Fraedom: the biggest fintech and finance trends in North America
In recent years, we have seen a number of developments within the finance sector, many of which have been driven by the latest technology. Increasing use of artificial intelligence (AI), for example, is now adding value to a wide range of tasks, such as credit risk management, risk and finance reporting, trading floors, customer relationships and, of course, security. As technology continues to advance, we are seeing a growing number of trends influencing the way banks and fintechs operate. But which trends are likely to be most influential in North America this year?
An innovation that is being driven by the application of ever-improving AI capabilities is the intelligence of chatbots. In a relatively short period of time they’ve 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 bn per year. And this growth is only expected to continue within the finance sector. According to Gartner, 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, improve their customers’ experience. Consequently, they’ll allow banks to serve more people, more quickly.
In the US, voice banking has been in use for several years now, with Wells Fargo one of the first international banks to adopt it. Since then, not only has its adoption increased but also its capabilities. In 2017, U.S Bank was the first bank to allow users to access voice banking on all three major voice assistants – Alexa, Siri and Assistant. This is a trend we expect to continue, particularly as Mariano Belinsky, managing partner of Santander InnoVenture, detailed that 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. With this in mind, it seems it will only be a matter of time before virtual assistants become more mainstream among US banks.
Blockchain technology 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 $1.7bn 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 among US banks of all sizes. As its adoption increases, it is likely banks, and financial services organizations will focus more on how they can use blockchain technology to reduce operational complexity, streamline efficiencies and to find a competitive advantage.
Advances in Mobile Banking
We are seeing a growing trend of consumerization as banks and financial institutions try to meet the demand among small businesses for the same mobile interactions they get from their personal banks. 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 organizations 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 consumerization 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.
We are already seeing a trend of financial institutions partnering up with fintechs, but this is something that will continue to develop, with Fraedom finding that more than three-quarters of US commercial banks 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. Not only are partnerships with fintechs enabling banks to implement the right technology for these purposes, but they are also helping banks to better understand the consumerization of business processes and technologies.
Ultimately, technology will be at the heart of developments within the finance sector this year, with partnerships with fintechs allowing US banks to get the most from these new technologies. These trends will be instrumental in helping commercial banks to improve their customer service and develop a more modern offering that is more in line with what people have come to expect from consumer banks.