The FinTech revolution and how it's transforming the FS sector
Andy Harbison reports on the 'FinTech revolution' facing financial services sector and how it will change the profession, following a recent event.
The disruptive manner of FinTech should be taken as a welcome challenge from start-ups to incumbent financial institutions. That was the message from the recent FinTech revolution ICAS event in Glasgow, held in partnership with Investec.
Kent Mackenzie, a director at Deloitte’s Risk Analytics and FinTech practice in Scotland, began the event by demystifying FinTech, breaking the term down to its bare bones.
Kent pointed out that the face of the traditional banking customer is evolving, and if the banks want to keep them interested while attracting new customers, they too must evolve.
Taking advantage of the giant leaps forward in artificial intelligence (AI) is vital for financial services institutions, as the technology presents a unique opportunity for both them and their customers to save time and money.
Evolve or die
Millennials who are used to living and working in a highly saturated digital environment are driving the trend for innovation from the industry. Compared to those before them, the millennial generation has a more relaxed attitude when it comes to sharing their personal data.
These trends can be leveraged by banks and start-ups alike to dramatically streamline the way their customers interact with the services on offer and take the cost out of back office regulation.
“There are thousands and thousands of hours spent managing and digesting regulation,” said Kent, giving an example.
Cognitive computing, such as IBM’s supercomputer Watson, is a technology that Kent uses himself by “uploading hundreds of pages of regulation PDFs into a cognitive technology and allowing it to tell me what the core themes are, cutting hours out of the process.
This way of working, and the technology used to produce the results, will “undoubtedly take leaps and bounds [in the future]” predicts Kent.
Following on from Kent’s comments on the streamlining of services, James Varga, CEO of FinTech start-up The ID Co., spoke of the potential that comes with a customer sharing their financial data with businesses.
“We live in a convenience world,” said James.
“We live in a world where the millennial generation are more likely to book a dentist appointment than open a bank account.”
There is a huge pressure on banks and lenders to improve their customer experience by making interactions less arduous. The way to do this, James say, is to “empower” the customer by letting them leverage their own financial data to their advantage.
The ID Co.’s consumer product miiCard does just that. By using a customer's banking data, the service offers a high level of ID verification, bypassing the need for proof of ID in the form of a driver's licence or a passport when making online purchases.
Their business product, DirectID, focuses on opening a person’s financial profile, which allows the consumer and the business to open up the financial environment to leverage that data for the benefit of all parties involved. In terms of lending, this service helps business turn around the lending decision faster.
But how likely is it that the average consumer would be comfortable sharing their bank details with a business? More likely than you may think, according to James.
“One of the biggest questions we always get as a company…is are consumers willing to share their bank statement?
“As soon as you put convenience as the motivator it moves from about 30% of people to about 80% of people.”
Sharing data in this manner not only improves timeliness, but it can dramatically cut the amount of application fraud since the business is receiving data directly from a customer’s bank.
The bank of Google?
Google, Amazon, Facebook, Apple, eBay. These names are synonymous with innovation.
As the rate of technological advancement continues at hyper speed it is up to the banks to keep up, or risk customers looking elsewhere.
Kent predicts that the tech giants listed above know this all too well, and that within the next 10 years one or all of them will have launched a “relatively full scale financial services business".
Would you feel comfortable banking with Facebook or Google? Let us know in the comments below.