By Arnold Koudijs, Financial Services Industry Principal at Pegasystems
There was a lot of chatter this year around AI, chatbots, Fintechs and Big Techs. But what does 2019 have in store for the banking industry? Arnold Koudijs, Financial Services Industry Principal at Pegasystems, discusses his top predictions for the year ahead.
Big Tech disruption rumours will grow but banks shouldn’t run to the hills in fear
The FAANG gang are characterised by knowing extremely well what drives customers and how to get their attention, interest and money. But, don’t underestimate the banks. They have experienced similar threats from fintechs before and many are coming through this challenge gloriously well. Established banks are using technology to become much more highly relevant to customers, while also addressing the everchanging complexity of regulatory requirements. We expect positive collaboration, not conflict, to be the outcome of Big Tech edging into retail banking. Let’s not forget this is a regulatory minefield that may make some Big Tech’s wary about making a financial play. If some do, expect them to seek a bank’s wiser counsel and support.
Digitising corporate banking starts in earnest
Retail banking has been the greater focus of digitisation to date. But corporate and business banking has been relatively untouched by the digitisation that we’ve seen in consumer banking. That’s going to change in 2019 as banks look to improve margins.
A lot more digitisation to do in 2019 despite early gains
Don’t believe digital transformation is or will be completed in the next 12 months for any bank. There’s been a great focus on digitised pockets of activity but progress on digitising the entire customer service lifecycle has been hardly attempted. 2019 will see banks look at this more to avoid creating next generation digital siloes. But it is difficult and requires zero code digital technology that’s adaptable and built for change. And with that, a bank’s core culture will change towards more rewarding innovation and encouraging agile collaborative behaviour.
Everyone in customer-facing work gets a digital co-worker
2018 saw a wave of chatbot technologies. In the right channels at the right time and place, chatbots are great and popular with the right customers. What we’ll see more of in 2019 is a fast rising but invisible wave of AI and machine learning deployment that will be sitting alongside banking colleagues when they need guidance and recommendations. This is not about replacing jobs, but rather about improving the quality of work and experience for workers.
Putting AI into practice
Bank innovation teams have been showered with AI hype. But, they’re no fools and 2019 will see AI plans advance but much more in selective and sensible ways. AI is a big beast, but only specific facets are of real value to a bank. The AI solutions that will pull through will have passed judgement on the real value offered and being fully compliant and safe. Customers are not hesitant towards AI but want to know when and where it’s affecting them. They also don’t want it to amplify prejudice and bad decisions so expect banks to reach for AI that runs on quality data, that is transparent and not closed off in a black box that restricts oversight and control.
Fintech love-in blossoms openly
Banks comfort levels with fintechs are high and will get higher in 2019. Yes, some may steal customer share of wallet, but established banks accept fintechs as players who they can work with. In this context, open banking and PSD2 are a blessing not a bane for banks in how it allows everyone to benefit from securely sharing data and processes. It creates a new role for banks who can orchestrate fintech services consumed by customers. So, rather than diluting their importance, open banking could increase it, making them the puppet master not the puppet.
Regulatory compliance is costly and not working so expect more imaginative solutions in 2019
Regulatory compliance is a priority and banks have invested in major regulatory functions. But still non-compliance issues trip up and test banks. This must change, and I see banks looking to find ways to share the regulatory burden, sharing data and applicable policies. For example, when one bank has done the regulatory KYC, why can’t that be shared with other financial institutions? Regtech can help too but what’s going to unleash its potential in next 12 months will be advent of low code solutions. This means you don’t need deep coding knowledge in the compliance team to rapidly ensure that a business process automates compliance with a new regulation.
Use of artificial intelligence, digital co-workers, no code and low code solutions are set to grow in 2019, being deployed by traditional players, fintechs and Big Techs alike to help them compete in what will be a challenging year for the banking industry. There is no need to run to the hills in fear, but one thing’s for certain – banks cannot shy away from such technologies and must be willing to invest and adapt if they want to succeed.