Going Live: How Some Banks are Dealing with Remote Implementation

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What is the safest way for banks to go live with new tools in the height of a global pandemic? Remotely, of course!

This is the reality that many bank and third party providers have faced over the past few months. Despite the complications that COVID-19 has brought to banks’ operations, many are still moving full speed ahead on projects with third party providers.

Naresh Kurup

Naresh Kurup, Marketing Director at banking financial crime risk management firm Clari5 has experienced this first-hand. After the pandemic hit, Clari5 was forced to quickly move to a work-from-home setting while onboarding two new clients completely remotely, something the team had never done before. We caught up with Kurup to get the details.

In the height of the coronavirus lockdown, you were able to help two new bank clients start projects. Tell us more about this.

We leveraged the coronavirus lockdown situation as an opportunity to excel, for our customers and for us. Amidst the din all around about how the pandemic has been negatively impacting firms and systems worldwide, we had some noteworthy achievements during the lockdown, including three new client wins.

The two projects that we started were both large enterprise fraud management projects for banks (one of them is the Philippines’ second largest bank). Both banks were agreeable to starting their projects during the lockdown – a testimony to the faith in our capability.

We also had another prominent new bank go live with our enterprise fraud management solution, despite the nation-wide lockdown, via a 100% remote implementation.

Our cloud-based project management framework – called Clari5One, has been helping us work seamlessly and virtually. In fact, we have been working at 150% productivity.

So, we actually have been having a silver lining in the Covid cloud.

Were there any hesitations from the banks’ perspectives? If so, how did you deal with their concerns?

There were a few initial apprehensions around remote project initiation and implementation as this is not the standard practice for large enterprise implementation projects.

We modified and extended our project management framework to the banks for higher real-time synchronicity and shared visibility of the delivery management plan.

In the case of the bank client going live during the lockdown, it was mutually agreed that the entire implementation would be performed remotely. Everything from requirement discussions, to integration strategy and configuration, to implementation rollout for the go-live would be conducted fully remotely.

Also, high operational rigor, advanced tele/videoconferencing tools, real-time communication, and continuous updates assured the banks that our project team were completely in-sync throughout the project journey.

These factors were instrumental in the banks gaining confidence that the projects would proceed exactly as per plan, despite the situation.

What was the biggest challenge of remote implementation?

Given the nature, scope, and scale of these projects, typically large enterprise fraud management solution implementation projects demand large teams from either side working together physically closely.

But, given our project management platform, advanced communication tools, and the heightened diligence because of the situation, instead of working alongside the banks’ fraud risk management department officials, our remote project team dovetailed seamlessly with them. So, we were very much present, but virtually.

In fact, the CIO of the bank that went live on Clari5 EFM said, “We are an execution-oriented organization that sets sight on a goal and achieves it, despite roadblocks. We are pleased that Clari5 imbibed our vision, and went live with the mission-critical, enterprise-level fraud risk management solution, despite COVID-19. We appreciate team Clari5’s efforts to keep our operations running and being supportive at every step. Happy to have Clari5 as our valued partner.”

Also, as with any conventional project management, we had no margin for error and were all set to achieve the targets on time, despite managing the projects remotely.

Lessons learnt include project management hyper-optimization, integration approach, methodology finalization, remote infrastructure setup, SIT/UAT support, and final thrust for go-live.

In fact, if it weren’t for the virus, we wouldn’t have had an opportunity to demonstrate that yes, we indeed can remotely activate and implement.

What technology/ tools have you found useful in implementing projects with clients remotely?

As a young fintech company we are equipped and enabled in processes and technology that support ‘work from anywhere’ for most of our staff. So, transitioning to a ‘complete’ remote working situation for project implementations in the wake of the coronavirus lockdown wasn’t exactly a big leap for us.

Since implementation of the Clari5 suite requires close interactions with client teams as well as tasks and activities that are required to be done on premise, we transitioned them to Clari5One – our cloud-based project management framework that has multiple technologies as components.

Clari5One helped us with –

  • Detailed requirements gathering, demo of use cases, technical specifications interactions
  • Installation / configuration of Clari5 application components
  • System integration tests and support for use acceptance tests
  • Production deployment, go-live, and post go-live support
  • Project governance (reviews, interventions, and decisions)
  • Issue tracking, work allocation, and status tracking

If given the choice between an in-person implementation and a remote one, which would you choose?

Undoubtedly, remote.

Being an enterprise product company, we work very closely with client banks to help them achieve their risk and compliance requirements completely and consistently. Project implementation proficiency and on-time delivery have been the hallmarks of our success, which we have achieved consistently in implementations across geographies. But COVID-19 tested our hypothesis.

The outcome has been a mindset shift in our project implementation approach. We had experimented with remote implementations in the past, but the COVID-19 lockdown provided a live environment to validate our remote implementation hypothesis. The leading bank going live boosted our confidence to manage an entire project remotely.  

We are now honing our remote implementation expertise for other projects on the anvil. We are currently implementing an EFM project for Philippines’ second largest bank using our remote implementation methodology.

Given the clear advantages of people deployment efficiency, cost economies, and much shorter go-live timeframes, we expect a substantial number of future implementations to be managed remotely.

Suffice to say, remote implementation of large banking enterprise solution projects will become the new normal.

The Not-So-Secret Secret to Getting Innovation Right

In the midst of the myriad challenges COVID-19 has thrown up for financial institutions and the people and businesses they serve, the crisis is also propeling innovation forward, proving the worth of past technological investments, and shifting the view of digital initiatives from a ‘nice-to-have’ to a ‘need-to-have’, particularly in a time of social distancing.

Against this backdrop of crisis-galvanized change, senior content producer Laura Maxwell-Bernier caught up with Sunayna Tuteja, Head of Digital Assets and Blockchain at TD Ameritrade, to talk about how she is seeing this play out, and how financial institutions should approach digital transformation to ensure relevance in the ‘new normal’.

We are also delighted to announce that Sunayna will be expanding on the themes covered in our conversation at FinovateFall in September, where she will look at the next phase of this trajectory, how changed consumer behaviors will drive further change, and what role technology will have as the dust settles.

Laura Maxwell-Bernier: Crises like COVID-19 have historically shown us how quickly technology can go from a nice-to-have to a real necessity for consumers. How are you seeing this play out in the context of COVID-19?

Sunayna Tuteja: Innovation often gains traction in times of turbulence. We are certainly witnessing that play out at massive and magnified levels in the context of COVID-19. Technologies and trends that were already in motion reached escape velocity – in scale and speed of both investment and adoption accelerating in the span of weeks vs. years. Examples include tele-medicine, online learning, and omni-channel commerce. The necessity of solving a pain point combined with a sense of urgency is activating laser-focused action that otherwise might be slowed down by inertia. In short, digital transformation is now a matter of business resiliency, representing an ultimate shift from “nice-to-have” to “need-to-have”. 

Perhaps my favorite example is the Supreme Court of the United Sates (SCOTUS), an institution steeped in tradition which until recently conducted all oral arguments in person, behind closed doors and without cameras present. They too have had to adapt and transform. Last week the SCOTUS moved to hearing arguments via tele-conference, and also opened it to the public to listen in real time. While the new format may lack the usual pomp & circumstance, it ushers in an era of transparency & inclusivity. It’s a joy to witness this epic transition. Necessity is the mother of invention, or in this case adoption!  

LMB: What similarities are you seeing in the way financial services organizations are responding to COVID to how they responded after the 2008 financial crisis? What lessons should we be drawing from this in our planning for the longer-term repercussions of COVID?

Tuteja: An imperative for institutions (private and public) to innovate is the rapidly closing delta between novelty and necessity. It wasn’t that long ago that the notion of banking and trading on your mobile device was unfathomable – mobile phones were for playing Candy Crush and Angry Birds!  But within a matter of years, driven by a shift in consumer behaviors and expectations plus the rise of Fintech, incumbents have had to evolve and for many, the nice-to-have digital venues are now need-to-have primary on-ramps to attract, engage and retain consumers. Ergo, shocks like the global financial crisis and COVID-19 further reinforce and validate that tapping into the power of nascent yet powerful technologies to break down barriers and create next generation products/client experiences must be an evergreen endeavor. You need to maintain a persistent and pervasive focus on client-centric innovation to keep up with and surpass the evolving expectations and norms. 

At TD Ameritrade, we saw this thesis come to fruition as we embarked on transitioning our employees to work from home in a matter of 10 days whilst serving millions of clients during tumultuous market conditions. The firm’s steady investments over the years in capabilities like cloud, Artificial Intelligence, messaging, mobile etc. enabled a speedy and smart transition.

LMB: What implications do you see this crisis having for the rate of adoption of digital assets – stablecoins, CBDCs and the like?

Tuteja: Digital assets are uniquely qualified for these present times. Be it as an investment vehicle akin to bitcoin’s value proposition of ‘digital gold’ or the prospect of modernizing payments, remittances, money movement or banking the unbanked/underbanked driven via stablecoins, digital wallets and CBDCs, the opportunities abound. It’s fertile ground for projects in the digital assets space, including DeFi efforts currently focused on solving these important problems. Again, this momentum is driven by heightened need as we reimagine and reconfigure our day-to-day norms in the time of/after COVID. For example: In my role leading emerging tech and partnerships, I had the opportunity to work with several Asia Tech firms in China. As someone who needs her daily dose of Starbucks, it was always amusing when I tried to pay for my drink with cash or credit card. In a society that has adopted end-to-end digital payments driven by digital wallets embedded within messaging apps like WeChat, the notion of a cash or physical credit card interaction could not be more antiquated. While the proliferation of digital wallets and QR codes have been slow to gain momentum in the U.S., current circumstances may mark a significant shift as consumers are more conscious and concerned about what they touch and who touches their card.

In this new world order, businesses will have to strike a balance between efficiency and resiliency, and as business leaders we must deliver a compounding and comparative advantage to our constituents – customers, employees, and the communities we serve. All of which will enable a good deal of change management and digital transformation to ensure long-lasting relevance. Yet in these times of hyper-change, innovation guided by the voice of the customer is always in vogue.

The confluence of these developments combined with the current macro environment garner an important inflection point in the proliferation of this nascent technology & asset class. It is therefore incumbent on the institutions that consumers know and trust, to lead with prudence and pragmatism in addressing this growing demand from consumers for education and access to digital assets, and continue the journey of bringing Wall Street to Main Street.

LMB: What does the path forward for digital transformation look like as a whole, and what do you anticipate the long-term effects on technology adoption being?

Tuteja: I’ve long maintained that anything that can be digitized will be digitized, it’s a matter of timing and led by the consumer, with technology as the enabler vs. the driver of change. An evergreen approach is key because the timing and pace of adoption is often influenced by external factors as we are witnessing at the moment. I’m reminded of examples like Webvan and Pets.com, which are often cited as failures of the dot.com bubble. Yet their contemporaries, Instacart and Chewy.com, are gaining tremendous adoption today. As an organization, you don’t want be caught off guard and unprepared, hence a persistent evaluation of the evolving consumer needs combined with a “perpetual beta” mindset in deploying new technologies is critical.

While starting with the technology can be alluring, it can lead to “shiny object syndrome” and innovation theater without much value for the end constituents. The not-so-secret secret sauce is an obsession with customer-focused innovation. A myopic focus on solving gnarly problems to deliver meaningful value by breaking down barriers that enable consumers to take charge of their financial future with confidence. If that’s powered by blockchain and AI, great, but the tech ought be secondary to the problem statement. The litmus test we apply is: What is the problem we are solving? Why is this problem worth solving? And why are we or is this tech uniquely qualified to solve this problem? It’s always better to be solving the hard problems and shipping pain-killers vs. vitamins. A strong anchor to the problem statement is also useful in maintaining focus on investing in, experimenting with and operationalizing new capabilities while averting the trappings of fads or fear of missing out.

In this new world order, businesses will have to strike a balance between efficiency and resiliency, which will enable a good deal of change management and digital transformation to ensure long-lasting relevance. Yet in these times of hyper-change, innovation guided by the voice of the customer is always in vogue.

How the Coronavirus Impacts the Appetite for Cryptocurrency

Photo by Sander Dalhuisen on Unsplash

We’ve heard a lot about how the coronavirus has made an impact across the fintech realm, but what about in the crypto space? With an unstable stock market, why weren’t investors fleeing to alternative, blockchain-based assets?

To get an inside view on these questions and more, Finovate’s Adela Knox spoke with Max Lautenschläger, managing partner and co-founder of Iconic Holding, a Germany-based company that manages and sells crypto asset investment vehicles and invests in blockchain and crypto-focused companies via its in-house accelerator.

How has the coronavirus pandemic disrupted traditional investments?

Max Lautenschläger: Personally, as a supervisory member of the biggest independent financial advisory company in Germany, I am monitoring the German financial market closely. I was surprised how good the day-to-day business is going in this very special time, which is forecasted to be one of the biggest economical depressions in modern history. Moreover, it’s positively surprising how much this pandemic is pushing us towards a more digital financial ecosystem. Consumers are adapting to the “new normal” and are suddenly forced, but also willing to make decisions online. Investment advisors and financial consultants on the other hand are realizing the potential of using online tools for signing documents, online identifications or video calls for customer acquisition and retention. Financial institutions seem to finally understand how important digitization is for the daily operations with millennials, which have a very different expectation of financial services. Even though the whole financial industry is suffering, it will also have a positive impact long-term.

By looking at the best performing stocks since corona started, you can also see that more and more money is getting invested into themes like data, remote working, online education, and sustainability. In this pandemic people are realizing the shift the world has already made and want to be exposed to the increasingly important topics.

How has this impacted the appetite for digital currency?

Lautenschläger: It’s very important to understand what was going on when corona hit us out of the sudden. We’re not in an economic crisis yet, but the initial shock led to a so-called liquidity crisis, which makes investors liquidate their holdings -if possible- to cash. All asset classes suffered severely, even “safe havens” like gold decreased by more than 10 percent. Cryptoassets crashed in those extraordinary times, as well, even though they’re said to be non-correlating to other asset classes. Nonetheless, this crisis just confirms what we already know: central banks can print money and are increasing the circulating supply constantly. The beauty about crypto is that code is law, which means that the supply-demand-relationship is predefined. Over the last couple of weeks more and more institutional money has been invested into crypto assets which also led to a new peak in commitments to traditional financial vehicles like the Grayscale Bitcoin Trust.

Secondly, the discussion of introducing a blockchain-based Euro or US Dollar is again one of the top priorities for central banks all over the globe.Libra, despite its weaknesses, seems to be a solid backbone infrastructure for those digitized currencies and could help to accelerate this development.

What is the biggest myth about cryptocurrency?

Lautenschläger: Most people I talk to think that crypto assets don’t have any intrinsic value and research from big financial institutions are trying to support this hypothesis. But this is entirely wrong! Let’s take Bitcoin as an example. Digital gold, safe haven, store of value — a lot of phrases have been used to describe Bitcoin, and to a certain extent, I agree with all of them. For me, Bitcoin is a commodity like gold, other rare metals or rare earth, which can be modeled by the stock-to-flow ratio. On the other hand, there are blockchain protocols which are the infrastructure for decentralized applications. The value of those protocols and their native tokens is derived from the number of deployed applications and the level of engagement. Users will use the infrastructure that offers them the applications they need and developers will go where the users are.

How is cryptocurrency performing in the current pandemic climate?

Lautenschläger: First it crashed like all the other asset classes. The reason for this is that corona -at first- didn’t cause an economic crisis, but primarily a liquidity crisis. Studies in behavioral finance suggest that people tend to convert all liquid assets to cash to be prepared for an upcoming crisis. But even though crypto

tanked even more than the stock and commodity markets it is still the best-performing asset class of 2020. With the monetary policy of the ECB, FED, and BoJ you can clearly see the vulnerability of our system, which makes more and more people lose trust in central bank policies and money in its current design. This is why crypto was born in 2009 as a reaction to the financial crisis.

What are the biggest benefits and reward of investing in digital cryptocurrency?

Lautenschläger: First of all, crypto has a low correlation to traditional and alternative asset classes, which makes it a perfect portfolio diversifier. Recently, we conducted a study in collaboration with the Frankfurt School of Finance and Management, which clearly shows that an allocation of 1% to 5% of crypto to a traditional portfolio not only generated additional returns, but also increased the sharpe-ratio severely, which is the most well-known risk-to-return measure.

Is the demand for crypto assets limited to professional investors or is it something that everyday investors are looking into as well?

Lautenschläger: Crypto assets were originally completely retail driven by individuals who believed in the potential and the idea of an intermediary-free world, in which everyone is financially included. Nowadays, we see more and more high net worth individuals and family offices investing into the space. The lack of professional, enterprise-grade financial vehicles is still an issue and makes it hard for institutions to enter the space. But recent developments like the European AML directive and the German crypto custody license are first indicators that crypto assets are becoming “bankable.” This is also what we have been working on for years at Iconic Funds: make crypto accessible through traditional, regulated vehicles.

Customer Experience and Member Engagement in the New Era

Financial services organizations have significant and unique roles to play in the societal responding to COVID-19 – both as we are in the midst of the global pandemic and as we emerge and eventually start to rebuild and recover. In light of this unprecedented challenge, Senior Content Producer at Finovate, Laura Maxwell-Bernier, spoke with Norman Buchanan, First Vice President of Design & Transformation at Alliant Credit Union, to discuss the implications of these unprecedented times for the customer experience and member engagement.

LMB: Thanks for taking the time to join me today. Let’s start with how customer experiences are changing… what does a good customer experience look like in these unprecedented times?

Norman Buchanan: The definitions and fundamentals of member experience stay the same no matter what external forces are at work. Throughout our 85-year history, Alliant has been committed to serving and supporting our members in good times and in bad. 

However, times like these do reinforce the human condition and highlight the importance of a human-centered member experience.  Establishing authentic, empathetic connections in these times is even more appreciated and critical during the crisis.

LMB: So, how can financial services institutions offer support and reliability to customers when they need it most?

Buchanan: It is critical for financial institutions to show support to our members and customers in this crisis. At Alliant Credit Union, our lending, product management and marketing team quickly developed a new unsecured loan product offering for our existing members within the first week of the crisis. In addition to our unsecured loan product, we have also made our Payment Deferral, Modification and Payment Reduction programs more readily available and easily accessible. These offerings are critical to providing a small amount of relief and peace of mind to members who are experiencing a sudden and dramatic change to their financial condition. 

We have been doing scenario planning for the last 10 years and some of the scenarios track closely to what we’re seeing in the market now.  We’ve prepared for times like these and will continue to monitor the situation every day so we can make rate change decisions that are in the best collective interests of our more than 500,000 member-owners nationwide.

LMB: How is Alliant Credit Union responding from the customer and member perspective?

Buchanan: During this uncertain time, we are focused on four priorities: continuing strong service to our members, employee and member safety, helping members impacted by COVID-19 and keeping members and employees informed.

Alliant instituted an initial work from home policy on March 13 and implemented a 100 percent virtual work from home call center within 3 business days to help support our members.  We had never implemented this type of a call center before in Alliant’s history, (and honestly something I never thought we would ever see) but we were able to accomplish it in rapid time thanks to our resilience as an organization.

Our contact center NPS Scores for the first month of being 100 percent remote are 2 points higher than the same period last year.  We mobilized a 100 percent work from home call center and have had slightly improved YOY satisfaction response from our members.  This is something our credit union takes a great deal of pride in having accomplished.

LMB: With social distancing now the norm, how can we harness digital services to best serve customers and engage members?

Buchanan: Digital Transformation has been the lynchpin of Alliant’s strategy over the last five years.  As our CEO, Dave Mooney puts it, “Banking is something you do, not a place you go.”  This strategy has driven the transformation of our Mobile and Online Banking offerings based in research and continual feedback from our members as well as investment in our call center infrastructure and analytics.  This strategy enabled Alliant to be in a position to close the majority of our branch network in 2018 so that we could focus on serving our members needs exclusively through our digital and phone channels. 

LMB: In your opinion, what is the biggest challenge COVID-19 presents us in terms of delivering best-in-class customer and member experience?

Buchanan: The COVID-19 situation highlighted that a frictionless member experience needs to be supported by a frictionless employee experience, especially when that employee experience is 100 percent remote! 

Areas of the operation that historically have been underinvested in automation have been highlighted by this historic experience.  Operations like loan deferrals and modifications, which typically handle transaction volumes in the teens per week for us, have been overwhelmed by the current environment.  This allows us the opportunity to re-prioritize our focus to ensure that we can support our members with optimized and automated back office processes.  That will be an immediate legacy of the COVID Member experience challenge. 

Fintech Analysts Speak Out About COVID-19

We’re used to things changing fast in the fintech industry, but in the past few months, we’ve seen even more rapid change. That’s the reason behind the latest series on the Finovate podcast: Fintech in Extraordinary Times.

In this series, host Greg Palmer caught up with nine fintech analysts to get their thoughts on what we can expect to happen in fintech now that the economy and our way of life is turned upside down. Check out the series to get a glimpse of who will be the winners and losers, what strategies will prove beneficial, and what the future of customer service will look like.

Ron Shevlin

Shevlin summed up his projection in three words: “I don’t know.” To be fair, he was the first guest in the series and didn’t have the benefit of seeing government stimulus packages, consumer purchasing changes, and infection curve adjustments. Shevlin explained that making guesses about the economy is the wrong move at the moment, and guided firms to instead focus their attention on strategic planning and helping to stabilize customers’ and employees’ lives.

“None of this advice matters,” he emphasized, “if the bank doesn’t first take a customer-centric approach.” Shevlin concluded that when we emerge from the other side of this crisis, banks will better understand the connection between financial health and physical health and will be better poised to deliver digital services.

Alyson Clarke

During her discussion, Clarke focused on the positive. She made the point that the key to surviving recessions is preparing for the upturn. Banks need to balance cost-cutting efforts with productivity and should reengineer their processes around the customer and not the product. Instead of simply cutting costs by laying off employees, Clarke noted, banks need to consider how they can improve their productivity and focus on higher value tasks.

As for what’s next, Clarke believes that the next wave of innovation will center around risk and back office solutions that drive efficiencies. “We’ve already seen sexy front-end innovation and now there is a demand for efficient solutions to drive more scale,” said Clarke. In addition to back office solutions, she noted that the low-touch commerce movement will spur innovation in digital payments. And, she opined, we may even end up with a mobile payments solution that sticks.

Jacob Jegher

Jegher stated that the crisis will prompt fintechs to be more creative, especially since consumer behavioral change has prompted a move into digital opportunities. The new era of the digital economy will ultimately be a test of a bank’s user experience. He explained that if consumers come running back to the bank branch when this is all over instead of learning to embrace mobile, perhaps there is room for improvement in the mobile experience.

In the future, Jegher predicts that changes to the economic environment and lower unemployment numbers will inspire banks to offer solutions that cater to the gig economy. Up to this point, traditional banks have failed to serve this customer segment.

Dan Latimore

Latimore kicked things off with a disclaimer that in the next few weeks as things progress and as new information comes in each day, his views may change radically. Overall, however, he predicts that COVID-19 will accelerate a lot of existing initiatives and consumer behavior patterns. For example, Latimore noted that we can expect to see hockey stick growth in consumers’ digital adoption and in their move away from cash usage.

On the other (perhaps more negative) side of the spectrum, Latimore said that we will likely see an acceleration of the “thinning of the fintech herd.” In other words, many fintechs will close their doors or become acquired by larger players.

Brett King

In his segment, King opened by saying, “This isn’t a fintech bubble that has collapsed, this is the entire world economy that has collapsed.”

In predicting winners and losers, King anticipates that challenger banks will do well. And though a lack of future funding rounds may slow their growth, these non-traditional banks will be able to acquire new customers organically at a faster pace. He added that, conversely, fintechs working in the credit space may not fare as well. “If you’re in the credit business in fintech right now, that’s going to be tough– you’ve got to de-risk,” King said.

As for change that has already occurred in the industry as a result of the coronavirus, King looked to his own company, Moven, as an example. He explained that because the direct-to-consumer version of Moven lost a major round of funding due to concerns around the economic effects of COVID-19, the company had to make some major decisions. Ultimately, Moven closed its direct-to-consumer offering and pivoted to focus all of its efforts on Moven’s enterprise product, which is currently experiencing increased demand because of new digitization requirements.

Adrienne Harris

Harris made that point the fintech has yet to experience a downturn, since much of it was born out of the last financial crisis. That said, many are watching the industry closely to see how it will weather the storm.

She highlighted the hope that fintech tools will help repress some of the negative effects of the economic downturn. Since we have a lot more tools and more data going into the current crisis than we had going into the 2008 financial crisis, perhaps the economic situation won’t be as bad as it would have been in the absence of fintech tools.

Harris predicts that as fintechs are impacted by the economic effects of the crisis, some will fold and others will fall short of meeting customer expectations. Because of this, she noted, we can expect to see more scrutiny from policymakers and regulators.

Louise Beaumont

In her interview, Beaumont made the point that this is a time of forced change, and it’s causing innovators to step up to new challenges. Experian, for example, is offering its Affordability Passport to its customers for free.

As a champion of open banking, Beaumont highlighted that the need for open banking is even greater during this time of crisis. When it comes to lending, she said that leveraging business data using open banking is one of the keys to ensure that the right funding hits the right company at the right time. This will allow all banks to see a business’ entire financial history– even if that company does not do business with the bank that is extending the funding.

Chris Skinner

Skinner explained that large banks are having difficulty with the shifting demands of consumers. He noted that not only have they increased their digital demands, they are also requiring more one-on-one attention in areas such as mortgages. Because of these changes, many banks are receiving 10x their usual call volume but have 10x fewer employees to service the calls. After the pandemic, he concluded, many banks will rush to become purely digital.

Skinner predicts that the fintech industry has another decade until it will fully mature. He explained that once fintech reaches true maturity, it will be built on open banking. Even before this time, however, he anticipates we’ll see banks flock to the open banking model because after the pandemic, banks will be seeking agility. “The ones that are just sitting there like rabbits in the headlights are really going to struggle,” he said.

What Leading Challenger Banks Have Learned on Their Journey to Build a Digital-Only Bank

What Leading Challenger Banks Have Learned on Their Journey to Build a Digital-Only Bank

Finovate’s Charlotte Burgess spoke to Michal Kissos Hertzog, CEO, digital bank Pepper and insha’s Founder and Managing Director, Yakup Sezer, about the challenges of setting up a digital-only bank, and how to get the customer experience right with zero face-to-face interaction.

What key lessons have your challenger banks learnt as you looked to be digital only?

Michal Kissos Hertzog: One key lesson businesses have learned is that you can’t just paste a “digital core” over an incumbent bank. They have to be truly digital or there will be limitations and barriers.

The benefits of having a business model that is digital to its core is that banks can adapt quickly to constantly evolving customer demand, technology and innovation. Incumbents with legacy systems need to adjust quickly or partner with tech and fintech companies, or innovation will always be slower.

Yakub Sezer: The learning curve is very steep. When building a bank from scratch, especially in countries with strong regulatory bodies such as Germany, there’s a myriad of things to consider on the way, and many hurdles to overcome.

Courage is a necessity: If you have too many reservations about what you do as an entrepreneur, you’re inclined to fail. Learning to fail fast and get back on track even faster is crucial, and so is a strong partnership network. With Albaraka Türk, we’re lucky to have a strong investor with roots in our market segment behind us, but building a fintech-spirited bank out of a corporate culture is a completely different challenge.

Why do you think we have seen such a boom of “digital-only banks,” and do you think these challengers have the ability to take on those more entrenched players?

Sezer: Consumers are used to a level of convenience from their personal lives that it’s only natural they want to handle their finances in an equally convenient way.

Challenger banks have much faster innovation cycles and often enable a company culture that encourages a team to try out things, and fail where necessary, and learn from that, and then go on and improve, facilitated through digital organizational patterns, something legacy banks have been lacking for the longest time . However, I don’t necessarily see challenger banks and legacy banks as mutually exclusive. We’ve seen many great partnerships developing over the last years and both sides can benefit from each other in various areas.

Hertzog: The profit and loss model no longer works. Unlike the incumbents, digital-only banks have the advantage of being able to utilize data to operate on customers first, profit second basis. Customer needs and demands are changing and they expect so much more from the companies they engage with on a daily basis.

For example, Pepper’s research found that two thirds (67%) of Brits don’t feel well-equipped to make the best financial decisions for themselves, yet nearly half (47%) believe it’s a bank’s duty to help them make better financial decisions. This shows that banks need to do more in providing the necessary tools to help consumers make the best financial decisions.

This is something that many challengers have already achieved and are excelling at, so for the incumbents, it really is a question of adapt or die.

How do you ensure a great customer experience when you are a digital bank?

Hertzog: Unlike traditional banks who have implemented technology solutions to improve how they currently work, digital banks tend to do things differently. They work hard to identify customer pain points and then implement tech solutions to solve them.

Another way is by leveraging data. Digital banks might not have the long history of data that the incumbents do, but they are far better at utilizing it to adapt to consumer demand and offer personalized services. This typically creates a much better experience for the customer. For example, we know that debt is a huge problem for many people, so at Pepper, we use data to provide our customers with the necessary guidance before this happens; such as suggesting cheaper loan alternatives to an overdraft.

Sezer: For us, it’s been very important to find a strong niche. As a digital bank, we’re obviously attracting people that are looking for a very high level of convenience in banking; but we also have strong moral principles when it comes to what we do with our customers’ money. We’re also convinced that legacy banks have been doing certain things right: personal customer service is definitely a plus.

We’re combining the best of both worlds: a mobile-first banking experience, that offers consumers the possibility to get in touch with their beliefs and moral convictions through a personal banking partner.

Finally then, how do you see fintech as a whole evolving over the next decade?

Sezer: B2B solutions, especially will continue to gain traction across the board, and co-operation between digital and legacy banks will play an increasingly important role throughout Europe. But B2C is going to evolve as well; handling your financial situation will not be only banking anymore. With the ability to monitor personal spending habits and saving goals on your phone, customers will always be aware of their financial situation.

Hertzog: In the next decade, we can expect to see a lot more partnerships and collaborations – not just between banks and fintechs, but also fintech to fintech partnerships. Many successful businesses realize the importance of collaboration, so they can focus on what they do best and use other companies for the rest.

The other trend we can expect from fintech is increased personalization through the use of AI. At Pepper, we envisage a world where a consumer enters their favorite coffee shop, and we drop money into their account to pay for their coffee as a reward. This level of personalization and customer obsession will dramatically reform the banking industry in particular, as consumers opt for products that truly understand them and their needs.

Personalization and One-to-One Communication

Gregg Hammerman has seen first hand what works when it comes to personalization. In fact, in 2012, he launched a company built around the entire premise of personalization.

Hammerman is now CEO of Larky, a mobile engagement platform that enables financial institutions to put the right message on an account holders’ lock screen at the right place and time. However, personalization and push notifications– while effective– can be difficult to implement. Not only do the timing and location have to be perfect, there is a careful balance between messaging and spam. On top of that, privacy is often a top concern for both financial institutions and their end users.

We caught up with Hammerman to tap his expertise on implementing a personalized user experience.

When it comes to personalization in fintech we often hear of sending offers to the right consumer at the right time in the right place. What is the most challenging aspect of this?

Hammerman: It’s critical to make sure that these communications are relevant, meaningful, and helpful to the consumer. We work closely with financial institutions to create experiences that use these communications to make people feel like they are part of a special club.

Three key things make our programs a success. First, we recommend segmenting an audience so you can tailor messaging for a person who has a mortgage, someone who recently purchased a car, a student with a new checking account, and other unique parameters that shape consumer habits. Second, scarcity is a powerful component. Consumers want to know that they have access to something special that isn’t available to everyone. Third, communications need to be fresh. Consumers want to see new messages and new experience opportunities on a regular basis.

What measures does Larky have in place to keep banks from fatiguing their customers with too many alerts and messages?

Hammerman: We work closely with our financial institution clients to give them complete control over how they communicate with their customers. The financial institution is always able to increase or decrease messaging frequency based on what is the best fit for their audience.

From an end-user perspective, account holders can snooze messages, turn off some types of notifications, and more. A lot of this discussion returns to making sure that these communications have high value. If every time I go for an auto repair, my financial institution tells me that I can save $100 because I’m a valued account holder, I’ll never fatigue from that message.

Thinking about geo-targeting, how does Larky balance a user’s privacy with the need to know their physical location?

Hammerman: Larky has been on the forefront of user privacy since our initial solution launched in 2013. We believe that users have the right to access any information that is collected or stored about them, and the right to obtain that information and have it destroyed if desired.

We are in compliance with all regulations from Europe and California. We plan to continue to lead and innovate on privacy. We don’t sell the data that passes through our servers. It’s not part of our business model. We have never and will never share any user information with any third parties.

Aside from knowing a consumer’s location and the best time to send a relevant offer, how else does Larky help banks with personalization?

Hammerman: We’re now working with financial institutions to leverage data from their other systems to help personalize communications. For example, we help improve new account holder onboarding with touchpoints that welcome and educate new clients and help them become more engaged with the financial institution.

We’re able to help financial institutions create campaigns that reach out to only their account holders who have an auto loan, just one account with the financial institution, recently started direct deposit of their paycheck, and much more. We’re finding that partnering with financial institutions to personalize the right message to the right consumer increases the impact of the campaign and includes account holder engagement.

Future Banking: Creating an ‘Incumbent Challenger’

Finovate talks with Ronit Ghose, global head of banks research and co-head of the fintech theme group at Citi about the future of challenger banks and why some shouldn’t be calling themselves a “fintech” at all.

Finovate: How would you define the different types of challenger bank that exist today, and what are the key differentiating factors between them?

Ronit Ghose: Challenger banks are designed around the digital revolution and are able to leverage data insights via advanced technology stacks. I’d say there are three types of challenger banks that have emerged:

  • The first are standalone challenger banks, which are primarily Fintech companies leveraging technology and data to streamline retail banking by offering better convenience and pricing.
  • The second are incumbent-led challenger banks, started within legacy banks through investment in technology and by creating new digital-only banks.
  • Finally, we’re seeing BigTech-led challenger banks who can use their vast networks to acquire customers quickly as they branch out into financial services.

Finovate: Interesting! So, we’ve seen many incumbent banks attempt to set up their own challenger banks – how successful has this been, what lessons should others learn, and how can banks make their back end look more like a digitally-native company’s?

Ghose: Over the past five years or so, especially since 2016 through 2017, incumbent banks have moved from ignoring or mocking the new entrants to engaging with them and giving them the best testimonial possible: They have begun copying them by setting up their own new businesses. While the results have been mixed, the success or failure of incumbents in this field could be characterized using three factors: markets, technology and operating model or culture.

So in most cases, incumbent banks launch a challenger bank in a market where they are already active; albeit they use their new proposition to better target a specific segment, such as millennials or digitally-savvy customers. With regards to technology, in the past 12 to 18 months incumbent banks appear to be moving to consider more disruptive technology and business model approaches, and to attempt to actually build new brands or businesses “like a startup”. If you aren’t doing new tech, then stop calling yourself challenger or fintech. ‎

Finally, we have to consider bank employee incentives, training, and formation are the human capital equivalent of a fixed income instrument. By contrast, fintech founders work and their employees are growth equity to the bank employees’ fixed coupon bond. In the language of financial instruments, can banks become convertibles not just bonds? ‎

Finovate: Moving away from challenger banks to other new market entrants, to what extent do incumbent banks fear big technology companies over fintechs?

Ghose: The emergence of BigTech has led to heightened competition in the financial services sector. I think the challenge BigTech poses for incumbent and standalone challenger banks is daunting, given the absence of any cost drag from legacy information technology (IT) systems and underused branch networks (common problems for banks) and their natural advantage in customer acquisition owing to their high user engagement models.

One of the most prominent of these is in Korea, where popular social messaging app Kakao Talk launched a digital-only bank in 2017, acquiring two million customers in a short span of just two weeks from launch date. Similarly in China, challenger banks such as WeBank, backed by Tencent, respectively, have seen strong user growth following their launch in 2015.

The experiences of Korea and China are successful examples of internet companies venturing into banking. There are many lessons to be learned from this. Firstly, incumbent banks should not be overly complacent with their existing customer base – the speed of customer acquisition could be much faster through digital channels than the traditional distribution channels. Secondly, internet giants have a clear edge in certain areas of banking, especially around payments and mobile money. Finally, there are opportunities to cross-sell and scale to other products.

Finovate: So there’s potential for a lot of change and upheaval then. What will the bank of the future be characterized by?

Ghose: Legacy banks often have data that is stuck in multiple silos supported by core banking technology that was literally built in the era of black and white television. Manual intervention is high, which slows down operating speed, reduces flexibility, increases costs, and ultimately degrades efficiency and experience. Creating an incumbent challenger sounds like an oxymoron, but as legacy banks recognize the threat that new entrants into banking are posing to revenue and customers, they need to reinvent themselves and reimagine banking. This involves legacy banks partnering with technology companies to create effective joint ventures as well as moving into more disruptive technology and business models to transform themselves into digital competitors. By creating their own Bank X, we believe some legacy banks can transform themselves from slow moving caterpillars to agile butterflies.

banqUP, PSD2, and the Future of Open Banking in Europe

With Finovate making its debut on the European continent just over a month from now, we thought it was a good time to catch up with one of the major fintech innovators in the region, banqUP.

The company, headquartered in Belgium and “proudly developed in Poland,” demonstrated its small business banking platform at FinovateEurope 2017. We reached out to company CEO and founder Krzysztof Pulkiewicz to talk about banqUP’s latest accomplishments in open banking, as well as what the landscape for fintech innovation is like inside and outside the CEE region.

Finovate: The most recent news from banqUP is the news of your AIS license from the Polish Financial Supervision Authority. What does this license enable and how important was this development to your company?

Krzysztof Pulkiewicz: It allows us to broaden our reach and gain new clients. We have been working with a number of banks but now, with our newly gained license, we have the possibility to work both with banks and other entities that can gain access to the opportunities provided by open banking thanks to our solutions.

Finovate: You also recently announced that the company will focus fully on its B2B2C open banking platform. Can you tell us a little bit about the thinking behind this decision?

Pulkiewicz: For banqUP, the main reasons of moving from an idea of a fintech bank to a platform integrating banking APIs were challenges related to the acquisition of customers, especially on mature digital banking markets like Poland. There were also several limitations like opening accounts in polish zloty. On the other hand, we were already closely working with banks interested in our technology. We have seen that a number of our partners were interested in our open banking solutions. We have been working in a sort of a schizophrenic environment – both working with banks and building our own bank as well.

Multibanking was a core element of banqUP fintech bank from day one, and we have decided to focus on this aspect of the platform. We knew that sticking to what we are really good at – technology and data analytics – will be working for us. And it proved true.

banqUp’s platform adds new functionality such as analytics and data enrichment in addition to data aggregation.

Finovate: In line with this, the company has decided to launch a TPP-as-a-Service business line. Why do this and how large are the opportunities there?

Pulkiewicz: This is something we have been thinking about since we have started considering open banking. Multibanking solutions are the beginning of the open banking ecosystem, but we are sure that what the future brings, are the new ideas and products that will come from PSD2. There are many companies that do not consider getting their TPP licenses, as it is not a core of their business.  However, they are willing to use the information provided by the banking system, and our solution is created for such partners.

The number of inquiries we are getting from prospective partners is really astonishing – and these are both new companies and major players from different industries. 

Finovate: You mentioned in an email that you plan to open the next generation of your platform to the public early next year. Can you give us a preview of what’s new and what to expect – as well as any update on the timeline?

Pulkiewicz: Our main focus is on what we call “open banking building blocks.” We are extending our platform with best-in-class API and SDK that will offer effective integration capabilities for developers. On the functional level, we are adding new functionalities on top of data aggregation (analytics, data quality management, and data enrichment) as well as provide and expand on all the components that can support different businesses in connecting to the open-banking world (consent lifecycle management, data streaming, combining PSD2 APIs with other data sources). We know that data aggregation and payment initiation is just a starting point and we are positioning our platform as a one-stop shop for open banking.

The team from banqUP during their live demonstration at FinovateEurope 2017.

Finovate: BanqUp operates in both CEE and non-CEE Europe – Poland, Slovakia, Hungary, and Bulgaria on the one hand, Belgium and Ireland on the other. Are there categorical differences between working with financial institutions in Central Europe compared to Western Europe? Are attitudes toward open banking the same or different?

Pulkiewicz: The ecosystems differ, but the main distinction we see is not between Central and Western Europe, but between individual countries. Ireland’s ecosystem, for example, is very open. It is not only a reaction to the British banking regulations that have been the basis for PSD2 and had an effect on Ireland, but also the number of fintech companies from the U.K. and Ireland that had quickly started working with banks as they have opened. Poland’s banks have been working on many innovative banking tech projects, and banks have implemented many solutions of their own, making their ecosystems quite closed. When you look at Hungary, it was very fast with opening its own data – with eight out of 10 of the biggest banks in the country providing their API access in March of 2019, well before the final implementation of PSD2 in June. The central bank of the country has also created a fintech cooperation strategy. The differences here do not come from geographical divisions, but from the local ecosystems.

Finovate: In addition to the platform enhancements expected in 2020, are there any other announcements you can preview? New partners, new investors, new markets?

Pulkiewicz: We are definitely planning to expand to new markets – mostly focusing on the CEE region. We have a number of really promising talks with new, large partners, but we cannot really disclose any names at this moment. When it comes to investors – we have been very proud we have managed to come to this moment without any external support, but we are now also looking for strategic partnerships and alliances.

Banks Shift to Automation in 2020

The financial services industry is ripe for Robotic Process Automation (RPA) and Business Process Management (BPM) technologies. Organizations in this field have many tasks that can be– and even should be– automated.

Many banks already have successful implementations of these technologies in place. But with the dawn of a new decade, what’s next? We posed the question to AI Foundry’s Director of Product Management, Arvind Jagannath, who helped us uncover the future of RPA and BPM.

Finovate: What are some key developments in RPA and BPM we can look forward to in 2020?

Arvind Jagannath: RPA will play a key role in automating processes in legacy systems. It will have a lot of momentum in industries like retail and finance that are trying to achieve digital transformation because it can automate repetitive processes in their legacy applications.

Most companies view this kind of automation as a key to integrating new technologies and improving their business process. RPA will evolve into a gateway for adopting higher-level, modern technologies.

Finovate: Tell us about that evolution.

Jagannath: Finance, retail and online shopping all have processes that can be easily automated, such as data entry, button clicks, task routing, etc. For these processes, RPA can provide substantial savings in time and cost. Now, imagine you can amplify these gains by using cognitive technologies such as voice recognition, OCR, and AI…this can be a game-changer for many companies.

For example, voice recognition is now increasingly used to provide a more “conversational” flow for gathering initial caller information, just as a support person would do. All of this information can be used to drive the back-end processes that are automated by RPA, such as creating a support ticket and routing it to the right department.

In mortgages, document recognition technologies can quickly scan data from uploaded borrower documents and immediately provide feedback on the validity of the document or ask for additional information. This creates a powerful, real-time feedback loop that can cut days and possibly weeks out of the loan origination process.

Finovate: What does this mean for fintech’s strong partnership ecosystem?

Jagannath: Process automation tools are becoming more sophisticated, and traditional system integrators are taking notice. Large firms like IBM and SAP are realizing they need to partner with or acquire smaller, specialized RPA companies. So now there is an opportunity for collaborating and partnering to create a “smart” RPA eco-system.

A “smart” RPA eco-system combines process automation and AI to orchestrate the appropriate handoffs of tasks between humans and systems to automate processes across a value network.

For example, imagine automating the processing of a homeowner’s property insurance claim where the adjuster pulls data from many disparate systems to make a determination. In a smart RPA eco-system, robots can easily interweave with the adjuster to perform many tasks such as manual registering of the claim, scheduling the next available adjuster, tracking completion of the damage assessment, and proposing an equitable determination.

Finovate: What advice can you offer financial services companies looking to get started with RPA and BPA?

Jagannath: You first need to figure out how to automate your processes, and then start using cognitive technologies to get all the benefits out of RPA and higher-level cognitive AI. RPA becomes a gateway to adopting AI. So, RPA is helping build the ramp for AI to get adopted.

AI Foundry most recently appeared on the Finovate stage last year at FinovateFall. The company demonstrated its Agile Mortgages solution, which brings key efficiencies to the loan origination process.

Women in FinTech: “The Ability to Serve Customers in the Best Manner Possible is Where I Draw Energy.”

As part of our #WomeninFinTech series, we sat down with Kristin Marcuccilli, executive vice president and chief operating officer at STAR Financial Bank.

We talked about her transition from the world of college football to the world of banking and finance, what technology she thinks will lead the way, and why it is important to work with like-minded individuals to drive a business forward.

Finovate: How did you start your career?

Kristin Marcuccilli: STAR Financial Bank is a privately-owned family bank that’s been around for more than 75 years; in fact, my grandfather’s name is the “T” (Thomas) in STAR. Despite this family history, I didn’t always aspire to become a banker. I earned a bachelor’s degree in psychology and pre-medicine from the University of Notre Dame, and my student work in football operations and player development ultimately led me to my first job in the Notre Dame Football office for three years.  It wasn’t until later that I decided to pursue a master’s degree in business administration and management from Indiana University.

While working toward my master’s degree, I asked my dad about potential opportunities with the bank – though I still was unsure if this was the right path, I became more curious as I progressed in my studies and job experiences. When an opportunity to join the bank arose, I had to follow the same process as anyone else. Our bank has strict rules about family employees: we must work somewhere else for five years first; new positions won’t be created just for family members; and we must pursue an MBA or banking certification to even be considered for a senior management role.

In 2008, I joined the bank as a project manager, and haven’t looked back since. Over the past 11 years, I have worked my way up to chief operating officer, and I now help oversee our technology partnerships, project management efforts, bank operations and strategic direction. During my time at the bank, I’ve helped establish a strategic vision, oversaw a website redesign, helped implement 55 Interactive Teller Machines and have enhanced our digital banking strategy.

Finovate: What sparked your interest in fintech?

Marcuccilli:My interest in fintech stems from the reason I choose to work in community banking – it’s a relationship business, and our team’s involvement in creative thinking that will ultimately help change and influence the way people and businesses interact with their bank is an ever-present and ever-evolving challenge. A passion for fintech calls for an entrepreneurial spirit and the ability to embrace failure and change nearly every day. For me, that’s an exciting challenge.

Finovate: What technologies have you seen lately that have excited you?

Marcuccilli: New technology seems to appear overnight. Years from now, we expect that real-time payments will be the norm – no more waiting for money to move overnight or over the course of several days via check. The application of biometrics and advanced analytics for enhanced security will continue to expand and evolve, and artificial intelligence will support personalized customer experience through digital channels. Electronic delivery of documents, signatures and account opening will also likely be dominating a once paper-intensive banking environment. Self-service kiosks will also have advanced to replace much of the standard transaction activity both as in-branch and as standalone options. All of this excites me, as the ability to serve our customers in the best manner possible is where I draw energy.

Finovate: Why is it important for banks to embrace new tech? How is Star Financial Bank doing this?

Marcuccilli: In our rapidly changing industry, banks that are slow to adapt risk falling behind and losing critical business. Bankers have a significant advantage when it comes to building valuable relationships and supporting their local communities, but they must also add modern technology to remain nimble and relevant.

At STAR, we place a strong emphasis on maintaining our community focus while optimizing delivery channels and meeting customers where they are on their financial journey. We take a collaborative approach when evaluating and implementing new technology, starting at the top with our CEO who encourages the team to embrace change.

I am proud to be part of a powerhouse team, working alongside innovators and leaders who dedicate significant time and effort toward studying technology and client behavior to best meet our community’s needs. We have a group of smart, data-driven individuals who ensure our technology and services align with our business and customer demands.

Finovate: Where do you think the future of fintech is heading?

Marcuccilli: Delivery channel optimization (to ensure convenient and engaging customer experience), security threats and payments are all rapidly evolving and will continue to be a major focus in the fintech space. To effectively address these trends, there will be a growing demand and emphasis on the selection of third-party partnerships.  Finding the right technology partner – both a technical and cultural fit – will be important in facilitating the best experience for customers.

Finovate: Why is the #WomeininTech movement important?

Marcuccilli: There is a general lack of female representation in financial services, especially when it comes to the technology side of the house.  As industry professionals, we can help influence this by supporting and encouraging women to join and contribute to the field. Series like these are a powerful way to highlight how women are innovating and making a difference in their local communities through financial services and technology.

Finovate: What piece of advice would you give women starting out their career in finance/ fintech?

Marcuccilli: My advice is to be open to different possibilities within the financial services and fintech space as there are no shortage of opportunities. It’s important to surround yourself with strategic and smart individuals who help build up the team, supporting professional goals and development. I’d also encourage women to become involved in their local communities. Learning and growing from individuals outside of your organization can also be key to professional success. When we commit to staying attuned to business and industry trends and recent developments, we’re able to better support an ecosystem of entrepreneurship and growth in our local communities.

Finovate: And what piece of advice do you have for other banks to attract and retain more star female talent?

Marcuccilli: At STAR, we prioritize collaboration and innovation, and that’s been very attractive to top talent. Showing potential employees that the bank cares about exploring new ideas from all levels of the institution, not just from management or the C-suite, can be a powerful differentiator. Institutions that break down silos, encourage cross department collaboration and transparency, and embrace change will find more success in attracting and retaining star female talent.

Celent Shines Spotlight on AI in Financial Services

From banking chatbots to speculations on superintelligence, the impact of artificial intelligence (AI) on financial services is one of the hottest topics in fintech. Our Summit Day sessions on AI at FinovateSpring earlier this year were consistently among our best attended sessions.

To continue this conversation, we exchanged emails with Alenka Grealish, Senior Analyst, Corporate Banking, Celent. Grealish’s recent report, AI in the UI: Adoption, Use Cases, and Business Cases, represents Celent’s latest investigation into the issues surrounding the rise and role of AI in financial services.

Finovate: In setting up this conversation, I noted that Celent referred to this as part of an inaugural initiative. Why is now the time to turn the spotlight on this technology and its impact on financial services?

Alenka Grealish: We observed the beginning of a shift from all experimentation to gradual implementation amongst vanguard banks. It was common to have nine proofs of concept to one pilot at the vanguard banks. We’re now seeing more pilots and a few moving into production.

Finovate: What are we talking about when we talk about AI? How broad is this technology?

Grealish: Broad. What defines AI has expanded in the commercial world. The narrow Turing Test no longer applies. The current goal of AI developers is not to replicate humans, but rather complement them and build applications that team with them. A great example is found in anti-money laundering.

The broad definition includes rules-based and learning-based models. A useful way to categorize AI capabilities is: natural language processing and understanding, natural language generation (data-to-text), speech (speech-to-text and vice versa), vision, and data insights (machine learning driven analytics that generate, for example, cash flow forecasts for customers and next best action for bankers).

Finovate: Has AI become a catch-all for a variety of technologies, some of which are AI and some of which are not? And is that an issue for AI adoption going forward?

Grealish: AI has certainly become a buzz word and its definition stretched by tech vendors. Semantics aside…Critical to successful AI adoption is not to seek a problem for AI to solve but rather the reverse:  determine the key problems you’re trying to solve (e.g., high false positives in AML) and/or goals you’re trying to achieve (e.g., personalize customer-banker interactions). Then, (the next step is to) examine the potential means to solve/achieve. The means could be a combination of rules-based and learning-based AI or established tech (e.g., OCR) combined with AI.

Finovate: What were the top two or three high-level takeaways from your research?

Grealish: I was struck by the percentage of banks $10+ billion in size which had implemented front-office AI. I had expected less than 10%.

Finovate: Your report notes a difference in AI adoption between retail and commercial banks, calling the former an “early adopter” and the latter “vanguard.” What distinguishes the two?

Grealish: The vanguard phase is when a small number of entities, less than 5%, moves into production. The technology is not mature but works sufficiently well for low risk use cases. These entities tend to have nimble organizations and little to no legacy baggage. The early adopter phase typically occurs when the vanguard banks are successful and appear to be gaining a competitive edge and inspire the next wave of adopters to take action. The early adopters are innovators but are likely juggling multiple priorities and hence cannot always be in the vanguard.

Finovate: One of the areas you highlight is the use of AI-enabled technologies for employees and workers. What sort of use cases – especially those relevant to financial services – are you seeing here?

Grealish: In terms of employee enablement, I’m excited by what I see.  AI is proving helpful in basic “tell me” support, such as, “do we offer this type of product?” and “where is this feature located in our online portal?” It is also progressing in higher level support, such as data insights on sales trends and next best action suggestions.

Finovate: You note “relative complexity” as a main hurdle to broader adoption of AI. How are financial services companies navigating this challenge (hiring talent, partnerships, etc.)?

Grealish: AI is not a standalone technology but rather is woven into current processes and platforms and/or drives new processes and platforms. Hence, success begins at the top of the house, banks with a transformation, data-driven leadership team view AI as one component of a broader digital strategy.

Next, successful banks have a business model comprising four key elements: a collaborative multidisciplinary organizational dynamic, an enterprise-wide AI initiatives team, strong data and model governance, and regulatory engagement and compliance playbook. At the operating model level, these banks have basic automation expertise and are incorporating AI to solve the hard stuff, such as analysis of unstructured data.

At the foundation, these banks are migrating to a modern data and tech infrastructure that supports a digital-first strategy.

Finovate: You note that the primary business goal for most businesses using AI-enabled technologies is cost savings, but that customer engagement “is increasingly a goal.” What are some of the more interesting use cases for AI-enabled technologies in customer engagement?

Grealish: We’re in the very early days of customer engagement, that is, brief, basic “tell me” conversations. These “tell me” conversations are taking off thanks to Siri, Alexa, Google Assistant, which are driving consumers’ comfort level engaging with machines. The outlook over the next 5 years is promising. “Do it for me” type interactions will become common. For example, a small business will simply ask the online virtual assistant to choose the optimal payment type based on its criteria. Further on the horizon are “Alert and advise me” type interactions. For example, a mid-market company has an FX exposure and is alerted with action options to hedge the exposure.