Customer Development
If you follow the financial press, blogs and newsletters, you may have noticed a sea change in the topics du jour over the last 12 months.
As we close out 2016, receding into the background are the never-ending stories of Big Data technology, as well as the hype of how P2P lending is taking over. Instead, the focus is on blockchain, open banking, AI, fintech beyond P2P lenders, cybersecurity, digitisation and customer experience.
This shift is exciting because, as these topics all collide, it will shake up the very face of banking as we know it … although probably not quite as quickly as the technology talking heads would have us believe.
I have one more to add to that list: financial inclusion must be central to the story of 2017 because it will be the beneficiary of many mainstream industry innovations.
Here are some thoughts on just four of these trends.
Blockchain goes mainstream—but not as fast as the hype suggests.
As opposed to the hype around Big Data, my sense is that the excitement around blockchain is different. Since it’s a technology, it is easier to get a sense of what it can do and what it can’t do. And since there is a shared need for banks to adopt it, adoption therefore also drives collaboration.
Many, like me, have written about the world of Big Data and how the most important thing is knowing where to start. This seems a lot easier in the blockchain world. Cross-border payments, share registration, KYC, asset titles— there are plenty of examples to go after.
The Financial Times reports that 50 of the world’s largest banks are looking at blockchain and hope to launch their first applications in the coming year. Some even think it will revolutionise the core banking system. Chances are progress will go slow and start around the periphery, as banks think twice before embedding the technology too deeply too soon. Still, look for an accelerating list of reported real examples as 2017 unfolds.
Open banking creates opportunity and threat in equal measure.
If you judge the importance of something by the amount of air time it gets, Open Banking or Open API’s is right up there. All of a sudden, each consumer will have access to and the ability to grant others access to his/her data for his/her benefit.
This is coming as governments around the world embrace the idea. It’s the calm before the storm, as we see the fintech world on the frontend and banks at the backend being joined up by some new and innovative open API platforms in between.
All sorts of outcomes could ensue. Will it be all your financial needs in one place with the core systems reduced to accounting at the back, or will the banks be able to adapt and exploit this revolution for their own benefit?
Like blockchain, the ability to collaborate will be key. But whereas in that world, it’s between the banks as well as with technology start-ups, here I see the emphasis much more on the latter. The winners will be the banks that can open up their systems and invite in the technology players in order to then be in a position to learn and pick and choose.
AI replaces machine learning as the obligatory Big Data phrase in every conversation.
At face value, this would be incredibly depressing. Please save us from the next person to talk about a real-time 360° view of the customer, which turns out to be just code for, “get data, build models and figure out which product you intend to push next on the customer.”
Fortunately, while AI, machine learning and data are all bound up in somewhat close proximity, what is happening now is different. Now, the narrative isn’t just about data, models and selling stuff, or that somewhere in all that data there has to be a pot of gold if I only knew where to look for it. Now, the debate is about using intelligence to improve. This time, it’s about using software bots to take away laborious tasks and, eventually, intelligence that will help guide every customer interaction to mutual benefit.
At long last, I sense a different emphasis. While my comment about “pushing the next product” is somewhat tongue in cheek, I don’t believe it is too far from the truth. This time, it feels more like technology for the benefit of the consumer.
Financial inclusion becomes one of the biggest geo-political issues.
Depending on which estimate you believe, there are up to 3 billion people in the world that live outside the formal financial industry, and very few of them by choice. Providing access to even the most basic of financial services is a key goal in the fight to tackle poverty in the world.
The internet, as a distributor of services, transmission pipe and generator of data, is the cornerstone technology, but look for many other technologies to also play a role. For instance, developments in voice computing will enable communication for people who can’t write or read—skills we in the developed world take for granted. Guardian Angels of the un-winged variety will increasingly be used to create alerts for events, such as severe weather, and those cognitive agents that we read about in the AI coverage will take care of many day-to-day things. One could also foresee a role for blockchain as a low-cost way to keep track of financial obligations and customer verification.
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All these forces will have a profound impact on banking—and I didn’t even get to cybersecurity and regulation! Cyber is right up there, and while we await the stance on regulation to be adopted by the coming American administration, I sense what we have now is just too much of the world order for there to be large-scale dismantling.
Amid this much disruption, banks find themselves in that oft-quoted situation of “changing the engine while driving the car.” We all know that is an impossible task. The successful ones will be those that don’t seek to change the engine, but they will be acutely aware of what is going on outside the bank as well as inside. They will figure out how to embrace fintech and how to collaborate, and they will put the customer first and understand that doing so doesn’t mean just sell another product.
I’ll leave you with one final prediction—that these same topics will be still be top of mind this time next year. That’s because they have sticking power, and there are real examples of where they can and are being applied.
