New and engaging products are available both at online checkouts and in the real world, with popular new offerings like Buy Now, Pay Later (BNPL) fast becoming a staple of the modern payments experience. 

In recent years, financial services (FS) companies have undergone seismic changes, with the rate of innovation skyrocketing and consumer expectations rising along with them. There is a clear correlation between this meteoric rise and the sudden profusion of fintechs, challengers and neobanks that have taken the market by storm in recent years.

So, what is it about the fintech boom that has catalysed re-invention for financial services firms? Why has their proliferation sparked a revolution in everything from payments and accounts to embedded solutions and novel credit products? And what has enabled these small and numerous players in a highly technical and challenging space to mobilise and grow so quickly? 

Form and function

In a sense, a fintech’s size can be one of its greatest advantages. Being smaller and more agile, particularly in the start-up stage, allows them to get things done quickly. They aren’t hampered by their scale, and they don’t suffer from the delays that come with the many moving parts of monolithic legacy institutions. This agility is a key part of what has enabled them to bring so many new concepts and ideas to market in such a short span of time. 

Many fintechs are founded around a single idea – a previously unidentified gap in the market that is crying out for a specialised solution. Given the many investment programs and incubators available to young entrepreneurs, those with the best ideas have been able to scale up quickly and bring their offerings to the mainstream, further stimulating the outpouring of innovation.

The success of this model of incubation and investment is proven by the staggering annual growth rate of the global fintech sector (25%) and its forecasted valuation of more than $300 billion. New fintech unicorns are crowned regularly, and the march of progress shows little sign of stopping. 

By their nature, these upstart start-upschallenge pre-established financial institutions as they are not bound by the same protocols and historic direction as their larger, more deeply rooted counterparts. That is not to say that incumbent banks have been shifted out by fintechs. Quite the contrary, by raising consumer expectations and making innovation table stakes within financial services, they have badgered the old guard into rejuvenating their own offerings and becoming more current. 

Finally, advances within the underlying technology behind fintechs have made these firms more driven and efficient – and crucially, able to bring novel products and solutions to market in record time. A secret force behind the fintech boom and its corresponding wave of new products and services is, in fact, banking-as-a-service (BaaS). 

The ace up the sleeve

For a fintech company to deliver comprehensive and versatile products like embedded insurance, BNPL and personalised accounts, agility and entrepreneurial spirit alone would not suffice. The technical and regulatory complications surrounding banking products pose significant challenges – meaning that expert solutions are required. 

BaaS is what enables the fintech-driven innovation within today’s financial services to continue at pace, and many prominent fintechs have a BaaS partner to thank for their success. BaaS solutions – powered by core banking APIs– make it possible to deliver products that integrate with different platforms, connect seamlessly to users’ own banking services and ensure reliability and safety throughout any transaction. 

But BaaS isn’t just for fintechs – it also helps legacy and challenger banks to improve their offerings. BaaS providers like Yobota can work with many banks to allow them to bring new, best-in-class products and services to their users without having to go through the lengthy, challenging and costly process of developing the products themselves, or building a core from the ground up.

In conclusion

Fintechs are the catalysts for change. Not only do they create their own products and services that add value to consumers, but they also encourage longstanding institutions to re-evaluate their offerings. 

Fintechs are the driving force for innovation in today’s FS ecosystem, and BaaS providers are giving them the support they need to offer new and engaging products to all. Together, consumers can continue to enjoy a broad slate of innovative financial products integrated into every part of their online experience. 

About the author:  Ion Fratiloiu is Head of Commercial at Yobota.  From launching his financial career at Deutsche Bank, Ion spent a number of years consulting in the equity capital markets space and leading sales growth for FTSE500 company Fiserv and core banking provider Thought Machine. He joined Yobota in 2021 to launch its commercial operation, leading GTM strategy and building a diverse and multi-faceted team to take the company to the next stage of growth.     

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Major players such as HSBC and JPMorgan are already leading the way in adopting the technology, with the latter’s report, Opportunities in the Metaverse, estimating that the metaverse poses a market opportunity of $1trn in annual revenue.

Creating world-class digital experiences

As organisations look to the future, having a metaverse presence has the potential to not only create virtual environments for staff and customers, but provide new ways to analyse trends, as well as extend digital operations into areas like cryptocurrencies, and generally provide a more immersive customer experience.

Although it has existed in some shape or form for more than two decades, the metaverse is finally becoming mainstream. Gartner predicts that in the next four years, one in four people will spend at least an hour a day in the metaverse, performing a range of tasks and activities from shopping and socialising to attending work events and distance learning. With leading tech companies like Meta (previously Facebook, Inc.), Google and Microsoft investing billions of dollars into the technology, there is no denying that it has the potential to revolutionise the way that companies engage and communicate with customers much like social media has over the past two decades.

As our lives moved online during the pandemic, the way we consume digital services like mobile banking or online shopping changed. As consumers, we don’t just compare digital experiences between competitors – but to the last great digital experience that we had; be that on our favourite fashion brand’s app or speaking with a virtual representative from our bank. Customers are demanding new ways to engage and bridging the gap between physical and virtual worlds could, therefore, help firms attract new, digitally native customers, as well as embrace and integrate new products like ‘metaverse mortgages’ and NFTs.

However, FSI providers face challenges when it comes to balancing these digital ambitions with the reality of their complex hybrid IT environments and modernising their decades-old legacy environments.

Balancing agility and governance

Despite a real willingness from banks to accelerate the pace of digital change, this often adds to the proliferation of homegrown and third-party technologies, platforms, systems, and environments. To keep up with the pace of change, banks created DevOps-led product teams with the mandate to ‘go fast and break things. Often, these teams are siloed from the I&O (Infrastructure & Operations) teams who are responsible for ensuring that the infrastructure these new products and services are delivered on is secure, compliant, and safe, but this approach is often not agile enough to meet developer’s needs.

This wall between DevOps and I&O is a barrier to the agility and resilience needed to achieve digital ambitions.

IT now, more than ever, must be service-oriented rather than infrastructure-oriented. I&O teams should modernise their approach to IT service management (ITSM) and become the brokers who enable and govern services across these complex hybrid IT environments. This means bringing together Platform Ops, Cloud Ops, and SRE (Site Reliability Engineers) to form a modern I&O function which supports and collaborates with its Product cousins and provides them with well-governed self-service environments in which they can innovate.

Automation for really complex IT environments

Essentially, to embrace new digital experiences, banks and FS organisations must adopt service-oriented orchestration and think about how they can move towards environment-as-code.

Environment-as-code elevates infrastructure-as-code to connect Product teams with I&O teams, prioritising both developer agility and governance and allowing them to deliver, manage and orchestrate environments, platforms, and services rapidly, reliably, resiliently and at scale. It can be achieved with automation tools that can deliver full lifecycle orchestration for any application, in any environment and at scale and which provide the centralised control plane required for good governance and compliance.

World-class digital experiences are built on these resilient and secure environments, and this approach can also free up developer time to focus on delivering innovative new services and products - such as those in the metaverse. It will be interesting to see how banks, FS firms and insurers move forward with plans to adopt metaverse technology and not get left behind by their competitors.

With disconnected processes and systems within their customers’ infrastructure exacerbating the issue, it’s not surprising that many fintech solutions are difficult to fully integrate. Indeed, almost half (40%) of fintechs globally are struggling to connect to their customers’ applications or systems, according to research from InterSystems. 

This challenge is likely to make it difficult for fintechs to integrate any new applications or solutions within a financial services organisation’s technology stack – impeding their ability to collaborate with these types of institutions. With 93% of all fintechs surveyed keen to collaborate with incumbent banks in some way, connectivity problems could seriously inhibit their ability to capitalise on these potentially lucrative relationships. 

To avoid missing out on opportunities like these, fintechs must find a way to connect more easily to any financial services organisation’s existing legacy applications. 47% of global fintechs state that enabling better integration with customers and third parties is one of the biggest drivers behind implementing new technologies, so there is a clear appetite to address this challenge. 

One of the most effective solutions for fintechs is to develop a bidirectional data gateway between their own applications - of which 98% are at least partly cloud-based, 23% are hybrid cloud and on-premises, and the remainder are based in public or private clouds - and their customers’ environments. This can be achieved with smart data fabrics. With cloud offerings making it easier to provide remote access and service updates, in addition to facilitating deployment on-premises, developing a bidirectional gateway will ensure that financial services institutions do not miss out on innovative fintech applications.

A new architectural approach

Traditionally, integration of fintech services and applications has been accomplished through manual and cumbersome means: the slow process of coding point-to-point integrations and moving and copying data is difficult to maintain and notoriously prone to errors. Moreover, this outdated practice makes feeding applications the live, real-time data they require extremely difficult.  

By implementing a smart data fabric, a new architectural approach, fintechs can create a bidirectional, real-time data gateway between their cloud-based applications and their customers’ existing on-premises and cloud-based applications and data stores. The smart data fabric provides a complementary and non-disruptive layer that connects and accesses information from legacy systems and applications on-demand. 

Smart data fabrics integrate real-time event and transactional data, along with historical and other data from the wide variety of back-end systems in use by financial services organisations. They can then transform it into a common, harmonised format to feed cloud fintech applications on demand, providing bidirectional, real-time, consistent, and secure data sharing between fintech applications and financial services production applications. Bidirectional connectivity also ensures that any changes made through the fintech applications can be securely reflected in those production applications.

Embracing this new architectural approach will allow financial services organisations easy leverage of new fintech services and applications, facilitating seamless integration with their existing production applications and data sources. For the 40% of fintechs currently finding it difficult to connect to their enterprise customers’ environments, this will be very gratefully received – and will open the door to mutually beneficial partnerships with banks. 

Driving innovation forward

Easier integration between fintech cloud-native applications and financial services organisations’ existing infrastructures will provide banks with a consistent, accurate, real-time view of their enterprise data assets, as well as increased speed and agility. With the financial services sector in need of an innovation injection to meet changing customer and regulatory expectations, this smart data fabric-powered approach to developing a bidirectional data gateway will also help to spark creativity and fuel innovative ideas. 

These capabilities will enable financial services institutions to swiftly react to new opportunities and changes in their environment. It also gives them the insight needed to make better business decisions and improve customer experience, as they can provide more digital and hyper-personalised offerings.

Fintechs across the world are recognising the potential benefits of improved collaboration with banks. 56% believe that banks will get value from fintechs through improved customer experience and engagement, while 50% say that better partnerships will result in more opportunities for banks to focus on their core areas of expertise. A similar number (54%) believe that banks stand to gain from increased agility and speed to market. With data fabrics, fintechs and banks can take steps towards putting these objectives into motion. 

A win-win for fintechs

By adopting a smart data fabric approach to implementing a real-time, bidirectional data gateway, fintechs globally will effectively kill two birds with one stone – helping to increase both collaboration and innovation. 

Embracing this new type of data architecture will allow fintechs to better connect their cloud-based applications to their customers’ environments, allowing solutions to be more swiftly and easily integrated within those environments. In turn, this will boost the potential for collaboration with financial services institutions. 

Furthermore, this technology will enable fintechs to better support financial services organisations through their own data struggles, helping data to instead become a critical differentiator that empowers financial services to swiftly innovate. By being able to more easily adopt fintech applications, financial services organisations can unlock faster development cycles, experience fewer bugs, and even reduce their total cost of ownership.  Enhanced innovation opportunities will steer institutions towards their business goals, thereby delivering benefits back to their customers and creating an all-important competitive edge.

About the author: Redmond O’Leary is Sales Manager, Ireland at InterSystems.

2021 has also been the year that brands have started to embrace embedded finance as a potential tool to solve the issues. Smaller-scale companies have been leading the charge, offering innovative products built around embedded finance, from crypto rewards to interest rates linked to physical health. As they have provided these proofs of concept, bigger and bigger fish have started to explore the possibilities available to them.

In 2022 we expect to see an explosion of new embedded finance use cases - from consumer, sports and healthcare brands. Our research shows that young people, or 51% of 18 - 24-year-olds, are open to accessing financial services from brands they love and trust and 42% are interested in a credit card from their favourite sports team. To date, we have mainly seen embedded finance delivered as a standalone product, but by building experiences. there are also possibilities to create enhanced customer experiences with financial services built seamlessly in.

The potential here is enormous and largely untapped, with different opportunities available to different sectors. For example, football teams have a really passionate fan base who regularly buy tickets and merchandise from their favourite club. Through embedded finance experiences clubs could expand their offerings, going beyond the current tickets and merchandise paradigm to also connect fans to hotel and travel deals for away matches. All of this can be handled in one app with seamlessly integrated payment and the opportunity for fans to accrue loyalty points redeemable against exclusive experiences. This both removes any friction points around access to financial services and payment while improving the loyalty strategy.

We know that loyalty is an important consumer consideration. Some 38% of consumers feel more loyal to a brand if they receive rewards, for example. However, there is also widespread dissatisfaction with loyalty schemes. It isn’t difficult to see the issue - most loyalty schemes only reward customers when they spend with a specific brand, which limits how often consumers can engage with the scheme.

With a loyalty scheme built around an embedded finance experience, brands can expand their loyalty schemes to encompass any purchase their customer makes, which means they can be part of their daily lives in a positive way while building a stronger relationship. For example, we are working with McLaren and QNTMPAY on creating a debit card with unique F1 based rewards, up to and including pit lane access on a race weekend.

What is particularly exciting about embedded finance experiences is that we are just starting to scratch the surface of what is possible. As customers become more familiar with the seamless journeys they can take, the demand for these experiences will increase and brands will be able to innovate further and push the envelope for what is possible. We can’t wait to see how these experiences are going to evolve over the next twelve months!

Financial services enterprises are under greater pressure to digitally transform. According to new Telehouse research, more than four out of ten (42%) financial service enterprises need to transform their IT infrastructure or risk becoming less competitive – a figure significantly higher than the 34% average across other sectors.

Pressure is being driven by a combination of factors, including customer demands for more connected, relevant and personalised experiences (46%), the need to simplify business and operating models to increase efficiency (46%), cyber security (44%) and the necessity to deliver new applications and services to customers (44%). The emergence of nimbler challenger banks and ambitious FinTechs has set the challenge for businesses across the sector to step up a gear and reshape their operations.

For many, a shift from a traditional on-premise infrastructure, to a more modern mix of colocation, cloud and ultimately, edge computing is the answer.

Scoping the challenge

Today, financial services firms need to react quickly to regulatory demands and take advantage of market opportunities. However, they often don’t have the right systems in place to manage, or effectively use data to respond as quickly as their ‘digitally native’ peers.

The problem is many are still reliant on inflexible, legacy, on-premise infrastructure. The research revealed that financial services organisations outsource the lowest proportion of IT infrastructure to colocation and the cloud of the enterprise sectors polled. So, it’s not surprising the sector also has the lowest confidence in IT maturity, with just 30% of IT decision-makers describing their organisation’s IT maturity as ‘very advanced’.

Transformation is clearly needed but it is not always an easy task. Historically, financial services firms have struggled to adopt new technologies and meet increasingly high customer expectations quickly, often limited by strict compliance and regulatory requirements, which ratcheted up after the global financial crisis of 2008. Even with the appetite to change, many have struggled to make meaningful progress, held back by legacy IT systems. But with time of the essence and providing personalised, connected and reliable experiences now business-critical, organisations can simply no longer afford to stand still.

Why connectivity is key

As customer demand and internet consumption grows, financial services organisations need to find ways to increase connectivity between offices and countries and improve the user interface on customer-focused technology like apps and websites.

5G will offer many benefits for financial services including reduced latency, which in turn will help decrease transaction and settlement times. It will also facilitate the adoption of AI to enable greater personalisation and improvements to customer experience.

However, as with any new wireless communications technology, the volume of data used will rise significantly, putting more stress on backbone networks. A fifth of financial service enterprises surveyed in the research already say that data volumes have become a serious problem. To succeed, organisations need the ability to quickly ingest and process data and this will be dependent on having a connected, secure, reliable, scalable, flexible, resilient and low latency IT infrastructure.

Ultimately, more connections mean more risks. So, the challenge is how to take advantage of increased connectivity without compromising security or compliance.

Despite lagging behind other sectors in most areas, financial services are leading the way when it comes to edge computing.

The role of colocation

 Many are turning to colocation as the answer; providing the extra capacity and bandwidth required, while also enabling fast, secure and direct connections to cloud service providers. According to the Telehouse research, financial services organisations are already outsourcing 38% of IT infrastructure in colocation with adoption set to increase further as the use of big data; 5G and the Internet of Things (IoT) rises.

By hosting their IT infrastructure in a colocation data centre, organisations can control the migration process, keep on top of regulatory demands and keep a lid on costs. The research found that the top drivers of investment in colocation are sustainability, faster data access and improved connectivity, likely driven by the need to improve customer experience and connect disparate hybrid IT structures.

More importantly, by deploying a combination of cloud and colocation strategies, organisations can create a resilient and secure foundation for growth. This will enable them to flex and scale operations when building new services and innovations to meet future demand, while also ensuring they provide their customers with a responsive and high-performing service. And by choosing a colocation facility in close proximity to financial markets and exchanges, organisations can benefit from reduced latency and faster data processing to enable real-time big data analysis.

Moving to the edge

Despite lagging behind other sectors in most areas, financial services are leading the way when it comes to edge computing. 72% of respondents have already implemented a strategy for edge computing, driven by a need to optimise data volumes (36%), digitally transform (34%) and match competitor capabilities (34%). However, over a third say they are challenged by a lack of understanding of edge networks and their purpose as well as uncertainty over which locations to gather and manage data in.

Given that it’s now more important than ever for financial services firms to store, access and analyse and access exponential levels of data at record speeds, it is not surprising that interest in edge computing is soaring. Gartner predicts that by 2025, 85% of infrastructure strategies will integrate on-premises, colocation, cloud and edge delivery options, compared with 20% in 2020.

Demand for edge is also likely to be driven by its convergence with other technologies such as cloud and colocation and is evidenced by the fact that many firms opt for a mix of technologies. Ultimately, the key for success for organisations will be building the right infrastructure foundations and connectivity, and the right data centre partner is critical to achieving this.

Embracing the connected future

Financial service providers have a huge opportunity to provide the seamless, secure and personalised services that today’s consumers crave. But doing so requires digital transformation.

As data volumes and connectivity increase, new developments such as predictive modelling to prepare for ‘what if’ scenarios, automation of front-end sales and customer-facing environments and the enhancement of customer care by self-service functionality will become commonplace. However, success depends on having the right IT infrastructure to enable fast, secure and seamless connections. It will be those that can build a connected, secure, reliable, scalable, flexible, resilient and low latency IT infrastructure that will be winners in the race to the connected future.

The finance sector is extremely vulnerable to the rising number of cyberattacks, with The 2021 Cybersecurity Census Report finding that finance companies in the UK suffered an average of 60 cyberattacks in the last year. The number of these attacks continues to increase, and finance companies need to employ strategies to keep their data and networks secure from attackers.

For obvious reasons, the finance sector is an advantageous target for cybercriminals, due to the wealth of data contained within these organisations and the fact that attacks can target banks processing systems to disrupt critical financial transactions. Nonetheless, the volume and severity of the attacks we’re seeing is cause for immediate action, with mid-sized financial services organisations worldwide spending an average of over $2m recovering from ransomware attacks. 

Aside from causing disruptions to financial services capabilities and potentially substantial financial losses, financial services organisations that are victims of a cyberattack also stand to suffer significant reputational damage. For example, recent Mimecast research found that consumers think that brands should be responsible for compensating victims of scams, with 39% of consumers saying that not taking responsibility for potential customers being deceived would put them off the brand. Notably, 65% of UK consumers would stop spending money with their favourite brand if they fell victim to a phishing attack involving that brand.  This is increasingly important for the financial sector, as online banking is the second most trusted sector by consumers in the UK, but is the most leveraged sector for cybercrime, with 28% of consumers receiving phishing emails from brands in this sector.

The key here is to move at pace, and employ a security model which helps organisations control access to their networks, applications, and data, enabling the financial services sector to remain secure in the face of sophisticated attacks.

The ‘New And Improved’ Cybercriminal

The pandemic has driven more criminals online, as they have adapted to the new remote/hybrid working world by exploiting improperly secured VPNs, cloud-based services, and unprotected emails. Inevitably, external data breaches are now a matter of when and not if. On top of this, a recent report found that the LockBit 2.0 ransomware gang is actively recruiting corporate insiders to help them breach and encrypt networks.

These criminals invest a lot of time in researching organisations and employees, asking questions such as: has someone been passed over for a promotion? Is someone being underpaid? Has someone received a negative performance review? Using this research, and spam/phishing attacks, criminals identify weaker links for exploitation. Criminals are then in contact with corporate insiders, asking them to install ransomware, collect information, plant malware etc. This is creating a perfect storm for many financial services companies.

The Zero Trust Model 

With this combination of internal and external threats and the risks of significant financial and reputational damage increasing, the financial sector might fear it is fighting a losing battle. But there is a model that can be adopted to keep their data and networks secure from attackers: Zero Trust. 

The Zero Trust model is founded on a simple idea, “trust no one and nothing,” this essentially means that the zero-trust security framework gets rid of concepts such as trusted devices and trusted users.  In practical terms, organisations that adopt the Zero Trust model put policies in place to verify everyone and everything, regardless of whether they are internal or external. The model provides a mechanism to secure new ways of working in the cloud while combating the risk of an insider breach. The application of a Zero Trust model is especially important when it comes to insider threats since it is this trust that hackers seek to exploit.

Zero Trust is a great way to address the challenges caused by the rapid transition to an increase in cloud spend and remote working, as it removes implied trust, with each access request needing to be verified, based upon strong authentication, authorisation, device health, and value of the data being accessed. This is one of the most effective ways for organisations to control access to their networks, applications, and data, leading to more security for the enterprise.  

Making It Seamless

One factor that must be taken into account is that, in order to be successful, the integration of zero trust systems must be as seamless as possible, otherwise complexity is re-introduced into the enterprise. Organisations need integrated solutions that optimise their current and future state of security. Avoid solutions that operate in isolation, and instead opt for platforms that integrate to form an ecosystem to improve visibility, enhance control and provide a robust set of orchestration capabilities. Ultimately, zero-trust security is more of a security model than any one tool, making it difficult to implement, especially when the infrastructure it’s being applied to wasn’t designed for new models, as there is no simple way to retrofit some systems for zero trust. For example, as a basic requirement, zero trust relies on multi-factor authentication, which many financial services may not currently have in place.  

As well as this, the financial service industry has not fully migrated to cloud solutions and large amounts of technical debt have been incurred over the years of deploying new applications coupled with digitalisation. With more than 90% of the UK’s financial firms still relying on legacy tech, business-critical information is currently continually stored on out of date software. This equipment is often not compatible with up to date software and provides several opportunities for “backdoor” access. Companies that use older legacy applications may have trouble implementing them on zero-trust networks and for this new solution to be effective, companies will also need to invest in employee training. Training for employees alongside new security solutions is the only way to minimise human error, raise awareness and truly increase cyber-hygiene across a whole organisation. 

While it's a long process, which may require the replacement of legacy equipment, and which demands inward reflection and internal reshaping, the finance sector needs to make cybersecurity a top priority. Otherwise, there is a real risk that even unsophisticated cyberattacks will cause serious damage and undermine organisations. Using new types of tools and capabilities, such as the zero-trust model, the finance sector can have a safer framework in place to help organisations tackle persistent security challenges, as well as mass remote working, allowing financial services to stay protected regardless of what comes next.

As a result of this ‘need for speed’, companies, big and small, have been developing technologies to speed up and smooth out the end-to-end customer experiences for financial services and insurance (FSI).

Artificial intelligence (AI) is key in this space, with machine learning enabling everything from automated saving and investing to speedy customer service. Despite this, traditional banks have been slow to adopt these new technologies, leaving them lagging in customer experience. In this article, we’ll explore 3 ways AI-powered tech can help FSI businesses enhance their customer journeys.

1. Increased personalisation

Research shows that personalisation is the key to customer retention. This is because personalisation (in both communication and product offering) increases engagement – and engaged customers are more likely to buy products or services. In fact, 80% of people are more likely to purchase from a company that offers personalised experiences. And when it comes to FSI, engaged customers stay loyal for up to 4 years longer than unengaged ones.

Banks can use AI-enabled technology to offer smarter recommendations based on people’s previous interactions. These digital solutions can also analyse consumer engagement to pick the best time to offer products, increasing the likelihood of up-selling and cross-selling. By using AI, banks can use their wealth of customer information to tailor every communication and every offer, maximising conversion rates and demonstrating to consumers that they’re more than just another number.

2. Faster decision making

Financial products and services hinge on credit and background checks, which can be time-consuming to carry out. These slow processes can frustrate customers and increase drop-out rates.With AI, FSI businesses can automate key decision-making processes and cut down on wasted time. AI solutions allow lenders to make smarter underwriting decisions based on a wide range of factors – and make these decisions much faster. Whether it’s giving customers an automatically calculated chance of approval, quickly assessing premiums based on risk factors, or granting instant approval to existing customers who meet criteria – AI makes it much easier for customers to take out financial products.

3. Improved security

FSI is tightly regulated, which means security is paramount. Not only can a breach lead to hefty fines, but it can also erode trust, which can be a death sentence. Because of this, traditional banks have typically relied on seeing physical proof of identification when people open accounts, withdraw or transfer large sums of money, or take out insurance products. But this approach simply isn’t suited to our modern lifestyle. Customers have neither the time nor inclination to walk into a branch with multiple copies of old utility bills. And even if they did, Covid has meant many physical locations are unavailable.

The good news is that security in the digital world is robust. Two-factor authentication and biometric recognition are quick and easy ways for banks to enforce security and speed up digital identification and verification (ID&V) processes. Biometrics are essentially impossible to forge, and two-factor authentication adds an extra security layer, giving businesses and customers alike peace of mind.

This AI image recognition technology can also be used to verify digitally uploaded documents, speeding up the customer experience without compromising security. 

AI is increasingly integral to the world we live in, and the finance industry needs to implement these technologies to stay relevant and meet customers’ high expectations. Fortunately, despite a slow start, most banks recognise this need to modernise. 80% acknowledge the benefits of AI, 46% plan to implement it in the near future. Success then hinges on a holistic implementation approach, with banks focusing on joined-up processes and data.

To learn more about implementing AI, download Engage Hub’s whitepaper on balancing customer trust and security while using AI to improve customer experience. 

About Engage Hub:  

Every customer is unique. Engage each one.

At Engage Hub, it’s our mission to make sure your business treats your customers as individuals to engage each and every one, so you win them over faster and keep them for longer.

With over 30 years in the business, our services have evolved alongside the needs of our clients, including some of the world’s most successful brands across the financial services, utilities, telecoms, retail and logistics sectors. We understand the challenges you face - from data silos to legacy systems – and have built intelligent, intuitive and effective solutions that work for you.

Our commitment to excellence has helped us build a reputation as the leading global provider of data-driven consumer engagement and customer retention solutions. At a time when brand loyalty is at an all-time low, our data orchestration technology delivers the kind of experiences your customers have now come to expect. So, you can always keep them engaged and happy.

Get in touch: 

sales.enquiries@engagehub.com
+ 44 (0) 80 0088 5662 

Michael Worledge, Head of Financial Services Research at Harris Interactive explains what brands should know about digital transformation in financial services.

Faced with layoffs, job uncertainty, and an economy in flux, consumers worldwide have become far more conscious. They report thinking more about saving and budgeting than they have in the past, and many have prioritized sound investments with well-known providers. At the same time, their once-low confidence around spending is seeing a slow and steady increase.

Recent data shows that consumers are at a point where they’re ready to spend—and save—more. But what about how they’re doing it, and the role that digital financial management plays?  

Let’s look at where consumers are with this digital transformation right now, according to real-time data from our UK Financial Services Sentiment Indicator tracker and our wider Global Barometer. This is especially important for brands because the more understanding and data you can put behind the answer, the better informed your decisions become—and the lower the risk attached to it.

Financial management is forever changed with a rise in “digital first.”

The financial landscape is changing in terms of consumer engagement with internet banking, online payments, digital wallets, and other elements surrounding the transition from traditional to digital financial management.

Digital options play a much more prominent role in normal life than they ever have before. Between the pandemic limiting the ability to visit branches in-person and the resulting pressure on call centres, many have decided that the most remote option is safest. 

As a result:

• Two in five people worldwide say they manage their finances online more than they did 12 months ago.
• A growing number of consumers say they’ll never revert back to how they previously managed finances, ranging from 61% in China to 26% in Japan.
• The UK Financial Services Sentiment Indicator shows that 60% of consumers are comfortable with managing finances exclusively online.

Nearly half of consumers have been influenced by the digital transformation so much in the past year that their behaviour has changed significantly—and, most likely, permanently.

Different age groups show different comfort levels with managing finances digitally

The pandemic forced the adoption of digital alternatives to in-person banking across the board. But just because digital financial management has become far more common doesn’t mean that it has been as easily adopted for every demographic. 

While more than half of consumers ages 55+ say they’re comfortable using self-serve, online-only channels to manage their finances, they show more hesitation over other aspects of online money management, including:

• Frequently using their mobile devices to make payments, at 19%, compared to 48% of consumers ages 35-54 and 56% ages 18-34.
• Twenty-eight percent claim a comfort level using social media and apps to communicate with financial providers, which is well below average compared to consumers 35-54 (44%) and ages 18-34 (54%).

Still, 40% of respondents from each of the three age groups studied here all agree on the importance of having physical bank branches—an area where the 55+ demographic is right on par with those ages 18-54.

Digital wallets are becoming more popular

It’s important to remember that consumers can use digital in their daily lives without having to log into providers’ apps and websites. This is evident at checkout, where more consumers are reaching to pay with their phones instead of their wallets. That’s because digital brands are connecting with customers through the digital wallet, as with Google Pay, Apple Pay, and more. 

In fact, the data shows that digital wallets are becoming a way of life:

• In November 2020, 31% of consumers reported having no need for physical credit or debit cards because they can just use their phone — up from 20% just ten months earlier.
• In November 2020, 37% reported that they’d find it difficult to pay for anything without their phone.
• Today, nearly 50% of consumers report using their phone as a payment tool.

The digital wallet has become a key part of life as smart technology becomes the new normal in activities, financial management, and even in communication via apps like WhatsApp.

Regardless of digital options, consumers support brands that align with their values

Values are of core importance to today’s buyers; they want to know what the companies they’re supporting stand for. This is so crucial, in fact, that:

• 38% of consumers report that they’ve stopped supporting brands that don’t align with their values.
• 57% of consumers report being more likely to support brands that reflect their own values.

Regardless of providing digital options that offer convenience, security, and peace of mind, it’s more important than ever for brands to stand for something and to clearly and continually communicate this to customers. Only a quarter of consumers say they’ll keep supporting brands whose priorities don’t align with their own.

As the data shows, digital is here to stay—and its importance continues to gather momentum across countries and profiles. Brands must stay on top of these ever-evolving trends to make lasting, meaningful connections with their target audience.

To learn more about how you can aid your New Product Development, download our latest eBook guide here. 

IBM is an established and trusted partner across the financial sector, what does your position entail?

I am responsible for leading the banking consulting practice across IBM’s Global Business Services, concentrating on the bank’s digital transformation, core banking, and payments.

I am also the President of the IBM Industry Academy, an energetic and diverse community of IBM’s industry experts, thought leaders and consultants aiming to shape new solutions that will support our customers as they navigate to win in a rapidly changing future industry landscape. The Academy offers IBMers the opportunity to work cooperatively and collaborate with industry experts from every part of IBM.

Since my career began almost three decades ago, I have been fortunate enough to work across six different continents in various consulting and leadership roles in the financial services sector. This, combined with my current role and involvement with the IBM Industry Academy, provides me with a unique perspective and overview of the trends affecting other sectors, which helps me think outside the box for our financial services clients.

Are you able to tell us more about your recent appointment to BIAN’s Executive Board and BIAN’s role in the industry?

BIAN is an organisation of institutions and professionals from the financial and technology industries, standing for the Banking Industry Architecture Network. It is a collaborative, not-for-profit eco-system of leading banks, technology providers, consultants, and academics from all over the globe, who are committed to lowering the cost of banking and increasing the speed of innovation adoption in the industry. Members combine their industry expertise to define a revolutionary banking technology framework that standardises and simplifies banking architecture to overcome limitations preventing growth and encourages ease of management in their existing environments.

The invitation to become a member of the BIAN board was an opportunity I could not refuse. I am truly honoured to be part of BIAN’s executive board to offer counsel and support their work in helping financial institutions navigate this period of immense opportunity and disruption. Now, more so than ever before, BIAN’s open framework, services-oriented architecture, and standards model are essential to the financial services industry.

The banks that succeed will be the ones who have a technology and business strategy to support the ‘bank of the future’ in which much of the middle and back office get completely automated and more of the focus, investment and innovation gets applied to customers and customer value-adding functions.

Having worked in the financial services sector for a number of years, what makes you so passionate about the industry?

There are numerous reasons why I am so excited about present and future opportunities across the sector. However, one reason that stands out to me is the impact it has on people's everyday lives.

I am a strong advocate for financial inclusion and make it part of my practice to highlight its importance. Financial well-being and access to financial services should be available to all, no matter where you are in the world. So, I am continuously committed to supporting banks around the globe to expand the availability of banking services and reduce the cost point in doing so.

Financial inclusion is obviously incredibly important. But what measures can global banks take to increase the availability of banking services and reduce the cost point in doing so?

There is still a lot to be done to achieve inclusive banking globally. Although incumbents, FinTechs and TechFins have made massive investments in technology and innovation, there is still scope for more. Globally, billions of people still lack access to basic financial services. Critical areas such as payments - particularly cross border payments - continue to be expensive and access to credit remains a challenge for so many.

The combination of regulatory efforts, banks creating technology and business strategy that supports the bank of the future, and the prioritisation of innovation powered by hybrid cloud and artificial intelligence will inspire the transformation of the entire banking and financial services infrastructure.

Although a great deal more needs to be achieved, it is very encouraging that the combination of technological innovation – coupled with the emergence of new business models – is democratising finance like never before.

What can banks do to prepare for the future?

COVID-19 and changing regulatory environments has driven an evolving landscape which banks and FinTechs are navigating, while the financial services industry is being shaped by new consumer trends – from the rise of a cashless society to the pandemic-driven shift towards online banking and mobile payments.

There will be a continued focus on technological development to accommodate these changes. The banks that succeed will be the ones who have a technology and business strategy to support the ‘bank of the future’ in which much of the middle and back office get completely automated and more of the focus, investment and innovation gets applied to customers and customer value-adding functions.  This requires rapid digitisation and the adoption of exponential technologies to innovate, powered by the hybrid cloud and artificial intelligence. BIAN has an essential role in helping banks do just this.

With the move towards digital banking, including the increasing use of mobile contactless payments by customers, what will this mean for the bank of the future?

Digitisation is on the one hand driving innovation, new business models and efficiency while at the same time enabling extreme competition from both traditional and non-traditional competitors. In tomorrow’s banking eco-system model, more and more of the value is accruing from customer-facing functions supported by platform-based business models. By extension, this has meant competition from both FinTech and importantly TechFins (large technology companies that are moving into the less regulated aspects of financial services such as payments, electronic wallets, BNPL – buy now pay later models and more).

Banks in the future will increasingly not only automate extensively, but they will also likely extend their business models to create ‘beyond banking platforms’ to help their customers in a much broader context beyond the traditional banking value chain. The future of such models is being written in Asia by banks such as DBS in Singapore, SBI in India and many more as they change their business models to blunt the onslaught of the ‘super-apps’ such as Alibaba, Tencent, Grab, Gojek etc in that part of the world.

How can the industry find its footing after such a change?

Banks have several natural advantages that come from incumbency, customer loyalty and material regulatory barriers preventing non-traditional competitors from rapidly breaching their businesses. Regardless mastering the future will require banks to ask themselves three questions:

1. Is our strategy ambitious enough?
2. Are we executing fast enough? and
3. Do we have the talent and capabilities to win?

Answering these questions honestly and then putting in place programs to execute relentlessly is the only way for the industry to continue to thrive and take advantage of the huge opportunities that are presenting themselves in the coming decade.

Can you tell us a little bit about the way the pandemic affected you and your businesses? 

I think the pandemic was an intense obstacle for most businesses and business owners. For my companies, I quickly changed my mindset from being shocked and grappling with this whole new world to thinking about how I could adjust to better serve my clients, employees, and community.

The pandemic created unprecedented needs for our clients and with all the restrictions and safety concerns, we had to be very agile in creating client-focused solutions. All told, I think Postema Insurance & Investments grew well above 50% in 2020.

What were the main challenges you were faced with and how did you manage to overcome them? 

The first challenge was in rethinking how I could keep my employees and clients safe. The safety of those around me has always been important, but there was a new threat to consider with the pandemic.

With that handled, I had to decide how to keep my business operating smoothly so I could meet customer needs despite potential employee absences. We had to stay extremely organised and do a lot of cross-training while maintaining company ethics and service standards as our clients’ need for sound financial advice continued to grow.

What are some of the key lessons the past year and a half have taught you? 

It’s made me think a lot differently about my weaknesses. I realised how important it is to hire people who can do what I can’t, rather than just trying to do it all myself.

I’ve also learned how important it is to work on total and complete life management, not just time management. I’ve found that if I continue to follow a path of self-improvement, my entire team and all of my organisations will improve as well. If we want to change the world and make it a better place, we must first make ourselves better.

Tell us about your new company, Postema Capital Lending.

Ultimately, I have always wanted to add a lending component to my financial services organisation. The pandemic not only gave me the time to implement Postema Capital Lending but also pointed out just how necessary this service was. I strongly believe that financial planning isn’t just about accumulating wealth. It’s also about preserving your wealth and property with insurance, rigorous tax planning and strategic borrowing that’s easy to access from lenders all over the country. With the capital lending component, my company comes full circle. Our clients enjoy a full financial planning team meeting all of their financial needs, and it’s all in one place, making it easier for clients to manage.

What are your goals for the future of Postema Capital Lending? 

We are experiencing rapid but controlled expansion, so we’re focusing on opening satellite offices for captive sales associates and others. The Postema Capital Lending team is amazing. With Julie, Jodey, Kevin, Dustin and Abby running our home team in tandem with our accounting company, we’re seeing exponential growth in our list of lenders. We’ll soon have over 900 lenders available to help borrowers all over America get the right lending option. Ideally, we’d like to become the first place both borrowers and Loan Originators turn to.

Considering how much you’ve got on your plate, what are the strategies you implement to find time for everything?  

It really starts with the team that’s supporting me. We have to work together with a shared vision, ethics and goals. Once that’s taken care of, the rest is just a psychological battle. I’ve mentioned this in other interviews, but being a driven, hard worker can be both a blessing and a curse. But once you realise that your potential is limitless, it stops being a question of how you will manage everything; you just know that you will.

What does a typical day look like for you? 

I’m typically up and working out by 5 am. I get to work by 7 am so I can get ahead of everyone else. Keeping each company structured and running requires a full day of appointments, meetings, podcast recording and television interviews.

Ideally, I’m home by six and enjoying dinner and family time. From 8:30 pm to 11:00 pm I enjoy what I call my Prime Time. This is when I’m usually journaling in my victory journal and gratitude journal and working on book, program or website content. Before bed, I review my goals and plan my day so my subconscious mind can sort everything out and organise it by morning.

What are your top tips on motivation, productivity and successfully juggling a lot of things at once? 

I make sure that throughout the day, I’m constantly “filling my cup.” In other words, I’m getting spiritually, emotionally, and psychologically renewed all day by making sure I’m always immersed in some form of self-improvement. I never want to be the same person tomorrow that I was today. I want to constantly grow and evolve so I can better my life and the lives of those around me.

Keith Pearson, Head of Financial Services GTM at ServiceNow, explains the importance of hyperautomation for financial services.

As financial services look to accelerate their digital transformation plans in a post-COVID world, they must quickly recognise the importance of hyperautomation and the benefits it provides. In April, Gartner predicted that the worldwide market for technology that enables hyperautomation will reach $596.6 billion in 2022. Hyperautomation is no longer a choice, rather a condition of survival.   

What is hyperautomation? 

Hyperautomation brings together capabilities including machine learning, process mining, RPA, API integration and intelligent workflow orchestration to replace high levels of complexity with 80%+ automation of the delivery of services to customers. 

The key to success is actionable integrated data. Fragmented data and isolated systems are the enemies of hyperautomation, and data lake technologies don’t put the data that they hold into the hands of your employees in the workflow. The ability to integrate rapidly to modern and old systems, bringing together process-related data into one place where intelligent automation technologies can be effectively applied is the key to delivering actionable automated workflows and successful outcomes. Too many financial services organisations continue to deploy a ‘sticking plaster, hybrid-technology approach’ to achieve their automation goals, inadvertently creating yet more technical debt and islands of data.

IT leaders must therefore recognise that hyperautomation is crucial to achieving business outcomes. It empowers people and businesses to delegate the authority of decision making to intelligent applications, physical robots and software service assistants. Once technology that enables hyperautomation has been implemented then financial services organisations will begin to enjoy tangible benefits.   

Automating repetitive tasks 

The financial services industry is full of complex processes, transactions and payments connecting customers, buyers, traders, regulators and other stakeholders. Automation is crucial for firms to deliver a seamless customer experience, but legacy systems complexity often leaves high levels of human-dependent process management, while traditional business process management technologies, RPA and low code app development continue to contribute to a sub-optimal fragmented systems landscape. In these firms, engineers have traditionally wrestled with complex architecture and integrations trying to join systems that were never designed by vendors to work seamlessly together. 

Hyperautomation can empower these organisations and reduce manual input while ensuring high-quality results on front and back-end processes. The combination of RPA with ML and AI is the core enabling technology behind hyperautomation and the reason behind its intelligent automation. It allows companies to automate in places that weren’t previously possible, namely undocumented processes that rely on unstructured data inputs.  

For instance, if a bank’s customer requires a refund of a direct debit that should not have been paid, they contact the bank to recover the funds from the vendor. Hyperautomation streamlines the tasks involved within this request by automating data validation, making the processes quicker, more consistent, and less prone to error. Not only will this speed up digital processes but removing human intervention will dramatically reduce operating costs in the longer term. By combining hyperautomation technologies with redesigned operational processes, businesses are predicted to lower operational costs by as much as 30% in the next three years. 

Boosting customer satisfaction  

Streamlining back and front office processes will inevitably lead to a much more efficient customer experience. Removing human intervention not only speeds up the delivery of customer requests, such as refunds or complaints but also eliminates any chance of human error through automated workflows.  

Firms that embrace hyperautomation can create a simplified platform environment that is natively integrated, integrates quickly to other systems and combines the best that humans and machines have to offer in the ultimate delivery of service to customers. They monitor and adapt their processes in real-time, evolving quickly depending on changing customer and business demands. Bringing data together in one place has the added benefit of effective fraud monitoring, a single view of the customer and the ability to apply predictive analytics to spot patterns and avoid issues before they occur.

Hyperautomation can also create customised products, tailored services and highly responsive omnichannel customer services that are available 24 hours a day. By removing the need to do cumbersome, repetitive tasks, employees can focus their time on tailoring their products and services for their customers. Additionally, more time and opportunities can be opened up for innovation and digital transformation, which are crucial components for organisations to stay competitive and agile, particularly amid the pandemic.  

Real-time data analytics 

If business agility is the marker of success, then real-time data analytics is the key to this. Businesses often fail to identify where their inefficiencies lie due to a lack of data analysis, which is particularly frustrating in the financial sector given the vast amount of transactional data available.  

Hyperautomation can transform financial services by helping IT decision-makers unleash the true potential of data by deriving insights that enables them to understand current business trends and make predictions about future outcomes. This means they are well placed to refine their automated processes and make the necessary course corrections. Companies can therefore adapt in real-time and evolve depending on the changing consumer landscape.  

Furthermore, banks can utilise the AI algorithms and ML technologies built into hyperautomation to efficiently monitor all monetary transactions and proactively identify any fraudulent activities. Machine learning predictive models built with advanced modelling techniques can predict the probability of fraudulent transactions, minimising risks for customers.  

The future of automation 

Given the abundance of operational business benefits available, it’s difficult to overstate just how important hyperautomation will be for financial services over the next few years. Rather than just automating manual tasks, it will take a company’s ecosystem of technologically advanced tools and merge them to create a truly interconnected workflow solution.    

Hyperautomation was created so that low-value tasks can be performed with automation tools, advanced AI and ML, so that outputs can be created automatically and run productively with virtually no human input. It is designed to grow alongside a business and will create a working ecosystem that is constantly educated, agile and ready to utilise data and insights for quick and accurate decision-making. As financial companies look to remain competitive in a post-COVID world, it has never been a better time to embrace the future of intelligent automation.  

For financial institutions, leveraging data to gain insights and inform decision-making has become more important than ever before as digital transformation agendas become more focused on enterprise-wide initiatives that deliver elevated customer experiences. However, these efforts are currently being hindered due to overly complex data infrastructures that rely on a disjointed set of technologies for data management, semantic layers, data pipeline, data integration, and analytics. This is leaving firms unable to obtain data fast enough, and in a way that is easy to interpret and share to drive their organisation forward. 

Consequently, to solve these issues, many are looking for a new approach to data management. This has led some of the world’s leading financial institutions such as Bank of America, Citi, and Goldman Sachs, to implement data fabrics. But it’s not just larger firms that stand to benefit from data fabrics. Slated as the “future of data management”, this new architectural approach to data management can help firms of all sizes to achieve smarter data enablement, 'information fluidity', and a simplified and futureproofed data architecture to maximise the value of their data. 

The future of data management

The growing popularity of data fabrics is down to their ability to speed and simplify access to data assets across the entire business. A data fabric accesses, transforms, and harmonises data from multiple sources, on-demand, to make it usable and actionable for a wide variety of business applications without creating additional data silos. This is a far cry from the overly complex architecture most firms are currently used to. 

Smart data fabrics extend these capabilities even further by embedding analytics capabilities directly within the fabric, such as data exploration, business intelligence, natural language processing, and machine learning. This makes it faster and easier for organisations to gain new insights and power intelligent predictive and prescriptive services and applications. 

Another major benefit of a smart data fabric is that it allows data to remain at source while adding new functionality and levels of flexibility. This means existing legacy applications and data can remain in place so firms can maximise the value from their previous technology investments, including data lakes and data warehouses, which is particularly beneficial for smaller firms with tighter budgets. Additionally, this approach ensures firms don’t have to worry about moving data to a centralised store and all the challenges that can entail, such as latency and duplication of data. After all, it’s these issues that can call into question whether the data can be trusted and if decisions based on it are truly informed. 

Elevating the customer experience

Once implemented, smart data fabrics give financial services institutions the ability to more fully leverage their data, customer and otherwise, and open up a world of possibilities. By weaving together different data sets and providing easy and uniform access to data, a smart data fabric can help generate insights to better understand customers, predict behaviours, and provide customised experiences in real-time. These capabilities promise to help firms to elevate the customer experience and enhance business results. This has the effect of helping organisations to expand customer opportunities, retain existing customers, and gain a competitive advantage in an increasingly competitive landscape.

The use of a smart data fabric also caters to business users’ demand for more direct and simplified ways to derive insight from the firm’s data assets, while also helping firms keep up with regulatory imperatives that require support for advanced data quality, lineage, security, and governance capabilities. 

Smart data fabrics for all

With their ability to unify data from both internal and external sources on-demand, without creating additional silos, and provide accurate and seamless access to that data, smart data fabrics present the opportunity for financial services firms to do more with their data. This will put the power to accelerate business innovation and obtain or maintain a competitive advantage firmly within the grasp of organisations of all sizes. In what can be a challenging and volatile environment, this can make a significant difference to how firms respond to changes within the landscape and position them to use their data to inform their next move.  

As firms turn their attention to implementation, working with experienced technology providers and partners will offer the best path forward and ensure they are able to make the best use of the various data management, integration, and analytics technologies that make up a smart data fabric. 

By taking this step forward by implementing and embracing this next-generation data management approach, financial firms will set themselves up to succeed both in today’s landscape and well into the future, giving them the capabilities they need to deliver an elevated, customised, and differentiated customer experience every time.