Russell Bennett is the CEO of Fraedom. Here he reviews the major trends seen at London Fintech week 2019:
This year’s London Fintech Week saw delegates from over 50 countries come together to discuss the latest global fintech trends. In its sixth year, the event highlighted some of the key developments, disruptors and changing legal landscapes expected to impact the fintech sector in the coming months. At the heart of many of these developments is technology, which should come as no surprise given the growing influence it has had on the finance sector in recent years. For example, increasing use of artificial intelligence (AI) has added value to a wide range of tasks, including credit risk management, risk and finance reporting, customer relationships and security.
As technology continues to advance, it’s likely to play a key role in many of the disruptive trends set to emerge in the fintech sector, with this year’s London Fintech Week putting the spotlight on the following trends:
Blockchain was a recurring theme of London Fintech Week and is really gathering momentum across banking and financial services sectors. A recent report by the market intelligence and advisory services company, Greenwich Associates found that the financial services industry is spending about $1.7 billion per year on blockchain, as banks and other firms move beyond the proof-of-concept stage and start rolling out commercial distributed ledger technology (DLT) products.
The research also reveals that blockchain budgets increased by 67% in 2017, with one in ten of the banks and other companies now reporting blockchain budgets in excess of $10,000,000. Additionally, it found that the typical top-tier bank now has about 18 full-time employees working on the technology. These figures are substantial and are expected to rise as blockchain technology gains more traction. As its adoption increases, it is likely banks, and financial services organisations will focus more on how they can use blockchain technology to reduce operational complexity, streamline efficiencies and to find a competitive advantage.
In a relatively short period of time chatbots have gone from only being capable of completing very basic tasks, such as answering FAQs, to being capable of initiating actions of their own. Their capabilities have grown so much that by 2022, chatbots and virtual assistants are expected to save companies $8 billion per year. This growth is only expected to continue within the finance sector as Gartner predicts that by 2020 consumers will manage 85% of their total business interactions with banks through fintech chatbots. Advances in chatbot technology will allow banks to streamline their operations, reduce service costs and improve their customers’ experience. Consequently, they’ll allow banks to serve more people, more quickly.
While voice banking has been in use for several years now, with Wells Fargo one of the first international banks to adopt it, this trend is expected to continue. In the UK, Santander has recently introduced new voice and phone recognition measures, while HSBC has been using voice recognition services since 2017. Mariano Belinsky, managing partner of Santander InnoVenture, predicts the next progression in chatbots and voice technology will be natural language processing. This will provide context and meaning to user inputs and enable AI to come up with the best response. Developments in this technology will enable chatbots to overcome natural communication barriers and better understand the user’s intent, therefore improving customer service and limiting the need for queries to be rerouted to humans.
Regulatory challenges were a major theme of the event as the financial sector tries to get to grips with the new wave of regulations being introduced and the FATF prepares to roll out new rules to increase the compliance requirements on cryptocurrency exchanges. These regulatory changes could be seen as a barrier to the fintech market, however, as PSD2 and the introduction of Open Banking have shown, they could just as easily be instigators of innovation. Only time will tell the impact these changes will have, but preparation will be key in order for the financial services sector to be able to manage their influence.
Advances in Mobile Banking
As banks and financial institutions try to meet the demand among small businesses for the same mobile interactions they get from their personal banks there is a growing trend of consumerisation. Business executives are increasingly used to leveraging the latest technology to gain a real-time view of their finances in their personal lives and are therefore now demanding the same capability within the organisations they work for. In fact, research from Fraedom found that 95% of commercial clients who bank digitally in their personal lives, expect to do so at work as well. As a result, commercial banks are beginning to invest in key technology areas to make consumerisation possible. This is something set to continue, as more commercial banks expand their digital offering to allow businesses access to a greater range of mobile banking capabilities with real-time visibility of spend regarded as one of the most sought-after features.
According to London Fintech week, the trend of financial institutions partnering with fintechs will continue to develop, with Fraedom finding that more than 84% of commercial banks in the UK are considering new fintech partnerships this year. There are a number of drivers for this, such as improving customer experience, speeding up digital transformation, better cash and card management and cost savings. Partnerships with fintechs are not only enabling banks to implement the right technology, but they are also helping banks to better understand the consumerisation of business processes and technologies.
As we can see from London Fintech Week, technology will be at the heart of many of the trends set to disrupt the finance sector this year. It also highlighted that partnerships with fintechs will be effective to help banks to get the most from these new technologies and overcome the challenges presented by new regulations. It’s vital that these trends don’t go ignored by banks as they will be instrumental in helping them to improve their customer service, develop the more modern offering that society now expects and stay at the forefront of developments within the industry.