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EMBRACING DIGITAL TRANSFORMATION: THE FUTURE OF BANKING

By Steve Tipping, Vice President Sales UKI & Benelux, Selligent Marketing Cloud

Financial services are undergoing a huge period of digital transformation, as advanced technologies radically transform the way the industry operates. AI, machine learning and robotics are fundamentally changing the sector and it’s time we fully embraced the amazing opportunities they have surfaced. However, added to the impact of digital transformation, financial services are also undergoing a crisis of trust with PWC reporting that British consumers have lost trust in the industry. With rising competition from fin-tech disrupters, the question is how can financial services succeed in this increasingly digital world? How can they embrace and deliver the digital innovation that customers demand without compromising security and ultimately consumer trust?

The Customer is still king

The financial sector has historically been a digital slowcoach due to strict regulations, legacy systems and senior decision makers being slow to recognise potential ROI. Whilst banks are now increasing I.T. spend and are automating business processes through artificial intelligence (AI), there is still a lag in meeting consumer expectations for seamless mobile apps, alternative technologies like person-to-person payments, mobile wallets and more. The problem is that many banks still believe that digital transformation is about systems and workflows rather than customers. Many banks are also hindered by fears that new technologies will lead to new security threats.

It’s misguided to let security concerns eclipse the fact that consumer behaviour in banking is changing. Studies show that instead of speaking in-person to an advisor at a local bank branch, most customers will prefer to interact remotely via digital channels. In fact, the average consumer will initiate up to 10 digital interactions with their bank per month. These changes in consumer behaviour are opening doors for a new breed of fintech disrupters who are ready and waiting to take market share and customers. Digital-first providers like Monzo and Revolut are giving dissatisfied consumers the opportunity to literally take their money elsewhere, and with multiple challenger banks shaking up the industry, consumers are spoilt for choice. Consumers are enjoying digital transformation in other sectors and now expect the same from financial services; disrupter banks are simply giving them the innovation they crave.

Learning from the competition

So what can be learnt from the boom of disrupters entering the financial market? Without a high street presence, disrupter banks have prioritised the user experience, as every point of contact for their customers is now digital. It’s clear from their successes that other financial services companies must follow suit in order to regain consumer confidence; put simply, banks must evolve or die.

Despite the threat from disrupters, traditional financial services organisations, such as banks and credit unions can win back favour with today’s entitled consumers. Financial services must generate trust and long-term dividends by establishing themselves as stewards of consumer financial assets, namely money and data, and by ensuring their service is relevant and bespoke.

Meeting consumers’ demands with new technology

Consumers are aware of the value their data has for banks, especially in this post-GDPR world. The good news is they are willing to share; but with this comes higher expectations of the service they will be getting as a result. Research by Accenture found that almost half of UK bank customers expect relevant advice and product information available at their fingertips that they can access easily. They expect banks to inform them of the best rates to suit their individual financial situation. What’s more, Big Data provides significant opportunities for banks to outshine their competition. Migrating data onto a cloud platform provides a 360-degree view of every customer and this deep insight shows banks where they can provide a higher level of service and create more value.

For example, if a customer is in the process of buying their first house, their bank can contact them with relevant and useful information to ease the process. With all the data available to financial services, customers expect their bank to know what they want and need, before they do, offering them next level personalisation that caters to their every possible financial need. AI and machine learning has finally made it possible for financial services to personalise marketing messages which truly resonate and drive revenue.

Creating seamless experiences

Another aspect of the customer experience that needs to be improved is flexibility: giving customers the freedom to access and manage their finances on the go is vital. Consumers expect to perform transactions anywhere, at any time, and only a seamless omni-channel experience will meet this demand.

British consumers want the flexibility to access and manage their finances from wherever they are, whenever they want to. If offered by their primary bank, for example, over 75 percent of Gen Z US internet users would use the financial tech services offered such as apps that can be accessed on the go.  It is the responsibility of the banks and financial services to ensure accounts are quick and easy for customers to access, whilst also being highly secure in order to avoid catastrophic data breaches.

Despite the ongoing fundamental changes to the industry, three things remain certain: customers want to bank with companies they can trust, customers demand individual financial advice, and customers insist on full control over their finances. Prioritising customer experience in these ways is nothing new, but financial services must wake up to the new technologies at their disposal in order to match changing consumer behaviour. Through a data-driven blend of personalisation, prediction, and true omnichannel reach, financial services can create a much brighter future for their customers and, ultimately, themselves.

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2020: THE YEAR BLOCKCHAIN COMES OF AGE

– By Rob Coole, VP of Cloud Technologies at IPC

 

Despite headlines over the years stating that blockchain will change the world, it has not been validated or deployed at such speed and scale like other new technologies such as AI or cloud.  Blockchain’s intensive power consumption, reliance on multiple servers and the sheer expense of it, are some of the main reasons cited. In the past, the hype had not met the reality.

But in 2019 blockchain came into its own. With more understanding of what blockchain can do for financial markets and its use points becoming more clear, real-life deployments and advances have started to develop. 2019, for instance, was the year when we saw new blockchain alliances such as Enterprise Ethereum Alliance, increase of blockchain start-ups and the introduction of new infrastructure projects.

Additionally, Gartner’s own Hype Cycle for Blockchain Technologies shows that blockchain is sliding into the “Trough of Disillusionment” – predicting that over time, “permissioned blockchains will integrate with public blockchains, and will take advantage of shared services while supporting the membership, governance and operating model requirements of permissioned blockchain.” Additionally, Gartner predicts that blockchain will be fully scalable by 2023. IPC’s sense of the future of blockchain, particularly in the enterprise space, is just as positive. We are seeing customers truly learning about the practical purposes to deploy, leading to more investment in time and money in blockchain.

Rob Coole

Blockchain is suited for complex, collaborative, multi-party, and critical application use-cases and one reason why the hype around blockchain took much longer than some predicted. Adoption in highly regulated, complex markets such as the financial services industry shouldn’t be a surprise. However, we are now seeing a rise in organisations taking a competitive advantage by adopting next-generation blockchain, rearchitected and redesigned to meet the stringent requirements needed for the financial industry.

Next-generation blockchain organisations are leading the way showing the industry how the technology can be used intelligently for the world we live in today. R3, an enterprise software company for example, is working with an ecosystem of over 200 financial institutions, regulators, trade associations, professional services and technology companies to develop Corda, a Blockchain platform designed specifically for businesses to deliver two interoperable and fully compatible distributions of the platform that address issues such as transactional certainty, data privacy, and the scalability limitations.

Both application service providers and subscribers should exploit service providers with products and solutions so that they are not left behind.  It is important that partners are complementary to both service providers and subscribers in terms of operational level integration to complement application services.  It is critical for adoption success.

We are now seeing blockchain have real value with the integration and support from the hyper-scale platform community such as Microsoft Azure and AWS together with open industry platforms, such as IPC’s Connexus Hub, that creates end-to-end solutions that solve business problems.

We are, like many technology sectors, seeing a move to an API approach. APIs support partners integration and gives institutions the ability to easily access data, provide insights and inspire innovation for the market need.

Service providers, like IPC, can play a critical role here by supporting operationalisation in the systems-oriented context. Such providers are a natural connector embedding connectivity to key market participants. IPC, for example, enables access to all asset classes with over 2,000 sell-side firms, 4,000 buy-side firms and over 75 exchanges in its vast, diverse ecosystem.

Of course, 2020 has and continues to bring new challenges, with the COVID-19 pandemic affecting every aspect of our lives. The World Economic Forum, however, believes technologies such as blockchain “will benefit all countries currently impacted by COVID-19”, as it provides an efficient approach to reduce trade cost on a global scale.

Digital initiatives such as blockchain is non-partisan and open to all which allows users to act quickly at low cost with low barriers for innovation – all valuable factors in getting the global economy back on its feet. So, although blockchain adoption was slow in its early stage, 2020 seems to be the year blockchain comes of age.

 

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AI IN THE FINANCE SECTOR: WHAT’S NEXT?

By Rui Vasconcelos, Product Manager for AI/ML at Canonical – the publisher of Ubuntu

 

The last few years have seen the promise of general AI acclaimed across multiple industries and this vision has been particularly strong in the finance sector.  We’ve currently hit the trough of the hype curve and it will take some time for engineering solutions to deliver on the touted promise. The potential is so great, that hope for general AI will require a longer term and collaborative investment, rather than a quick ROI for a single financial company. As a result, we need to see a continued collective effort from organisations in the direction of making general AI a reality – whether that is in the near future or further in time.

 

Artificial intelligence within financial organisations has developed from an almost unfathomable vision into tangible deployments, with applications ranging from back-end decision making to front-end customer-facing services. Financial services companies are now placing a much greater focus on AI/ML and are rearchitecting their IT and business operations to take advantage of what this new technology can offer. However, these implementations are what is known as ‘narrow’ AI, which is focused on a single or limited task and operates within a pre-programmed state. Almost all of the AI that surrounds us today is narrow AI. Everyday examples within the financial industry range from Robo-advisors to tailored credit and insurance tools. In distinction, general AI is a progression of this and is often described as an AI solution that can solve a wide range of financial services issues – from natural language understanding to anticipating risk and detecting fraud  – with the additional advantage of self-learning to solve any problem without human intervention.

 

Rui Vasconcelos

Narrow AI is goal-oriented and solves a particular problem, which is not necessarily bad. We have seen AlphaGo perform a singular task (playing the complex game of Go) and beat the top human expert at it. Organisations focused on being highly competitive in specific use-cases, should concentrate on narrow AI, however it is a short-term win. Those looking at wider-range problems and planning to gain long-term competitive edge need to consider investing in work that will make general AI more accessible, benefitting both the company and society in the long run. Getting there will harness tools and insights that will be very  valuable to other financial services applications, even if we do not reach general AI in our lifetime.  Where a ‘narrow’ AI would take into consideration historical stock prices to make time-series predictions, general AI would look into all types of accessible data that might influence the mood of investors on that day.

 

It’s unsurprising that AI development is a resource heavy and challenging process, and general AI development will be even more so. However, we possess an unparalleled capacity today to move it forward, both in terms of computation and human collaboration. The open source community may be able to help tackle some of the hurdles to general AI development by encouraging collaboration as well as pooling knowledge and resources. For instance, open source software allows IT teams in finance companies to benefit from frameworks, data sets, workflows, and software models in the public domain at reduced costs. In addition, the open source community sees projects as a shared responsibility, so provides an extra layer of security by continually monitoring source code for potential flaws and vulnerabilities.

 

A further advantage of the open source community is that it assists financial businesses to overcome the AI skills gap – one of the most frequently discussed obstacles to AI adoption. In fact, recent research shows that  a third of IT teams cite a lack of skilled people and difficulty hiring for required roles as the third most-common challenge. The first hurdle is a lack of institutional support from within the business. In another study, technology’s lack of transparency was also cited as a major hurdle. With collaboration promoted at its very core, an open source approach to AI allows smaller IT teams to benefit from the wider expertise of the much broader community.

 

Open source will be fundamental to democratising the development of general AI. Financial services organisations who are invested in refining and improving AI for the benefit of their own operations and society will look to open source for future development. However, realising general AI will require long-term  investment. Without it, the likelihood of reaching  general AI in our lifetime is low. So, it’s up to financial services businesses to start concentrating resources into general AI now to make this future a reality in a short timeframe.

 

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