Innovation in digital transformation and emerging trends were firmly front-of-mind this year at FICO World 2022. It's clear industry pioneers and top performers are blazing a trail for the rest to follow. But at the same time many are keeping an eye at what consumer trends and emerging regulatory requirements are set to come over the horizon. Six ways digital transformation is accelerating growth and driving a critical competitive advantage are outlined here.
Digital Transformation and Digital Trends
The consumer is now fully in the driving seat. Customer expectations are evolving and continuing to evolve. Success hinges on agility, adaptation and the ability to meet their demands at the speed of the market – or faster.
As a result, consistently compelling online experiences are now a mandatory expectation. Choppy service and delays simply won’t be tolerated anymore. We’re all an impatient lot. Often once a customer has gone, they’ve gone for good. Organizations across the globe now have a timely opportunity to drive ahead with digital transformation initiatives, get to grips with emerging digital trends, reinvent themselves by bringing together the best of human and artificial intelligence to create and deliver superb customer experience and significant value for their clients.
Applied Intelligence and the Intelligence Revolution
While some firms may still be hamstrung by legacy operating systems and siloed thinking, the right technology investments in Artificial Intelligence, machine learning and digital transformation will not only help automate some of your internal process but also deliver competitive advantage and critical wins.
At FICO, we know how to turn data and insights into actions to achieve desired business outcomes. Our heritage in these areas has already helped leading companies around the globe operationalize their analytic and machine learning insights to make smarter, faster, and more profitable decisions. Like many of our clients, we’re now doubling down on this approach to digital transformation.
Hyper-Personalization and Pre-Emptive Offers Are Key to Unlocking Customer Service
Amazon knows what we want, often before we do. Netflix posts viewing recommendations that continually hit the button, while online fast-food outlets are creating bespoke menus for every loyalty card-holding customer.
Now consumers expect the same level of innovation, customer experience and digital transformation from financial institutions. We all know our data has value - but the exchange of personal information comes at a price. Banking's been slow to deliver on the potential hyper-personalisation offers.
And it's missing a costly trick, given analysts predict revenue rises at specific points of hyper-personalisation adoption.
We’re all operating in a noisy and hugely competitive marketplace. But irrelevant offers are frustrating and often risk undermining customer sentiment. Wins come from investing in digital transformation, staying ahead of emerging digital transformation trends, consistently standing out from the competition with pre-emptive, competitive, attractive offers that you assign in real-time via omnichannel communications strategies.
There are multiple routes in - from real-time Open Banking data overlaid with AI insights, to personalisation through fintech partnerships. In the meantime, regulators continue to keep a close eye on developments and now expect banks to ensure they always serve financially vulnerable customers in the most appropriate way possible.
The winners that embrace digital transformation and emerging digital trends to unlock the competitive customer service advantage, will be the organisations that leverage the mass of data that’s now available, all underpinned by AI, machine learning and appropriate technology investments.
Buy Now Pay Later, Rising Inflation and the Cost-of-Living Crisis
BNPL is the new buzzword. With the impact of the pandemic and subsequent global lockdowns, the industry has seen a transformation, consumers are driven to digital channels far faster than many had anticipated. Almost overnight, there’s been a generational cultural shift in typical habits as it drives further digital transformation.
Legacy banks now face being left behind as many customers switch to leaner new-to-market fin-techs and are clearly willing to adapt to new ways of transacting. Among the global stellar performers is the rise in prevalence of BNPL schemes.
The BNPL industry is now estimated to be worth an eye-watering US$100 billion - and it's only set to increase. Millions of shoppers already use a BNPL service to finance their purchases. Options are more varied than ever — Klarna, Affirm and Afterpay are just a handful of the many providers in the space. Elsewhere, bigger players are jumping on the bandwagon.
But there are also concerns financially vulnerable customers may be over-committing themselves especially in the face of rising prices, inflation and a rapidly increasing cost-of-living. Are BNPL disruptors leaving credit bureaus with a poor line of sight on consumer exposure? Has BNPL become the new overdraft?
It’s clear there are opportunities to provide convenient, competitive and desirable options for pay-in-four instalments, while still accurately assessing a customer’s ability to pay and analyzing precise exposure for at-risk consumer segments.
The AI-driven FICO Platform is helping boosts banks’ BNPL programmes thanks to an advanced credit risk scoring framework leveraging transaction data - employing external sources such as Open Banking Data Aggregator APIs or internal data sources - to advanced customer profiling technology and machine learning models.
As the target is primarily the younger Millennial and Gen-Z segments, who may have thin credit files, transaction data holds key insights into BNPL applications, FICO Platform enables lenders to process new data streams at speed, decisioning customers in - or near to - real-time. A key capability of FICO Platform is a quick route to a customer profiling engine, which processes large volumes of customer transaction data to create digital profiles of customers. With access to transaction data on income, expenses, commitments, discretionary spend, savings, available in real-time, the insight is helping drive the speed to a decision and the time to ‘yes’.
ESG Takes Centre Stage at FICO World
The Environmental, Social and Governance (ESG) agenda has grown rapidly in recent years and is forcing seismic regional shifts in some industries such as energy and transportation, as consumers, investors, employees and regulators raise their expectations of corporations. Recent climate and sustainability summits like the COP26 Conference urged a push towards a net zero aspiration by the middle of the century and help ensure “every financial decision takes climate into account”.
The ESG agenda is largely delivered at a corporate level. But from here on it’s anticipated there will be increased focus on bringing ESG considerations into more granular lending and investment decisions among many organizations. It’s a bold move and an ambitious longer-term aspiration.
Organisations will also increasingly need flexible data and decisioning platforms that enable these new data sets to be ingested, assessed rapidly for their validity and then deployed into decision-making processes. Over the longer term, ESG and climate risk evaluations may become an integral element of credit risk and the automation process.
Digital Transformation with a Human Face
FICO World 22 delegates also got to meet Digital Jane for the first time. She's everyone's customer and she, quite rightly, has high expectations.
Jane is a 28-year-old woman sharing an apartment in the big city with friends. She uses her mobile phone to conduct and transact much of her day-to-day life, including connecting with friends, making purchases, checking her bank account, even buying a new car. She wants a bank that can keep up with, and even anticipate, her needs. Jane is not alone in that expectation. In a fast-paced, digital world, financial institutions who succeed put customers at the centre of their business.
Enter FICO Platform. It’s designed to predict, analyse, and optimize customer interactions in real-time to help organizations make better customer-level decisions. A series of short, snappy videos demonstrate how financial institutions - using analytics, decision modelling and AI - can seamlessly elevate Jane’s financial interactions in a typical day in order to strengthen customer loyalty. But don’t our word for it, take a first-hand look.
FICO World 23
For those of you who couldn’t join in person, there will be an opportunity to be at next year’s FICO World. In the meantime, here are some links highlighting how FICO Platform, Applied Intelligence and Digital Jane, can help your business become even more customer centric.
- Discover the power of FICO Platform to help you move faster and more intelligently.
- Read about The New Age of Applied Intelligence.
- Explore FICO Enterprise Intelligence Network – Redefining the Next Generation of Applied Intelligence.
- Watch FICO Platform in action with the story of your everyday consumer, Digital Jane.