‘Big data’, the achingly common buzzword over the last twelve months is helping to disrupt the sectors it touches including Fintech.
Go big or go home
This so called big data is helping provide a much granular level of access to customer behaviour and psychology amongst other things. Millennials in particular crave & demand a different experience from their financial products these days and simply walk away from interactions and interfaces which don’t fit into their lifestyle. UI and UX have come (rightly) to the forefront of consideration for financial digital services and banking of old is starting to become just that…old. Combine that with the ‘uberization’ of other services whether it’s booking a place to stay or ordering a pizza and you have the perfect storm of potential disruption the Finance sectors ever seen. If I can order a Pizza using Facebook messenger, or order a Taxi using Siri then why can’t I manage my financial products using a similar human-like interface?
Look, it’s no surprise here that people want better, faster, quicker and slicker services when it comes to banking & finance. You only have to look at what’s happening in the sub and near-prime portions of the market to understand people want a more human, more responsible and more contextual experience. No more badly managed & irresponsibly lent pay day loans, but more carefully considered products to meet individual needs of the individual person.
One size does not in fact, fit all then. Recent UK regulatory changes with the FCA capping fee’s and otherwise squeezing UK lending companies profits mean we’ve got massive change on the horizon. It means banks now have to offer everyone a basic bank account, but where does that leave short term lending companies who could previously only push their sometimes toxic pay day loan product? And how do they make money? Are we about to see these companies turn into challenger banks baking in their subprime products and actually adding value for the customer? Probably. Who the fuck really knows?
There’s definite potential to offer a bridging service between those who have had their fingers burnt with irresponsible borrowing & are now in a position to learn from their mistakes, & need a helping hand ‘up a rung’ on the ladder. Maybe short term loan companies can start offering relevant subprime services which mirror prime services but use big data to help make much smarter, accurate & more responsible lending decisions.
Ultimately people want the minimum of friction, and there’ll be an app for that!
So below then is what I think are several key areas of change and innovation which are due to hit the banking world at some point in the next 24 months and I’m not saying I’m a particular trend spotter or thought leader, these are just the ones which have impacted me, my projects or the things I’m working on or see in my immediate horizon.
TD Bank integrates with Facebook Messenger.
Real time chat services from Facebook (allowing deeper interactions with customers) meant TD bank could integrate their services with it, a good Podcast from J Chan from TD talks about this but basically, customers are able to get specific customer service via Facebook Messenger http://www.prnewswire.com/news-releases/td-bank-offers-legendary-customer-service-over-facebook-messenger-300251674.html
Security is always at the forefront of everyone’s thoughts when it comes to banking. Security and easy access are at polar opposites so we’re already seeing mobile banking apps take advantage of device security hardware such as iris recognition, NFC token access & biometric finger print reading to access their services. And from an operational and process perspective, let’s not forget about Blockchain also. No more legal paper work to sign when taking out a loan – now it can all be done digitally and satisfy legal regulation. HSBC have recently rolled out voiceprint authentication which I think is really interesting.
Sometimes quite a lofty title, but I guess what I’m talking about here is contextually relevant services for an individual user. I’m currently working on a proof of concept idea in relation to a bespoke financial service but the world over, we’re seeing more & more innovation when it comes to AI. A very interesting article here showing how AI can help improve business process effiency and increase accuracy of financial decisions https://thefinancialbrand.com/52735/robots-artificial-intelligence-ai-banking/ and lest we forget the humble bot with AI learning thanks to Microsoft brilliant SDK which makes this thing kinda easy https://dev.botframework.com/
E-Commerce payment option integration
Wonga did it with PayLater and a few select e-commerce providers. Offering a payment option right next to Credit Card, PayPal and Worldpay you’d have a payment option for those who can’t get prime credit services but want to utilise a credit offering. These types of customers aren’t your traditional pay day loaners, but a new type of well-needed customer meaning a more diversified customer base, and potentially more lucrative (on an assumption someone wanting to spend £1500 on a sofa maybe a better risk than someone needing £300 until their next pay day). There’s already off-the-shelf infrastructure to support this, so we’ll see other companies extended their toes into this water very soon.
Secret sauce – big data (and hence the title)
Let’s be real for a second. There’s no IP or value in websites, Ukranian kids in their bedrooms are knocking out sites in their sleep. There’s little value in apps, again, same Ukranian kids doing their thing. Even infrastructure, everything’s turn key and off-the-shelf. Look at Wonga’s Paylater! However, the secret sauce is in the personalised big data around individual consumers. Scoring individuals based on an arbitrary score from one of the big three CRAs or making judgement calls based on their Experian Mosaic means little to those inviduals who are actually a good bet, are looking at rebuilding their credit scores and have made just one or two mistakes in the past. Linking a money management app into personal usage, gamifying good money management (to some degree, FCA regs mean you typically can’t trivialise such matters) and then augmenting this data alongside the CRA info means you get a much clearer and accurate picture into the individual. ‘Responsible lending’ means squat if you’re not making a proper effort to get under the skin of your customer and understand exactly what they do with their money.