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The Path to Digital Leadership in Financial Services: Collaboration with Fintech
By Preet Chhokar, Industry Practice Advisor, Financial Services, Cisco
Braving the FinTech Storm
As competition increases and demand grows, financial institutions will be left with two options–do nothing or embrace disruptive technologies by proactively partnering with fintech companies. According to a recent Roubini ThoughtLab research survey of 1,503 C-level ? and direct reports in nine financial industry sectors, 96 percent of CEOs now see digital transformation as central to their businesses. Digital leaders are advanced in the use of fintech, and 44 percent currently integrate fintech into their core products and processes. Over the next three years, BNP plans to double its investment to $3.2 billion to create the digital “bank of the future.” Germany’s biggest bank, Deutsche Bank, has committed over $750 million to digitalization over that same time period. J.P. Morgan, the largest U.S. bank, spent $9.5 billion on technology in 2016 alone. Partnering will enable financial institutions to deliver differentiated features and functionality that complement their own products and services.
One of the ways fintechs have significantly altered the financial services landscape is by leveraging application programming interfaces (APIs). They have been able to eliminate much of the friction associated with traditional financial transactions and, at the same time, develop better customer experiences.
The good news is that financial institutions are embracing openness and collaboration and making smart investments in fintech
APIs provide a gateway for innovation where almost every fintech is an opportunity for banks to gain a competitive advantage. According to IDC, by the end of 2018, 50 percent of global Tier 1 and Tier 2 banks will offer at least five external APIs. The future of financial services is migrating to a collaborative environment where banks partner with fintech companies to share data, deliver richer customer experiences, and drive new sources of revenue.
As banks pursue a renewed emphasis on digital customer experience, many are working with fintechs to provide customer experiences on par with large tech companies and innovative startups. AI is taking the technology world by storm, allowing companies to cut costs, automate processes and boost their bottom lines. For financial institutions to enjoy the same benefits from AI, they need to first address a multitude of issues. These include: cultural alignment, upgrading legacy systems, eliminating data silos, staff training and talent acquisition, cloud strategy, internal or open source technology, and security and privacy.
The Sun is Shining, So What’s Next?
Once these are addressed, the opportunities are endless. Robo-advisors can provide the same index fund weighting and portfolio diversification without the overhead or human error potential. Using AI to replace analysts, back-office operations, and even research teams can reduce costs and improve productivity. AI can be used to monitor regulatory compliance to ensure adherence to thousands of regulations in real time. And AI can help banks automate repetitive processes and potentially improve the customer experience. Today, AI-powered chatbots are being used as virtual assistants, customer care representatives, marketing executives, and salespeople.
One of the most valuable benefits AI brings to financial institutions is data. The future of fintech is largely reliant on gathering data and staying ahead of the competition, and AI can make that happen. With AI comes huge volumes of data which will, in turn, offer game-changing insights. These insights can be used to create reports that not only increase productivity and revenue, but also help with complex decision-making processes.
No business can survive by simply satisfying its customers–companies have to deliver on the brand promise and delight customers with every interaction. Financial institutions need to work in a customer-centric culture that strives to create frictionless consumer experiences like those that have made fintechs like Transferwise, Zelle, and Betterment so successful. Banks can also learn from what fintechs have been doing for years. This includes consistently monitoring customer expectations through open-data exchanges and qualitative feedback and incorporating learnings into new product offerings and interactions.
There is a sense of commitment and purpose among banking leaders to embrace innovation and leverage technology to develop new business models, build momentum, fail fast and learn from failures. The good news is that financial institutions are embracing openness and collaboration and making smart investments in fintech.