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Cognitive technology and the future of financial services

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Social Lead for IBM Analytics - Financial Services Sector, IBM

IBM has had a trusted relationship with financial institutions for more than 100 years and continues to help the industry become stronger and move into the future. At the FinTech Ideas Festival 2017, IBM CEO Ginni Rometty shared her vision on what a modern financial services platform consists of. Today’s world marks an interesting time for the financial services industry when considering the challenges and impact of economics, the political environment and technology. A wide range of priorities including customer experience, instant fulfillment, cyber security, risk management and compliance, expenses and low interest rates have led to the emergence of fintech businesses that are solving pieces of these challenges.

In addressing these challenges, being digital must be the foundation, with cognitive computing and blockchain layers. The financial services business has the competitive advantage to transform into a cognitive business that represents a way of operating that is not technology-based. Blockchain is profoundly innovative and is expected to do for trusted transactions what the Internet has done for information. Together, these technologies can form a modern financial services platform that is cloud-based, data-driven and applies cognition and blockchain. With this approach, fintech and business leaders will now have the opportunity to work together.

Cognitive technology and the future of financial services

Partnering with fintech

In a recent podcast, IBM banking expert Matt Kinney met up with industry experts Brett King and Bill Sullivan to discuss the need for partnerships between fintech and financial institutions. Financial institutions have large volumes of data, but they haven’t truly maximized the use of that data. They need to understand the value of the data to provide personalized, customized and textualized service for their clients. Fintech may not have the scale, but they are agile and they’ve raised the bar on the expectations of technology. Banks want to know how to turn data into cash and are partnering with fintech to realize their goal of delivering revenue through the technology.

Cognitive technology and the future of financial services

Modernizing now to capitalize on momentum

A recent video captured a presentation live on location at the Financial Services Sector (FSS) Forum. Marc Andrews, vice president, IBM Watson Financial Services, at IBM, and guest speaker Jim Marous, owner of the Digital Banking Report and co-publisher of The Financial Brand, trace the trends that reveal the need for modern customer insight solutions for financial services: 

  • Not only is data collected on every aspect of life, but this data is also powerful enough to connect—and even interact—with customers.
  • The trend toward financial inclusiveness is connecting financial institutions with previously disregarded or overlooked populations.
  • The modern consumer can use a smartphone to make a down payment on a fully electric car that can park itself in a driveway.
  • Even children mowing lawns are asking to be paid electronically, so that they can avoid a trip to the bank.

Cognitive technology and the future of financial services

Identifying challenges that can stop the momentum

A recent article, “The biggest threat to banks? Legacy systems, not fintech” (The Globe and Mail, November 2016), describes huge losses for JP Morgan, the collapse of MF Global caused by IT systems and the use of out-of-date, inappropriate tools. Author Mike Gardner explains how the rapid, mass adoption of digital, mobile and other innovative technologies compels fintech to force banks and other financial services organizations to modernize and keep up with accepted technology advancements in other industries.The "if-it-ain’t-broke-don’t-fix-it” attitude might be leading banks to ignore critical technology improvements preventing them from offering truly innovative products and services to meet current customer expectations.

A group of fintech experts came together to offer their thoughts on the current threats to the banking industry, legacy systems or fintech options, which were the topic of the blog post, The complex impact of fintech and legacy systems on banking. These experts also provide their opinions on whether legacy systems constitute a cause of disruption for the banking industry.

Cognitive technology and the future of financial services

Taking a look at what can be done

Something interesting is happening, and it is causing banks and other financial services to rethink how they are doing business. Customers are embracing mobile and digital channels more than ever each year, and successful companies need to deliver customer engagement through those channels. Disruptive technologies are challenging the traditional banking model. The competitive industry, banking, should come as no surprise, but the form of that industry’s competition is changing. The playing field is transforming, thanks to the rise of disruptive technologies as discussed in the blog, 5 disruptive technologies that are challenging the traditional banking model.

The biggest trend in fintech today is centered around improving customer experiences. Some say that millennials are driving this push, but perhaps the cause is much more subtle. Millennials are known to be technology savvy and often reject apps or products that do not integrate easily into their lifestyle. However, as digital and mobile technologies become part of daily life, everyone is demanding that the interfaces they interact with fit into the way they want to do things—seamlessly and effortlessly. Listen to a podcast featuring Carolyn Baird, noted author of papers, analyzing the millennial phenomenon; Priya Malani, cofounder of Stash Wealth; and Jon Stein, CEO at Betterment. They discuss the impact millennials are having on the financial industry with experts Alex Baghdjian, Robert Stanich and Brian Walter.

Cognitive technology and the future of financial services

Making that deep dive into innovation

Taking into account the customer experience changes that are occurring around us is important and perhaps can be summarized as uberization. Essentially, Uber and others like it—Airbnb and Alibaba, for example—are interfaces to common chores in our lives: calling for a taxi, booking a vacation or making a retail purchase. Now, we finally see these human-like, yet technology-based, interfaces showing up in financial services such as banking, wealth management and insurance. In the blog post, 6 biggest trends in fintech today, we explore six examples of innovation and change now happening in fintech.

Often, learning directly from people who have led the way by implementing leading-edge solutions has high impact. Watch this video that was recorded live on location at the FSS Forum to hear why Pershing, Southern Farm Bureau Life Insurance Company, USAA and US Bank are using a new era of customer segmentation and cognitive computing. Industry-specific models that effectively predict, personalize and address the changing needs of your clients enable you to segment your clients by their behaviors dynamically. You’ll be able to anticipate life and financial events, foresee client attrition, identify product opportunities and deliver tailored news and alerts.

Cognitive technology and the future of financial services

Improving customer relationships with cognitive technology

Today’s consumers tend to be continuously connected, digitally savvy, convenience-loving and price sensitive. They tend to be this way in all industries, which is changing the ways banks are doing business. Banks need to find ways to cut through vast stores of data to find actionable information to keep customers. View this slideshare to see how IBM Customer Insight for Banking helps you to take the following actions: 

  • Act with perfect timing
  • Cultivate the relationship
  • Discover what’s really going on
  • Drill deep into market segments
  • Earn permission to become part of the customer’s life
  • Identify customers by their behavioral characteristics
  • Make the right offer
  • Renew customer loyalty
  • Seize opportunities as they arise

Cognitive technology and the future of financial services

Learning more about fintech and cognitive technology

The financial services industry has a wealth of information, and the companies that are able to get the deepest insights from this information can gain a competitive advantage. Cognitive technology is needed to make sense of this data and is, therefore, a core element of a modern financial services platform. IBM commits to helping the financial services industry face their priorities including customer experience, immediate fulfillment, cyber security, risk management and compliance and expenses to become stronger and to move into the future.

Now is an excellent time for collaboration. Fintech is like research and development sandboxes for established banks.  Hybrid cloud solutions provide the flexibility for maximum achievability for organizations to plan system upgrades in the areas impacted the most. Consider IBM as a large research and development sandbox that focuses on fintech, where you can find all the latest technologies including blockchain, cloud computing, cognitive computing, the Internet of Things, machine learning and more. These technologies are all under the umbrella of a single technology company possessing an in-depth know-how of the financial industry and legacy systems.

Learn more about cognitive technology for banking