The confluence of a variety of trends—social, cultural, technological, regulatory—are combining to bring the banking industry to a generational inflection point. One where long-established business models and processes are under threat, with agile and dynamic entrants from the outside poised to capture emerging growth markets.
This ‘disruption’ is much broader than a simply ‘digital’ phenomena. While the catch-all phrase may fail to fully identify the wide variety of drivers that are transforming the banking ecosystem, technology innovation is fundamentally at the heart of the transformational challenges we as an industry face.
From innovations in cross-border payments (Ripple, SWIFT GPI), the global adoption of new instant-payment infrastructures (around 40 today, a 60% increase from 2017), a mainstream reliance upon biometric identity authenticators (voice/iris/facial/ fingerprint), to the growing expansion of Open Banking and API connectivity models (beyond PSD2 inEurope, initiatives are underway in the US, Australia, Hong Kong, Singapore and India), our industry is changing at an unprecedented velocity, with regulatory mandates playing an important role in driving some of these changes.
In this era of disruption and transformation, banks have little option but to review and re-engineer existing business processes and models, not only to ensure they can manage the security and compliance consequences of a move towards instant and multi-party API transactions, but more fundamentally to remain relevant and competitive—strengthening their service propositions for both existing and, hopefully, new customers.
This innovation imperative presents many operational, technical and business challenges for banks, but for those who are ready to seize it, today’s mobile-first, cloud-first, open-API economy brings unprecedented opportunities.
AI powered transformation
Many, if not all, of these new opportunities fundamentally revolve around data. Banks should not underestimate the value of the historic and real-time transactional data they hold about their customers. Successful banks will look beyond a narrow business-as-usual focus and recognise the hugely valuable view of customers’ financial habits, interests and needs they possess in their currently siloed and passive data repositories.
This is one area where ArtificialIntelligence (AI) technology is now a business essential. AI disciplines uniquely provide banks with the ability to translate this data into meaningful insight about customer needs. By leveraging the AI disciplines of Machine Learning and Natural Language Processing, banks can transform extensive historical and real-time data into actionable business insight and intelligence, enabling them to offer truly personalised and beneficial services and products. The new ‘ambient’ smart technology platforms businesses and consumers increasingly use will also be the new ‘market squares’ for banks to communicate, engage, and serve their customers.
Success through partnership
How can banks best develop these highly specialised AI skills and domain specific capabilities? This is a strategic question and one that will almost certainly involve collaborating with proven fintech partners—ones that have both a deep AI pedigree background as well as possessing extensive banking ecosystem expertise.
Our industry boasts a strong history of innovation. With the right partnerships, today’s open-API and real-time economy presents enormous rewards for those banks that embrace the innovation imperative.