By now we all are aware that 2018 was the biggest year so far in fintech investments by value and volume. But this was by no means a one-sided street. In fact, the value that fintech companies around the world added and are adding to financial services firms is estimated to be of equal value to that of the funding and support they receive, if not more. Two sides to every coin, huh! Here are three ways in which fintech companies (seriously) added and are continuing to add value to financial services firms.

 

Voice-based artificial intelligence

While the actual technology has been around for a while now, 2018 saw progress and a wider adoption of voice-based systems; even in the financial services industry where customers were traditionally always hesitant to trust start-ups with systems that managed such sensitive information. Customers began embracing such technologies both externally by dealing with channels such as call centres and banks, and internally via the aggressive entry of home-based voice devices such as Google Home and Amazon’s range of products.

The value that voice-based technologies are adding to banks is really focused around intelligent voice-banking services that uses AI and algorithms to handle end-to-end banking functions for customers via a phone. These services include but are not limited to assistance with calculating loan amounts, making payments, getting market updates and seeking advice. The operating model in this stride typically comprises of banks that partner with voice-technology companies to develop customised solutions to suit the specific banking needs. While efforts towards these technologies are really pioneered in the US, Europe is quickly catching up and will soon be on a par. What remains to be the key focus is building trust and a safe environment to make users comfortable.

Text services are an equally important channel

In spite of the rising popularity and acceptance of voice-based services, texting also has a strong value-proposition to customers that makes it equally important and attractive. The primary advantage of using text-based services in important interactions such as those with banks is that it allows for referenceability by means of the fact that customers can go back in time and check their banking interactions and records. What makes text-based banking services even more attractive nowadays is the fact that these services are no longer only focused on providing information to customers via text (traditional uses), but actually now allow for a two-way engagement. Customers are now able to engage with smart algorithms via text to ask questions for purposes such as finding out balances, and also give text instructions for purposes such as making money transfers.

Allowing for smart two-way interactions allow customers to feel fully secure and feeds their need to be in constant communication and control of their banking accounts and services. Companies such as Digit are making big leaps by working directly with banks around the world to provide customers with as many text-based capabilities as possible.

Two hands to clap

Collaboration between start-ups and financial services players was and will continue to be an important factor in having an impact on the overall industry. The value is really three-fold. On one end, banks often struggle in keeping up with the innovation happening in the world and therefore see immense value in being able to learn from start-ups in every way.

Second, by virtue of the fact that start-ups are typically small and are primarily focused on building their products and solutions, they often struggle in terms of dealing with regulatory gate-keepers and find it hard to grow quickly without external support. Their collaborations with large financial services players therefore go a long way in building key initial relationships and giving them a platform to test their offerings.

Lastly, we must not forget about the final customers. They are at the top of this triangle. Customers gain significant value out of such collaborations because they are most frequently using the offerings of financial services companies to increase the value they can extract from such offerings. Mastercard’s Start Path platform plays an instrumental role in bringing 150 start-ups from around the world together every year to work together and build products for Mastercard customers and other firms. This program has given birth to fintech giants such as Revolut, Mobeewave and others who are dominating the global market today.

 

By Sahil Anand, Director, IBS Intelligence

This article was originally published in the January issue of the IBS Journal

by Sahil Anand
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