Finovate Blog

Summarizing four days of fintech content can be done using a four-letter word: data. That simple term and its many uses was the overarching theme of FinovateEurope last week in London.

The use of data is not new to the industry, but advanced AI models have helped data evolve from the early days of “Big Data” in fintech. Leveraging large data sets for a variety of uses has become an industry standard, but players who make the most of their data will win.

Below, I’ve categorized a variety of data uses, all shown and discussed at FinovateEurope last week. Remember– it’s not how much data you have– it’s how you use it.

AI

When talking about data, artificial intelligence seems like a good place to start. It is AI, after all, that offers deep insight into data.

In his keynote presentation, futurist Rohit Talwar discussed the AI revolution and the road to superintelligence. In the speech, Talwar explained six types of AI:

1. Domain specific: the AI knows a lot about the problem, but not about the world surrounding it
2. Context-aware: the AI is able to retain information for later use
3. Theory of mind: the AI has the capacity to reason like a human
4. Self-aware: the AI has an understanding of human emotions
5. Superintelligence: the AI is capable of out-thinking humans
6. Singularity: the AI has achieved enlightenment and transcendence

Credit scoring and risk underwriting

Data has turned traditional credit scoring upside down– and that’s a good thing. During the demo sessions, ApPello showed how it is using data to transform credit scoring and risk underwriting. The company’s risk assessment technology helps underwrite business loans with thin credit files.

The topic was also breached during the panel discussions, when Hari Ramamurthy, CTO & Technical Architect of Kuflink and Jaidev Janadana, CEO of Zopa each talked about data’s importance in making lending decisions.

Banking the underbanked

This topic is tangential to leveraging non-traditional data sources for credit and scoring. Because unbanked and underbanked individuals have little-to-no credit history, data is the key to providing services to these individuals.

In Friday’s fireside chat with Bernadetta Arese Lucini, Oval Money CEO, Lucini discussed how Oval Money leverages the bank account data of underserved individuals to help them achieve savings goals. Additionally, Sheraz Dar, CEO of CreditLadder explained how CreditLadder uses monthly rental payment information to help users build their credit score by paying their rent on time.

Open your bank

Being in the EU, there was plenty of talk about PSD2. Throughout these discussions, many touted the benefits of consumer data-sharing through the use of APIs. Allowing third parties to leverage data ultimately offers the best experience and provides more options for your customers.

Specifically, Tesobe’s Open Bank Project demoed a portion of its large catalogue of APIs, along with its network of more than 8,000 fintech developers across the globe.

Secure your site

Data gathered about how consumers navigate a website or a mobile app can help flag fraudulent activity. Two demo companies exemplified this use case.

First, Fortytwo Data showed how data can help banks comply with anti-money laundering regulations and leverage behavioral analytics and transaction monitoring to meet compliance standards and keep the client’s account secure.

Next, HooYu demoed how it leverages customer data to help onboard customers and ultimately meet security and compliance needs.

Personalizatoin

Personalization is a huge use case for consumer data. By tailoring the user experience based on the client’s specific needs, banks and fintechs stand to gain more customers and sell more products, ultimately improving the user experience. Three companies exemplified this in their demos.

First, Efigence debuted EFI4 Analytics, which converts data into insights and automatically recommends banking products based on those insights in real time.

Next, DataSine showed how it uses psychology and machine learning to tailor the customer experience and segment the audience by personality type at scale.

Finally, W.UP takes a range of customer data– including photos on their camera roll, fitness data, and geolocation– analyzes it using AI, and leverages those insights to create a personalized user experience.

Regulation

With the GDPR deadline looming, data protection is on the minds of many banks and fintechs across the globe. This topic emanated in almost all discussions throughout the conference.

Analytics Marketing

Offering loyalty and rewards to consumers is a great way to differentiate a payments offering. This topic was quite popular in 2011 but faded after mobile wallets struggled to gain ground. With the advent of more powerful analytics thanks to AI, however, loyalty and rewards offerings are experiencing another surge in interest. Four companies in last week’s show demonstrated how consumer data can be analyzed to improve marketing efforts.

First, CASHOFF uses consumer transaction information to create a white-labeled, gamified loyalty rewards program that is tailored consumer preferences.

Second, Yoyo offers a payment and loyalty platform that leverages behavioral analytics and marketing tools to effectively reach consumers, increase their transactions, and offer them spending insight via receipt analysis.

Finally, Touche showed how it analyzes consumers’ historic activity and predicts behavior in order to offer merchants insights for loyalty programs and targeted marketing campaigns.

Investing

Robo advisory services stand to win big if they leverage data correctly. By analyzing large data sets about consumer confidence and market sentiment, algorithmic investing models can win over consumers. On the human side, financial advisors also benefit by gaining the ability to better manage more portfolios at scale. Two companies exemplified this during the demo session.

First, YUKKA Labs showcased its language intelligence capabilities that evaluate financial news to help advisors and individual investors make better investment decisions.

Second, aixigo demoed how it leverages data to help advisors scale their offerings and manage millions of portfolios.

Our first, four-day conference in Europe is a wrap! And once again the Finovate twitter feed @Finovate was a great place for attendees and online onlookers alike to express their thoughts about our two days of live demos followed by another two days of deep dives and discussions on top fintech trends.

For those who missed it – and for those who’d love to relive the magic of #Finovate from the week that was – here’s a short sampler of the Twitter conversation from last week’s event.

We hope you have as much fun reading it as our Twitter followers  – now at more than 40,000 – had in tweeting it!

And remember to follow us on Twitter @Finovate to stay up-to-date on the latest trends, hot topics, and cool companies in fintech.

“Banks need to ask themselves whether they are flexible and sensitive enough to adapt to the rapidly changing context.” Harrie Vollaard, Head of FinTech Ventures at Rabobank, has established several partnerships with startups, manages the Fintech investments for the Rabobank, is involved in Fintech accelerator programs around the globe, and created several spinoffs. Speaking at FinovateEurope 2018 about Creating A Digital Investment Experience To Compete In A Zero Interest Rate Environment, we chat to him about his key tips for banks who strive to create a successful digital agenda.

Finovate: What does a bank need to focus on when building a digital agenda?

Vollaard: There are three key areas that banks need address to build their digital agenda:

1. A clear innovation thesis and establishing the areas you want to focus on. Here are four areas that we have defined: financial cruise control, platform banking, emerging technologies as business model enablers, and data for food.

2. Open infrastructure to collaborate. To facilitate in- and out-coming datastreams as well as delivering services to third parties and incorporating external services. I envision a satellite structure of the bank’s core assets surrounded by an ecosystem of third parties and startups where the bank is still the first point of contact.

3. A company-wide digital DNA. This is the key success factor and enabler of innovation. Innovation departments running innovation projects and proof of concepts are essential, but in order to be successful you need scale. Scale can only be accomplished through the business lines and marketing department. The bank needs to look beyond the existing products and that can only be accomplished via a customer-first approach, which means a full adoption of a lean startup methodology and product development processes that facilitate iterative learning. A more Darwinian approach is also preferable; it is not the best executed project but the most adaptable organisation who survives. Banks need to ask themselves whether they are flexible and sensitive enough to adapt to the rapidly changing context.

Finovate: How does the fintech sector offer a growth opportunity for banks?

Vollaard: It offers growth in three key areas:

1. Delivering better, more transparant and cheaper services to our clients (challenger banks, personal finance management, market place lending), streamline business processes (by use of Artificial Intelligence, Blockchain), taking out risk (RegTech). The bottom line it the business model optimization; to improve cost/income ration and to increase customer satisfaction.

2. Adding additional services on top of existing banking infrastructure; services more embedded in the real life/business of the clients. A shift from product oriented to service oriented, related to the real customers needs/pains. E.g. in the value added services on top of payments. Bottom line it is business model extension fulfilling customer/client needs embedded in real life events.

3. Exploring new innovation areas; reinvent the business model of the bank. E.g.  transforming your assets in to new service offerings to your clients (e.g. delivering trust services (secure login, authentication, signing services to our clients). In general it means cross industry innovations. Example: We developed an FX platform for ourselves which now can be solved as a B2B solution to other financial institutions. Bottom line it is business model innovation.

Finovate: How has Rabobank collaborated with fintechs to expand products and services for customers?

Vollaard: 90% of the collaboration with fintechs are focused incorporating their services in the service offerings of the bank or in the business processes of the banks.. E.g. Sparkholder with loanstreet; a pre-approved finance tool for SMEs.

9% of Rabobank is an extension of our services, such as Rabo&Co with FinTech Cloud Lending solutions, which is a market place lending solution for SME clients.

1% of the collaboration is related to business model innovation, such as working together with fintech Signicat delivering e-business services iDin (secure login, authentication, signing services to our clients). With our corporate investment arm Rabo Frontier Ventures we are focusing on this category.

Finovate: What are the drivers for change in digital investing?

Vollaard: The most obvious one is the customer and business need. Although this seems like a no-brainer, for the incumbents it means a transformation from a portfolio of financial products (which served the customers of the past) to financial services that fit the customer needs of today.

Another driver is the technologies that offer us opportunities we have never seen before, such as risk models/predictions based on different data sources, optimizing business processes, and new revenue streams.

Finally, there is the regulatory motivation and the harmonization of legislation across Europe to stimulate innovation and lower the thresholds to then expand.

Finovate: How can you compete in a zero interest rate environment?

Vollaard: By making investment more accessible; a mobile only investment app focused on millennials whereby the roundups from transactions are invested in ETFs. The threshold is very low to invest in and a small amount being invested on very regular bases counts up without the customer even noticing. It is completely chat-based, user friendly, design-focused and automated with low cost operation. It is a new and engaged target group.

We know the success that Betterment, Wealthfront, Nutmeg have had serving customers via insightful and user-friendly websites. Inspired by them, we introduced last year Rabo Beheerd Beleggen, which has been accepted with huge success.

Finovate: What will new technologies – like artificial intelligence and blockchain – mean for investment management?

Vollaard: The second wave of technologies impacting the financial industry will offer substantial investment opportunities and reduce costs significantly.

AI can slash down costs by 30% by reducing manual work, and blockchain/smart contracts will eliminate steps in the value chain.