Expert opinions, TECHNOLOGY

How to succeed in the UX Economy: Embracing fintech in a smart way

Christopher Truce – head of fintech, Saxo Bank

Fintech is increasingly becoming more of a household name in Russia. The question of relevance is not why it matters, but rather how financial services providers can take advantage of it to thrive in today’s user experience (UX) economy.

Saxo Bank has been a fintech company from the beginning- before the word ‘fintech’ was even created by enabling traders, investors and wholesale partners to access the global financial markets with our technology, people and processes. Therefore, smart integration of financial technologies is in our DNA and a daily challenge we try to tackle.

Russia is one of the countries making great progress in fintech adoption. In fact, the fintech penetration index in Russian cities with a population of at least 1 million stands at 43% in 2017, EY reports. This is the third highest among the world’s top 20 leading markets, yielding only to China (62%) and India (52%).

Russia’s Central Bank puts priority on redefining the financial services industry with new technologies, and the country’s Fintech Association comprised of key market players is exploring how the financial landscape could be changed for the better through the development of blockchain, digital identity management, retail payment systems, and open APIs (application programming interface).

Among all the technologies, blockchain seems to be dominating discussions in the Russian media and at the high-profile business events. For example, Herman Gref, the CEO of Russia’s largest bank Sberbank, recently stated that the commercial applications of blockchain in Russia would start in two or two-and-a-half years from now. However, it is not the only technology that is changing the banking system in Russia and globally. There is an array of tools, including open API and AI, which also have great potential to help financial services providers in meeting the challenge of increasing customer expectations.

People have grown used to the responsiveness, convenience and customisation they have experienced via apps downloaded from their smartphones to run key aspects of their daily lives. As it is already evident in many consumer-focused industries, we are making a transition from a service-based economy – in which firms including banks grow relationships and revenues by adding more services over time – to the one in which the user experience (UX) is paramount.

Greater personalization is key to delivering the right experience, and it comes with better knowledge, or, more specifically, data. In today’s increasingly digitised economy, people are generating, capturing and analysing data at volumes and speeds that are accelerating exponentially. Through access to high-quality data, AI programmes can ensure messages to and communications with customers hit the correct target, time after time. The more an AI programme knows about a client’s preferences and priorities, the better it can meet and even anticipate future needs. AI-driven apps are already proposing courses of action and making recommendations for users’ consent via a click of a mouse or swipe of a screen. Before long, these interfaces will fall away, leaving just an AI-enabled conversation between the customer and the financial service provider.

What does this mean for banks? They currently interact with customers across a variety of channels, from branch to phone to web to app. Inevitably, a lot of potentially useful data slips through the gaps that could otherwise help draw an increasingly detailed and accurate client profile.

Chatbots are making the process of customer interaction more natural and more useful for the provider in terms of understanding and gauging future needs. As with virtual assistants that are almost invisibly managing our homes, banks’ AI interfaces can also change the user experience landscape as they reach maximum utility.

AI has existed in banks’ back offices for some time, but it is fast emerging into new roles, and could well become a core competence in the near future, becoming critical in efforts to optimise customer interactions, ensuring they deepen and broaden over time to sustain valued, trusted relationships.

Currently the world is entering a new era of open banking where higher customer expectations can be fulfilled by banks providing a widening and customisable array of capabilities and services accessed via APIs. This will give mid-tier banks in particular the opportunity not only to survive, but to thrive.

Grasping this opportunity requires a radical change in banking models and mindsets. However, to win in the new economy, financial services providers need to take a leap of faith.

In response to economic and competitive pressures, banks are revaluating their business models including their production processes, supply chains and skill sets. As part of this process, banks are opening up to collaboration with third-party providers, even in the provision of products, services and processes once viewed as mission critical. In order for this to be achieved successfully, banks need to unbundle their offerings to identify their key differentiators, before deciding what to get rid of, what to focus on and how to potentially re-bundle with external providers to improve client experiences at reduced cost and system complexity.

Once banks have decided which products, services and processes give them a definitive sustainable competitive edge, they can evolve their business models. It will likely become commonplace for banks to outsource larger parts of their supply chain and integrate with third-party providers more deeply, as new re-bundled service propositions emerge, through the use of APIs.

The growing popularity of APIs has enabled a more comprehensive integration between partners, allowing tasks to be executed ‘natively’. To date, integration of a third-party vendor’s services into a bank’s client proposition has required some degree of manual intervention. However, the operational risks and inefficiencies of human involvement are being eliminated as third-party applications use APIs to connect to core banking platforms.

Saxo Bank’s Open Banking solution enables our partners to link their users to the global capital markets while picking and choosing the tools and services they need to integrate to their existing offering. In less than 12 months since its launch, Saxo Bank signed up more than 20 different institutions across several different sectors which are reaching a community of nearly 20 million users, facilitating the on-boarding of new clients and the trading and investment needs of current ones.

In Russia, a number of leading banks including Sberbank, Alfa bank, Otkritie, are already successfully using open APIs with the goal to expand their digital product portfolios. The Central Bank of Russia hosts the Daily Info API, which provides users with access to financial information associated with the bank. The further proliferation of the open API technology in Russia was also discussed at the forum of innovative financial technologies Finopolis held in Sochi in the beginning of October.

While the benefits of collaboration are gradually being felt throughout the financial services industry, the business case for it should be developed carefully. Ideally, banks should partner with firms that have already re-examined their role in the supply chain and realigned their business and operating models. By leveraging the assets of others, rather than creating a new division, banks can direct more expenditure to areas where they already have well-established expertise.

The UX Economy is a challenge and a new opportunity for the financial services sector. To succeed, providers need to adopt a new mindset and to be open to the idea of greater collaboration with the goal to bring new technologies and new experiences to their clients.

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