such capabilities is a strategic question and one that will almost certainly involve collaborating with proven fintech partners – ones that have both the technology and payments domain pedigree. A narrow technology expertise can be of limited value, without a deep knowledge of the payments and banking domain. Whatever the partnership strategy, the digital transformation agenda is a business imperative than cannot be postponed to 2019!
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