We’re back from Money 20/20 Europe and still on a high from meeting some of the biggest movers, shakers and change-makers in the industry. Rumman Chowdhury, applied algorithmic ethics pioneer and former Twitter exec, was there to shed light on AI bias, London Stock Exchange CEO Julia spoke about her ambition to fix the UK’s capital markets and actress turned activist Lily Cole discussed societal wellbeing – catch some of the event highlights here. As always, the conversations that happened off stage were just as insightful. Here are the thoughts, shared over coffee or a microphone, I brought home from Amsterdam this year.
“Eighty percent of banking apps have the same functionality”
That’s according to a researcher from Cornerstone Advisors, who also pointed out that features like checking current account balances or transferring funds aren’t what banks are competingon when it comes to attracting new customers. Or keeping existing ones, for that matter. User experience is where financial institutions have a real chance to shine brighter than the rest.
Translation: personalisation capabilities that enable banks to become hyper-relevant and customers to get financially healthy, are the new baseline for success in the industry. Think personalisation platforms that crunch big data into insights on customer habits and behaviours or digital engagement platforms that enable financial advisors to proactively engage with customers and customers to get advice whenever, wherever, and however they want.
Among the many reasons cited for this shift is the attention economy. Human attention is the most valuable currency on the internet, so convincing people to open their banking app as often as possible and spend as much time in it as possible should be banks’ number one priority. Those who continue relying on worn-out marketing tactics will inevitably fall behind in the race. Demographic segmentation is a prime example. In 2023, bombarding consumers with, say, car financing offers just because they’re middle-aged men really won’t cut it.
The bottomline is if you want to sell the right bank customers the right thing, you need to be there at the right moment – or don’t bother. And on the right channel! As Jim Marous said in his presentation: “The next generation of bank customers will not read emails. If it’s not happening through a smartphone, it’s not happening at all.”
Embedded finance and open banking are here
If that one step was incumbent banks’ reluctance to embrace the new paradigm, that’s gone. French banking giants such as BNP Paribas, Société Générale, Crédit Agricole as well as Utrecht-based Rabobank all seem to have developed an appetite for a slice of the embedded payments market, offering banking as a service for non-financial institutions.
To recap: embedded finance, sometimes referred to as invisible banking or contextual banking, means the inclusion of a financial product in a non-financial customer experience, journey or platform. A good example is a supermarket chain that wants to issue a branded credit card or a used car website looking to enhance its offering with car finance deals.
The benefits on all sides of these transactions are enormous, ranging from improved user experience to cost and risk reduction. In 2021, according to Bain & Company, embedded finance already accounted for $2.6 trillion, or nearly 5% of total US financial transactions, and is expected to surpass $7 trillion, or over 10% of total US transaction value, by 2026.
We need to talk about AI
When it comes to AI adoption, most of the thoughts shared at the event were in the form of questions.
Rumman Chowdhury’s talk on how to identify and mitigate algorithmic bias highlighted one of the many concerns that currently surrounds this issue. There’s no doubt that AI-based decisions can be faster, cheaper and more consistent than human-made ones – but who’s to take responsibility when an algorithm makes a bad decision? In an industry as highly regulated and risk-averse as financial services cautiousness is only to be expected.
Some, however, are busy blazing the trail. Earlier this year, Bloomberg made headlines by announcing BloombergGPT, the first large-scale generative artificial intelligence model specifically designed for the financial sector and trained on domain-data sets. Around the same time, Morgan Stanley rolled out a new, OpenAI-powered chatbot to help its 1,600-strong staff tap the bank’s vast repository of research and data, and we also modeled a situation of how AI-driven personalised finances would look in the future.
Who will be next is yet to be seen. How should they go about leveraging AI? “Act now, start simple and scale quickly,” experts at Money 20/20 advised.