Smart Finance’s Big Surge

The practical requirement for more-efficient digital operations and client interfaces—and now pandemic-induced lockdowns—have put smart digital on fast forward.

Partners Federal Credit Union, which serves employees and cast members of the Walt Disney Company and their families, developed an app in 2018 offering core banking, coupons from local merchants and an education portal where members can hone their money management skills. The app encouraged 1,800 new users each month, a 20% increase in remote deposits and a 64% increase in mobile card payments.

Atlantic Union Bank recently deployed a cloud-based software as a service (SaaS) solution to fund over $1.4 billion in US government Paycheck Protection Program loans to 6,500 businesses. And in Canada, Equity Bank’s EQ Bank direct-banking brand is using the scalability of the cloud to meet a surge in digital demand, recently reaching some $3 billion in deposits.

As these cases suggest, the argument for applying advanced digital technology to financial services is winning converts like never before. The Internet of Things and smart cloud-based integrations, blockchain and artificial intelligence have long been understood as a means of automating key processes; reducing potential errors, processing times and costs; creating innovative new products; attracting new customers and better serving current ones.

Now, the interplay of advanced technologies and analytics for better decision-making, improved supply-chain visibility, risk mitigation and competitive agility are encouraging new deployments. Meanwhile, the growth of open banking and increased competition from new entrants such as Google, Amazon, Facebook and Apple are making it more urgent for traditional banks to keep pace with change.

The Covid-19 pandemic adds an extra layer of urgency to the adoption of smart technology, close observers note. As economies move past the crisis, businesses will be looking for tech solutions that help them to reduce costs, conserve cash and leverage investments. Research conducted by Bain & Company before Covid-19 found that 90% of tech executives view AI and machine learning as priorities for incorporation into their product lines, but nearly as many—87%—weren’t satisfied with their company’s approach to doing so.

Focus On AI

AI will “separate the winners from the losers in banking,” software company Temenos and the research group Economist Intelligence Unit concluded in a report from June, which found some 77% of leaders in retail, commercial and private banking saying it will be the most game-changing area in fintech. Regulators, too, are adding to the impetus. The EU General Data Protection Regulation established a right to an explanation of the output from new technologies like AI algorithms, and this should further propel investment in the technology over the next five years.

More than 80% of respondents see banking becoming part of a digital platform of services. While technology has always had an evolutionary impact on banks’ business models—from branding to websites and then to mobile—increased online interactions with clients allow banks to enhance their offerings and provide new levels of engagement and insight through digital ecosystems.

In May, HSBC announced the launch of the AI Powered US Equity Index (AiPEX) family, the first equity index products directed by AI. The AiPEX indices were developed by fintech EquBot and also uses IBM Watson to turn digital data into investment insight.

“AiPEX with Watson simulates a team of thousands of analysts and traders working around the clock to learn from millions of pieces of information and identify potential investment opportunities,” says Dave Odenath, head of Quantitative Investment Solutions for the Americas at HSBC Global Banking and Markets. “In today’s markets, investors need strategies that can keep up with the growing amount of data being generated each day. We are now able to offer clients solutions that not only keep up, but thrive, in an increasingly complex world of data.”

Elsewhere, established vendors including BankTrade, Finastra and Surecomp are offering a variety of trade finance solutions. Both Intellect Technologies and Premium Technology provide supply-chain finance solutions, bolstered by the third-party technology platforms PrimeRevenue, GT Nexus and Tungsten.

For those looking for a silver lining in the recent lockdowns, there’s a contender.