Leading practitioners and observers are coming together to discuss retail finance trends. We’re working with the Centre for the Study of Financial Innovation (CSFI) to video the series and bring you the latest thinking on banking and the future of finance.
This page captures some of the discussion in the first session, covering the difference between fintech and techfin, the shift towards customer service, and which technologies support that.
Watch the first Future of finance video.
Technology has radically altered the business model of some industries. Music publishing, for example, has seen margins evaporate as fans subscribe to streaming services, rather than buying albums or hit singles.
Up to now, financial services has not suffered the same fundamental challenge from technology. It has made use of new systems to streamline and facilitate business, but consumers still buy the same products and the big banks still dominate. That, however, may soon change.
Fintech or techfin?
“We're coming to the end of the fintech era and we're moving into the ‘techfin’ era,” says Dave Birch, a director of Consult Hyperion.
“In the fintech era, the new companies…were doing the same things as the incumbents…they made money on financial products on loans or payments, whatever. They may have done it in a clever way by using some new technology…but they weren't really challengers in my opinion. They were niche providers.”
In the techfin era, Birch argues, financial services will have a different revenue model.
“If you look at the small business lending that goes on and Amazon Marketplace, they don't make a living out of the margin on those loans,” he says.
“They could probably do it as a loss-leader because they make money from the marketplace. They provide those loans to bring merchants into their marketplace.”
The future is customer service not products
“Traditional incumbent banking is about product and margin,” says Helene Panzarino, Associate Director of the Centre for Digital Banking and Finance at LIBF.
What fintech promised, she says, was something “embedded and transparent and seamless” based on customer experience and the customer expectation. It has been a long time coming, but, she says, “I think Apple and Amazon are doing that”.
The shift towards providing what the customer wants is also accelerating.
In particular, lockdowns put in place to combat Covid-19 have forced many consumers to start using digital banking and payments. That has changed behaviour and expectations – probably permanently.
“There was a massive surge of traffic to mobile and web on the financial side,” says Amir Nooriala, Chief Strategy Officer at Callsign, a technology company that supports online authentication.
“I think we’re going to see a focus from banks on how they can remove friction, remove steps, make the user experience as fluid as possible. We're not going to see a return to the old level of traffic in branch or in store.”
Which technologies support customer experience
“Technologies that do not replace people, but instead help them to reach a decision,” says Radu Orghidan, Endava’s Vice President of Cognitive Computing.
Top of the list, says Orghidan, is augmented analytics. Then comes artificial intelligence, followed by edge computing. Edge computing allows faster processing speeds because data does not have to be sent to the cloud and back. Orghidan gives better payments experience as an example of edge computing being used in financial services.
However, he stresses that there is another element required to make all the bells and whistles really work – emotional intelligence.
“The product has to be used by people. And people don't like to be pushed by robots or by rules that they don't understand, or they don't feel vibe with them.”
And technology may not have it all its own way for another reason – regulation.
“There is an almighty regulatory battle coming up between tech and fin,” says Birch.
“The banks are very upset about the regulatory landscape, which forces them to basically open up their data to the technology companies for nothing in return. That’s not sustainable.”
Watch the first Future of finance video.
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