Overview from Fintech Snark Tank
For readers unfamiliar with fintech snark tanks, this annual list subscribes to the Deep Throat approach to ranking banking technologies.
I wish it was an obscene reference, but it is not. in the cinema all president’s men, Woodward and Bernstein meet their informant—whom they refer to as Deep Throat—in a parking garage who tells them: “Follow the money.”
The really “hot” technologies in banking are those that financial institutions invest in—not necessarily the ones pundits talk about.
At the end of the past seven years, Cornerstone Advisors has surveyed financial institutions to find out where their technology dollars will go in the coming year. What’s going on in banking 2022 The study reveals some changes in technology focus for the coming year.
Hottest Technologies in Banking
The top five lists for 2020 and 2021 reflected slight changes in priorities in all those years as both years’ lists included similar technologies, but in a slightly different order.
However, for 2022, three new technologies crack the list: chatbots, machine learning, and digital loan origination systems.
Digital Account Opening: Get It Done Already!
It is 2022—what is taking the industry so long to implement digital account opening? This should have happened years ago. it’s not rocket science. According to Alex Johnson, director of fintech research at Cornerstone Advisors and author of fintech takes over Newspaper:
“Financial institutions attach great importance to digital account opening; As if a great digital account opening experience would somehow magically drive customer acquisition. This is nonsense. Applying a new coat of paint to your storefront every year won’t increase sales if customers don’t like the product you’re selling.
Chatbots: Every Bank Needs Some of Them
Looking at 2022, one in four financial institutions plan to invest in or deploy chatbots. To date, only 18% of banks and credit unions have invested in chatbots.
It’s taken some time, but the industry is realizing that chatbots—or more broadly speaking, conversational AI—have become a competitive necessity. Three requirements are driving the need for chatbots:
- process quality. The abandonment rate for digital product applications in banking is very high. Even more troublesome: A minority of institutions follow up with applicants within one business day. this is unacceptable. Banks need to make chatbot components of critical business processes (such as account opening) – not just general sales and service tools.
- figures. Attempts to codify and store “data” collected through human interactions – and even from clickstream data – are incomplete, generally inaccessible to other applications that may benefit from the data. , and is difficult to analyze. The data obtained from chatbot interactions can overcome these shortcomings. Banks need to make chatbots part of their data management strategies – not just their sales and service strategies.
- personalization. Many banks think of personalization in terms of personalization messages, smart banks understand that good personalization need personalized Conversations, However, they still struggle to create opportunities to acquire data and have personal interactions to provide good personalization.
Machine Learning Gains Traction (Finally!)
We’re hearing about how artificial intelligence—machine learning, in particular—will transform the banking industry. Few medium-sized financial institutions—just 12% of banks and credit unions—have deployed these technologies so far.
However things are changing. One in four banks and credit unions expect to invest in machine learning tools and technologies in 2022. Two use cases are driving this boom:
- Credit Modeling. A 2020 study by Cornerstone Advisors found that 20% of financial institutions with more than $1 billion in assets plan to make significant investments or enter into strategic partnerships thanks to new credit modeling and advanced decision-making tools.
- Fraud and risk management. The percentage of bank and credit union executives citing fraud, risk and cybersecurity concerns skyrocketed from the previous year in Cornerstone’s 2022 study. Many people are looking for machine learning tools and techniques to help manage these concerns.
What is stopping the banks? As McKinsey telling:
“Machine-learning models tend to increase some elements of model risk. Although many banks have validation frameworks and practices to assess and mitigate the risks associated with traditional models, these often deal with the risks associated with machine-learning models.” are insufficient for
Tools and apps from companies like Zest.ai and ComplyAdvantage are helping banks overcome these challenges, helping propel machine learning into the top 5 technologies for 2022.
P2P Payments: Riding the Wave of Faster Payments
Although only 15% of financial institutions have deployed Actual Payments, 28% expect to launch them in 2022, with another 26% expected to launch in 2023. P2P payments are the top use cases cited for faster payment programs by financial institutions.
A potential accelerator of banks’ P2P payment transformation is the launch of Chak™, an open network for instant bank-to-bank payments. Alloy Labs Alliance, a consortium of banks. The network will enable consumers to:
“Send money from their banking app (desktop or mobile), and let recipients choose where they want the money to go, including on some popular payment networks. Financial institutions now have a choice when it comes to providing instant payment capability. And they don’t have to settle for expensive, restrictive and closed networks.
The new network—to be integrated into community banks’ mobile banking apps—will reduce the need for users to transfer money between apps or log in to their bank account to transfer funds from another application. be able to check
Digital Loan Origination: Better Late Than Never
Back in May 2018, Daryl Jones, Senior Director at Cornerstone Advisors wrote,
“Digital lending is the future, and the ability to effectively capture and engage borrowers throughout the borrowing process is critical. But, the pace of banks and credit unions moving to these platforms is not as strong as many believe. “
With deposit levels rising, however, the industry’s focus is once again on lending, and digital loan origination systems have finally crossed the top 5 list – for tech firms like Numerate, Blend and Boss Insights. Good news.