Finserv Technologies: Propelling the Future of Finance

Fintech is propelling financial services into a new era like never before. As consumer demand for easier, more accessible and user-friendly services grows, so too does the industry’s drive to innovate in key areas. 

In this roundtable, we speak to industry experts on the crucial areas where technology is powering financial services in 2024. This includes how technology is powering ESG initiatives, fuelling the growth of digital currencies and the application of Gen AI at financial services providers.

We’ll also ask our experts for the ‘perfect formula’ on how to best implement technology to improve customer services in a balanced way, tailoring to all demographics as financial services march into the digital age.

Our experts are: 

• Samina Hussain-Letch, Head of Industry Relations and Operations UK at Square 
• Olaf Baunack, Head of Sales Financial Services & Insurance at Intellias
• Wilson Chan, CEO at Permutable AI
• John Stephens, Industry Principal, Banking and Financial Services at Workiva
• Jeremy Grinbaum, VP EMEA at Amplitude
• Doug Pollock, VP Customer Success at IDnow 
  

1. What new initiatives are we starting to see when it comes to Gen AI in financial services? Can it help with personalised financial planning and bespoke investment strategies?

Samina Hussain-Letch, Head of Industry Relations and Operations UK at Square 

Gen AI can be used to strengthen cybersecurity measures by improving threat detection and response. Adaptive and self-learning algorithms may prove to assist financial services to stay ahead of the curve. It can help the sector combat fraud more effectively and better understand customers by optimising the customer experience.

AI-powered algorithms can analyse market trends and execute trades at a speed and frequency that is not achievable manually. This means businesses can develop sophisticated and adaptive investment strategies, which is particularly useful for personal planning. Gen AI also has predictive analytics which can analyse historical data to forecast market trends, again helping with financial planning. 

The integration of Gen AI in financial services is an ongoing process and, as the technology advances, we can expect to see even more sophisticated and personalised solutions in the financial services sector.

Olaf Baunack, Head of Sales Financial Services & Insurance at Intellias

For financial services, AI-powered risk models can evaluate complex financial scenarios and assess potential risks associated with investments, loans, or business ventures. By providing risk analysis in real-time, AI helps decision-makers mitigate potential losses and optimise risk management strategies.  

Overall, the dawn of Gen AI is transforming financial services by introducing innovative solutions that enhance security, personalisation, automation and risk management. As Gen AI technology continues to evolve, its impact on the payment industry is expected to grow even further, shaping the future of how we make payments.  

The year 2024 is shaping up to be a pivotal year for Gen AI in the financial services industry. We're seeing a shift from experimentation to concrete initiatives, with a focus on enhancing customer experience, streamlining operations and unlocking new opportunities. 

Here are some key initiatives to watch: 

Customer Experience: 

·  Personalised financial assistants: Expect chatbots and virtual assistants powered by Gen AI to become more sophisticated, offering personalised advice, generating reports and answering complex questions about accounts and investments. 

· Content creation for customer education: Gen AI can tailor educational content (articles, videos) to individual needs and risk profiles, improving financial literacy and engagement. 

· Dynamic marketing & product recommendations: Leveraging customer data and market trends, Gen AI can personalise marketing campaigns and suggest relevant financial products in real-time. 

Operational Efficiency: 

· Document automation and analysis: Automate tasks like KYC/AML compliance, loan applications, and claims processing, freeing up human resources and reducing errors. 

· Fraud detection and risk management: Gen AI can analyse vast amounts of data to identify suspicious activity and predict potential fraud, mitigating losses and enhancing security. 

· Algorithmic trading and portfolio management: Advanced algorithms powered by Gen AI can analyse market data and generate investment strategies, potentially offering higher returns and diversifying portfolios. 

New Product Development: 

· Microinsurance and tailored financial products: Gen AI can help develop personalised insurance policies and financial products for underserved populations, increasing access to financial services. 

· Algorithmic wealth management for mass market: AI-powered robo-advisors can offer affordable wealth management solutions to a broader audience, democratising access to investment expertise. 

· Chatbots for financial inclusion: Conversational AI interfaces can reach unbanked populations in remote areas, offering basic financial services and promoting financial literacy. 

Important Considerations: 

·  Ethical considerations and responsible AI development: As Gen AI plays a bigger role, addressing bias, explainability and data privacy are crucial for building trust and ensuring responsible use. 

· Building the right skillset: Financial institutions need to invest in talent with expertise in AI, data science and ethics to guide and oversee these initiatives. 

· Collaboration and ecosystem building: Partnerships between banks, technology companies and startups can accelerate innovation and foster the responsible development of Gen AI in finance. 

2. This year has been touted as one where sustainable finance will come into sharper focus. How will support for green initiatives and investment in ESG strategies continue to grow?

Wilson Chan, CEO at Permutable AI

One notable trend in recent years is the increasing transparency on green initiatives and the integration of ESG factors into portfolio management decisions. Companies and funds are now more willing to disclose their sustainability practices and initiatives, providing investors with valuable information to make informed investment choices. 

This transparency enables investors to assess whether companies and funds align with their own sustainability goals and values. As a result, investors are more likely to support green initiatives and choose to invest in companies that demonstrate a strong commitment to ESG principles.

While fund performance remains a critical factor in investment decisions, it’s becoming increasingly clear that fund performance cannot be detached from ESG principles. 

Investors are recognising that companies with poor ESG practices may face significant risks and challenges in the long run, which could ultimately impact their financial performance. 

As a result, there is a growing understanding that integrating ESG factors into investment strategies can contribute to long-term value creation and risk mitigation. 

This realisation has led to a shift in mindset, with investors seeking investment opportunities that not only deliver strong financial returns but also align with their sustainability objectives.

John Stephens, Industry Principal, Banking and Financial Services at Workiva

We continue to see indications from leading banks, including JP Morgan and Bank of America – two of the largest in the world by market capitalisation – that point to a commitment to facilitating billions of dollars of not only bridge financing, but also direct financing, to address climate change and green initiatives. 

Since 2021, some of these leading global banks have financed and facilitated more than US$400bn towards sustainable development targets. This level of commitment and the amount of spending is expected to continue into 2024. 

Additionally, in 2024, US tax equity could be the single most important financing market for the energy transition in the world. 

The market is expecting demand for traditional tax equity from renewable energy projects to continue to outstrip supply, creating opportunities for corporations to purchase tax credits, either directly from the developers or from tax equity partnerships.

Ultimately, the finserv industry is anticipated to continue to integrate ESG strategies into mainstream initiatives to not only manage risk or compliance, but also to transform business models to meaningfully contribute to net-zero initiatives and account for complex externalities.

3. How will crypto’s growth continue this year – will we see a move towards greater regulation? And will we see a continued increase in CBDC adoption?

Olaf Baunack, Head of Sales Financial Services & Insurance at Intellias

Looking forward, as cryptocurrency continues to evolve, it promises to lower barriers to entry, reduce transaction costs and improve transparency. 

Cryptocurrencies also offer secure and decentralised storage of value, reducing the risk of inflation and government interference. 

Taken together, digital payments and crypto have the potential to make a notable impact on ESG strategies, making us all more sustainable.  

Digital and cryptocurrencies have seen a resurgence in 2024, following a volatile 2023. Predicting the future is always tricky, but here's a breakdown of potential trends: 

Continued Growth: 

· Increased adoption: Cryptocurrency use for payments and investments might rise with growing awareness and infrastructure development. 

· Innovation: New projects and applications fuelled by blockchain technology could attract users and investors. 

· Maturing market: Institutional involvement and investment could bring stability and confidence. 

Regulatory Scrutiny: 

·Greater regulation: Governments are likely to introduce stricter regulations to address concerns about money laundering, fraud and consumer protection. 

·Compliance challenges: This could create hurdles for crypto businesses and potentially hinder innovation. 

· Potential crackdown: Extreme scenarios could involve bans or limitations on certain crypto activities. 

CBDC Adoption: 

·  Increased adoption: Central banks worldwide are exploring and launching Central Bank Digital Currencies (CBDCs), potentially impacting traditional finance and crypto landscapes. 

· Competition and collaboration: CBDCs might compete with or complement existing cryptocurrencies, depending on their design and implementation. 

· Uncertainties: The long-term impact of CBDCs on overall crypto adoption and usage is still unclear.

4. How important is it that today’s financial services providers, particularly legacy institutions, tailor new onboarded technologies to meet customer demands? What will be the formula for providing the best CX?

Jeremy Grinbaum, VP EMEA at Amplitude

Customers have remained loyal to their local legacy bank branches for the same reason they remain loyal to other local amenities: trust built through personal relationships.  

Now, bank branches are shutting, but the desire for personalisation remains – which means financial institutions must recreate these personal, small-bank experiences digitally. 

With long-established banks encumbered by legacy systems, this opportunity truly falls to the cloud-native, agile neobank.

Firstly, neobanks can’t improve the customer experience without understanding the broader financial end goals of each user. Take the example of someone using a product to pay off student loans. 

While the transactional component of making payments and saving money is important, the way to go above and beyond is to ask the question, why does a particular person want to pay off their student loans? 

Maybe to buy a house, start a family or open a savings account for their kids. Challengers need to view their product from the user’s perspective: start with a financial goal and then build an exceptional product experience to support that.

To create a data-driven personalised experience, challengers can serve notifications and recommended actions where and when appropriate. 

For instance, delivering an in-app push notification about progress toward a financial goal. Pairing this with a recommended next-best action can be a game-changer for retention — and trust. 

If a fintech understands its users’ goals and why they take the journeys they do, then it can tailor communications to improve the product experience. Establishing this type of trust will increase retention and present opportunities to cross-sell into more areas of financial portfolios.

Olaf Baunack, Head of Sales Financial Services & Insurance at Intellias

Customer experience and Open Banking (seamless integration) are now a defining competitive differentiator in the financial services sector.    

Millennials and Gen Zs are growing their disposable income and personal wealth. Fintech product adoption is surging. When you pair these two facts together, it’s obvious that, to stay competitive, every bank will need to set a higher CX bar. 

Here are two examples of the technologies and smart techniques banks are adopting to deliver the best CX experience and stay ahead of their competitors:  

.  Gamification – the powerful mechanism to propel smart banking services and drive customer engagement: By using gamification in banking apps, a bank can target customers according to their specific needs. Games appeal to people’s desire for fun, entertainment, simplicity, social interactions, rewards and competition. It’s an especially good way considering the proliferation of smart devices, the mass popularity of gaming and the hobbies of tech-savvy millennials and Gen Zs. The millennial generation is highly motivated to get rewards for purchases and engage with brands using immersive and interactive technology. There are some good examples of smart banks that are taking the lead in utilising gamification to drive customer loyalty, build trust and upsell to more customers. Barclaycard US, in partnership with Mastercard, launched Barclays Ring, a social credit card. By applying game design techniques to make card-related activities more engaging, they’ve created a social community of cardholders. Online and offline rewards, like badges for switching to paperless billing and charity contributions through Barclaycard’s Giveback program, help to market the product as user-friendly and appeal to active and socially-responsible users.   

. Digital Wallets for Mobile Cashless Payments: An integrated, QR code-based payment system benefits banks, e-wallets, payment platforms, retailers and consumers by allowing fast and secure transactions via a smartphone or smartwatch. The user connects their bank account with the system and completes the transaction with a one-time scan. No personal data or bank details enter the system, making it completely anonymous and safe. A solution can be smoothly integrated into banking applications, cash registers, vending machines and retailer loyalty rewards programmes.  Take Intellias’ client, an innovator of QR payment technologies and one of the official providers of Alipay, China’s biggest payment processor. The mobile QR platform helps merchants interact with consumers more efficiently, speeding up the payment processes, cutting down point-of-sale (POS) equipment costs and enabling customers to use their preferred method to pay abroad. Its integration with other QR systems, including Alipay mobile payment services, allows these systems to use its European infrastructure to get access to all participating stores and retail chains. As a result, users can enjoy exceptional customer experiences, while traders win more buyers.  

Doug Pollock, Vice President Customer Success at IDnow

The Finserv industry has always been at the forefront of innovation, with a reliable and steady finger on the pulse of current consumer behaviour.

Our research in the UK market has shown what banking customers want from their digital experience. 

For example, according to our survey of more than 2,000 UK adults, well over 60% believed that digital banking processes – such as remote account opening, online banking options or an easy-to-use app – were either extremely important or important when it came to deciding which bank they should entrust with their money.

The research also showed that it does not matter if the business is a well-established name in its sector or if it was founded last week. Though customers want digital, they also want to be safe. The responsibility for safety rests with the business, which should put in place the highest security standards.

This need for safety must be balanced with a good CX process. If registering to use a business’ online services is cumbersome or fraught with what the users see as unnecessary steps, they may simply lose interest and abandon the onboarding process. 

The best CX is intuitive and flexible, and reassures the user of the need for good friction during onboarding for the important processes in the background that help keep them and their data safe.  Banks should engage with their customers in a way they find appropriate and provide flexible and inclusive solutions wherever possible.

One big CX development in financial services is the increasing use of digital identity solutions. Digital wallets are already maturing across markets, including the UK and the European Union in particular, which is pushing for the adoption of digital identity wallets across its member states by the end of this decade. 

The widespread adoption of wallets is viewed as a milestone towards helping businesses, citizens and public authorities conduct secure and seamless electronic interactions.

While the adoption rates of these digital wallet solutions in the UK remain in the early stages, all financial services providers should be ready for the upcoming transition to reusable identities.

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