It’s a transformative moment for the global banking and payments industries – and nowhere is this currently more hotly debated and discussed than at Sibos. Held this year at the ExCel in London, it is one of the world’s premier financial services conferences.
Newgate’s very own Jose Mendez has been at the conference. Here are his key takeaways on what’s been going on:
There was plenty of buzz and expert insight to kick off the conference, with an array of speaker slots and exhibitors:
- The growing influence of artificial intelligence (AI) into systems and processes in all sectors of business and life has been significant. However, the speed at which AI is becoming more prevalent does raise some questions in terms of whether this can potentially be damaging. On the positive side, AI allows for a better understanding of customers’ needs and their security. It can improve the customer experience significantly and allow banks to launch new services that are truly innovative. However, how can we avoid AI taking on unhealthy biases or making incorrect assumptions which may have been implanted by technologists? We have already seen real-life cases of gender bias in major companies where HR software has taught itself to prefer male candidates over female candidates, for example.
- Open banking is creating a more level playing field for financial services, giving customers more choice than ever and increasing competition for traditional banks. New fintechs and challenger banks are entering the market at a faster rate than ever. The impact that open banking has had is undeniable and has led to the democratisation of data, as well as the obligation to make access to bank account data and enable payment initiation services to all authorised third-parties – from the smaller players to the large banks and financial institutions. There are still some major challenges to overcome in this area, which include being able to process huge amounts of data at near real-time speed, then leveraging it and being able to use it effectively.
- Big banking is failing SMEs. The options which are available to SMEs vary dramatically yet rarely fit the bill. With no two SMEs being similar to each other, banks are struggling to provide SMEs with the tailored, flexible and agile banking solutions they need. Likewise, smaller fintechs haven’t fully and successfully been able to make a large impact here, which means there is a real opportunity for players who can move quickly and effectively in this space. Data and advanced analytics will play a key role here, as a bank with both a clear view of the business data, as well as the human needs of the owners, can see SMEs for their unique requirements and potential.
- Sell-side market infrastructure is evolving. Greater regulation and technological advancements, combined with diminishing margins is making companies re-evaluate their priorities and business models in order to stay competitive. Some of the key trends which are being noticed are:
- Emerging technologies need to be embraced. Technology is growing more sophisticated, especially with regard to cloud computing and machine intelligence. When firms embrace emerging technologies, they can advance application areas such as market surveillance and data analytics methods.
- Regulation has changed information flow in the industry, and with margins continuously being pressed, firms are looking for ways to lower their operations costs to focus on creating and retaining a competitive advantage in today’s market.
- Convenience is the key human trait driving disruption in the financial industry today. If you want your financial product to be successful, it needs to prioritise the consumers. If you innovate to improve the customer experience, making the customer work less is the right approach. The success of fintech’s big disruptors today is down to their accessibility and how easy they are to use.
There was a heavy focus on customer experience, technology and cyber security:
- Many financial institutions today are still struggling with cybersecurity. Attacks on banks succeed because of the challenge that banks face in keeping up with the basics of cybersecurity. Banks have tens of thousands of computers as well as employees who use those computers. Cyber criminals only need to find success once, making this a very unbalanced relationship. The challenge is further exacerbated by the overabundance of IT systems and security technologies that have been used over the years to protect the bank. Often, these systems are not effectively linked and those responsible for security find it difficult to see a cohesive picture of what’s going on. Essentially, the sector has a difficult time answering some of the key questions of what assets it defends and how these are controlled.
- The customer experience in banking is evolving. Banks are increasingly looking at how they can become more engaged with their customers and the answer lies in digital. Banks know that consumers today have a lot more choice than they used to and that they are a lot more prone to leaving if they are getting a sub-par service. There are numerous reasons that drive banks to go digital today, including the need to replace legacy systems or for brand driven reasons. However, the key takeaway is that they need to keep evolving and improving or a competitor will leave them behind. This is truer now than ever. New fintechs are delivering new hardware/software every day and this is giving the industry an exciting flow of continuous innovation.
- The payments business model is also transforming. In an open and competitive environment, serving customers who are no longer willing to pay for “moving money” is becoming more and more difficult. What this means is that for payments providers, the ability to execute payment costs effectively, while still being able to offer value-added services, is key to creating new streams of income. Data supports this, with a recent study by Aite Group showing that 63% of banks face payment profitability hurdles, while 95% report hardware as the biggest expense of payments and another 68% believe they will lose customers, prospects and volumes if they don’t evolve.
- Commercial banking is entering a new era – one that needs to be more connected, agile and relevant in the guidance and service it provides clients. An AI enabled, informed approach to client experience can alleviate operational tensions and improve how clients experience interactions across the lifecycle – from proactive client service to more conversant relationship management.
- There has never been a better time and incentive for financial institutions to proactively manage their liquidity as they grow. Regulatory, operational and cost pressures are demanding it, and technology has finally reached a tipping point where legacy IT systems are no longer a barrier to an institution’s real-time ambitions. Without a doubt, these are exciting times for the global financial industry.
Day 3 begins today, with the conference’s official wrap-up to come on Thursday, September 26.
More thoughts from Jose to come….