Authored by Grant Thomas, Head of Practices at BJSS, the below provides Finance Monthly with particular insight into the top trends and movements UK financial services organizations will encounter in 2017, and increasingly in the future.
Financial services have always been at the forefront of technology. The industry was amongst the first to invest in mainframe computing, while it pioneered complex integration points to global payment switches, and in 1967 Barclays introduced the concept of self-service with the world’s first ATM.
Fintech takes this innovative spirit a step further, and in spite of operational challenges, is driving the development of pioneering ideas to improve customer experience, efficiency and security in the Financial Service sector.
- Brexit has injured Fintech. But not fatally.
One of the biggest questions to be answered this year is the extent to which Brexit will stifle Fintech innovation and if there will be an exodus towards competing financial centres such as Paris and Berlin.
At face value, things look challenging. Proposed restrictions to the free movement of talent may make it more complex and expensive to hire experienced staff. The process of securing VC funding is likely to become more rigorous as financiers look towards investing in less politically risky climates, but many opportunities still exist.
The key opportunities are that the lower value of the pound has made UK providers more commercially attractive, allowing local firms to compete against their offshore rivals. Added to this, changes to the regulatory environment, and continued R&D in complementary technologies will mean that London will continue to play a leading role in Fintech.
- Product roadmaps will adapt to support the Bank of England’s new regulatory environment.
The UK will be keen to remain an attractive financial destination, so the Bank of England will take a critical look at its regulatory environment, deciding on which financial regulations require tweaking, diluting or eradicating. The regulator will also look at introducing new financial products, as demonstrated by a recent announcement of its ambitions to launch a Bitcoin-rival cryptocurrency. As a result, Blockchain, which automates and adds transaction security, will continue to attract investment.
Also, evolving regulatory directives such as Open Banking and PSD2, will create an even more difficult operating environment for established players – there will be great demand for Fintech providers to help plug this gap.
- Mobile devices will become Fintech’s primary channel.
According to Ofcom’s 2016 Communications Market Report, Smartphones are now our preferred channel for accessing online content. Now they are set to become the main way of managing personal finances. Already three out of every ten mobile internet users use their devices to access their bank accounts, while two out of every ten use their devices to complete electronic payment or transfer transactions.
While most consumers are already familiar with services such as Apple Pay, Android Pay and Samsung Pay, Fintech providers will exploit online as well as built-in NFR and biometric technologies to introduce peer-to-peer payments, digital-only banking, forex, and mobile wallet products.
But mobile is just one part of the future of Fintech, and the ability to crunch diverse and deep datasets will drive greater innovation.
- Customer take-up will be driven by Big Data, Data Science and Analytics.
Fintech providers will look at exploiting tools such as Hadoop, Python, NoSQL and Spark onto Private and Public Cloud services in order rapidly to deliver outcomes and to identify and understand customer behaviour and target markets.
Big Data will be combined with sophisticated machine-learning algorithms to upsell products and services based on key life milestones. This use of data science will proactively push financial products based on customer behaviours, instead of simply waiting for clients to submit product applications. Modern computing and advanced mathematical techniques enable personalisation, at any scale, and without human intervention.
- Artificial Intelligence and machine learning will use this data to put a human face in computing decisions.
AI technology presents a huge opportunity for Fintech providers because it combines the rules-based reality of computing, with a human interface. It enables providers to take quick, business-safe decisions while reducing the processing time of routine customer enquiries. The model can be adjusted to accommodate customer preferences, their demographics, and interests. Thanks to language interpretation, a customer will be able to ask a question, which will be processed and answered by a Bot either by through text to speech or instant messaging services.
AI has development commitment from the big players. Apple, Amazon, Google, Facebook, IBM, and Microsoft have partnered on a non-profit joint venture which aims to “conduct research, recommend best practices, and publish research under an open license”. AI is becoming mainstream.
By adding machine learning to the mix, the accuracy of chatbot responses is improved. When combined with AI and superior user-driven service design, Fintech providers are able to provide compelling and personalised customer interaction products to improve reliability and customer satisfaction. Those Fintech providers who focus on using AI and machine learning will pioneer a customer experience revolution: CX2.0.
This will lead to the death of ‘off the shelf’ and proprietary one size fits all.
Wide-ranging standards such as Blockchain, mobile, Big Data, AI and machine learning preclude a single one size fits all “off the shelf” solution. Fintech providers with ambitious roadmaps will embrace low-latency products based on enterprise-grade Open Source which are proven and secure.
Also, given the speed at which this new technology is evolving, Fintech providers will adopt an Agile approach to building their products. The benefit of Agile is simple. It accelerates delivery processes, and through on-going planning and feedback, ensures that value is maximised. Crucially, Agile also supports continuous delivery, ensuring that quality is maintained and that any risk of failure is reduced. With Agile and continuous delivery, Fintech providers will be able to rapidly develop and refine their products to support an ambitious roadmap. They enable Fintech providers to ensure that the engineering of their products, integration, functional and non-functional tests, deployments and provisioning are catered for throughout.
Britain’s role in the Fintech space is secure and, thanks to a range of next generation technologies, coupled with an improving operating environment and Agile development processes, will provide compelling products and innovation that will boost service provision and reduce costs.