It was a great 3 days packed full of talks from the leading thinkers in the industry and opportunities for great conversations and networking with a diverse group of participants from fintechs, banks, investors, tech companies and more. I have summarised my 5 key takeaways below.
Generative AI was the big hype topic and featured heavily in presentations, panel talks and general discussion. It was highlighted that recent developments are game changing, in particular the accessibility driven by reduction in compute and hardware costs and the availability of open source algos.
We heard a lot of talk about experiments with a primary objective of improving efficiency. Ian Stuart, the HSBC UK CEO, spoke of using AI to automate the production of annual reviews for their 750k UK business accounts, freeing up relationship managers and account teams to focus more on understanding and working with the customer.
Annerie Vreugdenhil, ABN AMRO’s CCO for personal and business banking, discussed ABN’s pilots for two use cases focussed on their contact centres. Contact centre staff need to access lot’s of information and navigate many product screens during discussions with clients, the first use case is to use ChatGPT to automate this so that the contact centre staff have the most relevant pages instantly to hand for the client they are speaking with. The second use case is to automate the call summary notes, enabling the agents to focus fully on the customer rather than taking notes, and then to move onto the next client more quickly rather than writing up the call.
This is just the tip of the iceberg, banks have masses of unstructured data and text that Generative AI can unlock. Other use cases that came up over the conference were chatbots and virtual assistants, KYC and AML, detection of data anomalies and fraud, and developer productivity.
The use cases all mostly related to transactional and operational use cases, when talk turned to decision making or advice, particularly where there could be a high degree of risk such as investment advice or risk decisioning in lending, it was felt that the human element was still vital.
There were words of caution however centred around areas such as data security/privacy, bias and regulation. ABN are using a contained data environment in Asia for their pilots, so they are effectively not putting anything back into ChatGPT. The subject of accuracy and bias also came up a number of times as potential blockers to customer facing use cases, with banks wary of high profile mistakes that could make the news. But it was also acknowledged that humans also have bias and are not 100% accurate, so why should we hold machines to a higher standard?
Work is underway in this area too, for example Citi have launched a Generative AI pilot to look at control and governance around different use cases to ensure safety. Rumman Chowdhury, Responsible AI Fellow at Harvard University, also spoke about how her team is building a tool to identify and mitigate bias in AI systems. It was also noted that Gen AI can support regulatory compliance by enabling a better understanding of regulations and generating code for compliance.
Personalisation was also a big topic, with discussion about the current state of personalisation in both the banking and insurance industries, and the potentially massive impact Generative AI can have.
A panel talk dedicated to personalisation featuring ABN Amro, projekt202, Bank Hapoalim and Pacemakers.io outlined how the industry has moved from gen 1 personalisation, that was focussed on areas such as mobile apps and personalised alerts, to gen 2 personalisation that encompasses the whole end to end experience.
The message was very similar in an interview with Insuretech UK chairperson Louise O’Shea. Louise spoke about how the insurance industry is moving on from personalisation being about personalised insurance quotes, to a full customer lifecycle view of personalisation from marketing all the way through to back-office processing.
This moves us into the realm of embedded finance. Banks and other financial services companies don’t own the whole experience, so this becomes a cross-industry problem to solve. In this scenario the role of the bank is a trusted advisor for all of a customer’s financial needs, driven by personalisation but with a service overlay.
Another interesting question raised was “how do we distinguish cross-selling from personalisation?” It’s a grey area but key is the intent, with personalisation being focussed on customer well-being.
Generative AI can be a real game changer here and is seen as the next frontier for personalisation with its potential to deliver improvements in customer experience and conversational personalisation at scale.
Embedded finance and BaaS was a big theme of the conference with many major banking platform and BaaS providers such as Temenos, 10x, Natwest Boxed, Thought Machine, Engine by Starling, Onyx by JP Morgan, Griffin Bank, LHV and many more in attendance.
Natwest Boxed, Engine by Starling and 10x all starred on the agenda and brought us insights on a range of areas such as the current state of BaaS, BaaS business models, technology and visions for the future.
BaaS and embedded finance follows on from the idea of end-to-end experience personalisation and the need to take a cross-industry view to embed financial services into wider customer journeys at the point of need.
To enable this, customers need to be elegantly connected into the right ecosystems to help them achieve life goals and outcomes (e.g. If they want to buy a house, they need to be connected into the house buying ecosystem – estate agents, mortgage brokers, solicitors etc). This can involve financial service providers working closely with distributors (e.g. retailers) to embed financial services, but it can also involve financial service providers creating their own ecosystems and integrating relevant partners into the customer experience.
B2B embedded finance was highlighted as a big growth area, particularly in lending with the opportunity for example to provide SME’s with quick access to working capital credit seamlessly via an embedded banking service.
It was also highlighted that banks that rely on legacy core banking platforms (rather than modern cloud-native cores) will find it extremely difficult if not impossible to engage in embedded finance due to the lack of open architecture and real-time capabilities. This is where the modern cloud-native and modular core banking provide an advantage.
Open banking was a big topic of discussion, it has been around for over 5 years now but the industry is at an inflexion point with technology and regulatory advances having created great potential, but adoption challenges remaining. We are still in the early stages of the API economy.
The biggest issues discussed relate to API standardisation and data. The lack of a standard API framework has been a frustration to industry participants, this was not included in PSD2 but there is expectation that this will be one of the improvement areas in PSD3 later in 2023. Data issues also persist with consumers wary of sharing credentials and data sharing regulations such as GDPR also having an impact.
There was also a dedicated session on “the power of open banking in corporate finance”. Corporations may bank with 25 different banks, so dashboarding and aggregation would provide benefits, along with integrating services like payments initiation into corporate processes. However there was some scepticism about whether corporates would be incentivised enough to share data and lose an informational advantage in negotiating with their banks.
Open banking remains a key industry priority, Ian Stuart (HSBC UK CEO) also gave it a special mention – “open banking is everywhere and will continue to be big” while reiterating that the “bank of API’s” remains a key priority for Natwest.
Cooperation between banks and fintechs was a constant message during the conference. This is a trend that we have seen over the last few years as banks seek to partner or buy fintechs to create a synergy of complementary skills and resources. We heard of the success story of the partnership between Natwest and Gocardless, and recent announcements such as Rabobanks partnership with Banxware for embedded finance and in3 for BNPL.
There are a number of Neobank success stories with the likes of Monzo, Starling, Revolut and Tandem turning profitability. However, for each success there are many more who have been less successful and could be targets for acquisition or consolidation as cash dries up.
Embedded finance and Open Banking continue to be growth areas, as covered above. Generative AI is certainly gathering interest, but investors are cautious to separate hype from reality. Others that stood out were payments (particularly cross-border and B2B), sustainability and B2B business models.
In the payments industry, cross-border payments and B2B payments were seen as areas of growth. Cross-border payments is a focus area that is ripe for disruption with the current long clearing times and fees involved in these transactions. There is a move to multi-currency accounts to streamline customer experience and simplify FX, but the complexity of intermediaries and regulatory jurisdictions that differ by geographies still pose the biggest challenge. Firms are looking to replicate the seamlessness of consumer payments in the business-to-business (B2B) payments space, with a growing demand for B2B embedded payments solutions. This is a much more complex area but represents a large addressable market.
Sustainability transitions and ESG were seen as a massive space for innovation, growth and digital progress. There was great discussion with ING and Cogo about their partnership and the role of nudging and insights in carbon footprint management to enable individuals and businesses to understand and reduce their impact on the climate.
In general, fintechs with B2B business models were all the talk, with this being a shifting preference for investors and B2B outpacing B2C in 2023. As macroeconomic headwinds hit consumer-facing business models, B2B is seen as less impacted by market volatility, and as the market matures it is perhaps a natural shift that as B2C becomes more saturated, B2B becomes the area of opportunity.
I hope you found these reflections useful. A highlight of the conference for Waracle was that we got to present our business and talk about how we are helping clients across financial services to deliver intelligent digital experiences. We combine the best of design, data/AI and digital technology to help our clients navigate the challenges described above and to attract, engage and retain customers.
If you would like to connect and talk more about the above themes or how Waracle could help your business, please get in touch.