Co-publisher of The Financial Brand and the owner and publisher of the Digital Banking Report
"Data is the fuel"
Given the changes taking place today, what do you imagine the future of
banking and FinTech will look like?
While new FinTech
providers and innovative digital capabilities get most of the attention,
improving the overall customer experience is at the foundation of these
changes. Today's consumer is becoming increasingly impatient with the pace at
which traditional financial institutions are able to create real-time
contextual experiences, opening the door for FinTech firms, and even large
technology firms, to fill this experience gap.
consumer wants their primary financial institution to "know them," "look out
for them" and "reward them" in real time, based on both their current
relationship with their bank, as well as their lifestyle and behavior outside
The future of
banking and FinTech will be highlighted by those organizations that can use
deeper consumer insights to drive digital banking interactions seamlessly.
Rather than needing to consciously perform banking transactions, movement of
funds will occur "behind the scenes," leveraging behavioral learning,
artificial intelligence and digital technology.
Ultimately we will
see an expansion of financial institution offerings that will integrate both
financial and non-financial services in a single ecosystem. This will occur
through open banking APIs and partnerships between FinTech firms and
traditional banking organizations, integrating new digital devices including
conversational AI digital assistants and the Internet of Things (IoT).
How do we get from where we are today to this future ecosystem? What
will be the driving factors?
and advanced data analytics will be the foundation of virtually every
retail-banking trend in the coming years. From removing friction from the
customer journey to improving multichannel delivery and exploring the use of
open APIs, data is the fuel that will power these initiatives.
Despite the vast
amount of data available to financial institutions, however, most organizations
are having a difficult time determining what data will have an impact and how
to harness the full potential of insight collected.
the build or buy decision, the expansion of the financial services ecosystem
outside of traditional financial services will include open banking APIs like
we are starting to see in many markets. This expansion may also result in large
tech companies entering financial services like we have seen with Tencent and
What are some of the early signs that we can see today that suggests
we're heading in that direction?
Branch visits are
plummeting, digital financial interactions are escalating and the competitive
battlefield is getting more crowded, with more start-ups leveraging data and
advanced digital technology to create better customer experiences. The application
of AI is becoming more widespread, with progressive organizations finding ways
to change underlying core systems as opposed to simply placing a nice veneer on
old applications. Finally, as opposed to being focused on cutting costs, forward-thinking
organizations are focused on enhancing the value of their financial offerings.
While the progress
of U.K. financial services ecosystems has been slow in the past, similar to the
U.S., it will be accelerated by the implementation of PSD2, which allows a more
positive open banking environment. Many FinTech firms in the U.K. have already
taken advantage of regulatory trends and are building their solutions
What are the key challenges that stand in the way of this
While there are
definitely external challenges to the transformation of retail banking, such as
regulations, compliance and the security of financial interactions, the biggest
challenge is the legacy nature of the institutions themselves. Traditional
financial institutions continue to face internal challenges, with most
financial executives at legacy firms unconfident in their FinTech strategy.
Therefore, one of
the most important keys to success in the future will be a change in culture
and the buy-in and support at the top of the organization. This is a major
paradigm shift for an industry that has taken pride in moving slowly and
meticulously, and in many cases will require partnering with the same FinTech
firms they see as competitors.
What are the potential opportunities for those that manage to execute
this transformation successfully?
To benefit from
the opportunities provided by the new financial ecosystem model, financial
organizations will need to build partnerships with outside providers, rework
distribution models, significantly enhance digital experiences and leverage
internal data to find the right match between the consumer and product or
More than simply
being the provider of traditional banking products, the opportunity for
progressive banking organizations will include becoming a resource for
entertainment, travel, hospitality, retail and a host of other services.
diligently, the improvement in customer experience could be the differentiator
that retains the overall banking (and non-banking) relationship.