CIO upfront: Beyond robo adviser: Top 5 emerging fintech trends in 2017

Ian Dunbar of SuiteBox reflects on emerging technologies impacting the financial services sector.

The wealth landscape is changing quickly as new technologies are developed and introduced into the market. Not all technologies will take off, but some definitely will, making life more productive for your financial services business.

An example is the arrival of robo-advice. There is no doubt that robo-advice is a significant technology play from the regulator's perspective, and we should be aware of this and other trends as well which we’ve summarised below.

1. The rise and rise of data aggregation

Not heard of Yodlee or e-Wise? I suggest you check them out. These data aggregation tools are the engine rooms of the future as they provide access to vast quantities of relevant client data. They enable data to be ‘scraped’ from your clients’ accounts if they provide access to their usernames and passwords. The real power of data aggregation is the value of the data and the actionable insights it provides. Yodlee was purchased by Envestnet, a US financial planning software provider for US$610m, reflecting the value of data aggregation in the future of financial planning.

2. The advents of APIs and the cloud marketplace

The rise of the Application Programming Interface (API) is fundamental to the future. APIs are the ‘plug and the cable’ of new technology that allow different systems to talk with each other and pass data back and forth.

Historically, technology was often ‘heavy’ and vertically integrated, with one application performing lots of functions. Now, fintech innovation is driving the growth of specialist tools and the significance of the API is that it allows seamless integration between specialist systems, with the help of the cloud.

Xero, the cloud-based accounting software provider, is a master of this type of business. In the ‘add-on-app marketplace’ there are more than 500 tightly integrated solutions, using the core accounting data from Xero and talking through APIs. For example, if you want to better manage debtors, there are 13 specialist add-on-apps to choose from which allow you to customise your online accounting solution.

For financial advisors, the leading US provider of financial planning technology, MoneyGuidePro, has 47 integrated partners already in place, delivering everything from financial strategies, ‘what-if’ analysis, portfolio management, robo-advice, profiling, insurance comparisons, virtual meetings, statement of advice production, cashflow analysis, budgeting and more.

Creating an innovation ‘garage’ or launching an accelerator programme are excellent options for larger organisations.

Ian Dunbar, SuiteBox

3. Robo advice will reach New Zealand

Expect the rise of the robo-adviser to continue. The marketplace in several countries is becoming crowded and not everyone will survive, but if the global experience is any guide, we will see the major wealth providers and broking businesses in New Zealand launch their own robo-advice offerings, with the regulatory environment becoming accommodative. The Australian start-up robo providers are also looking over the Tasman, seeing New Zealand as a natural extension of their market.

The real power of robo-advice comes from the combining of this robo-technology (which means efficiency) with the human financial adviser, to create scale and lower costs (the ‘bionic adviser’). The New Zealand market, with its low penetration of comprehensive advice and relatively low average Kiwi saver balances, stands to benefit significantly from this innovation.

4. Video killed the…

Global fintech marketing and events company Finovate has named the ‘virtual meeting rooms’ one of the leading wealth technology trends for 2017.

Why is this? Simply because video based engagement can deliver significant business benefits and an enhanced client experience. Take, for example Nationwide, the world’s largest building society, that boasts a relationship with 1 in 4 households in the UK via its 700 branches and 400 mortgage specialists. After the implementation of a video consulting service, Nationwide measured customer experience, new business uplift and cost and found that 93 per cent of customers who had experienced a video meeting said it was an excellent replacement for a face-to-face consultation.

5. Artificial Intelligence is on its way

The application of artificial intelligence (AI) to financial services is becoming mainstream. Smart machines and technology can turn data into customer insights and enhance service provisions, bringing the digital experience closer to human interactions.

US startup Clinc, coming out of the University of Michigan, is using deep learning technologies to deliver AI tools that will enable consumers to interact with their banking and financial services providers using natural language interaction. Spanish Bank, Santander, is using voice recognition via its banking app. Sweden’s Swedbank ‘Nina’ assistant is dealing with 30,000 conversations per month, achieving a 78 per cent first resolution rate. These ‘chatbots’ will become commonplace in our banking experience over the coming years.

According to a recent PWC report, AI will play a growing roll in the following areas:

Deep QA: systems that can answer natural language questions for clients.

Natural language processing: scanning swathes of online text to derive information and analyse consumer sentiment.

Machine learning: developing predictive models on when customers can most benefit from products based on their life-stage.

Simulation modelling: system running a complete life-event simulation for customers and then planning goals.

Virtual personal assistants: monitor a client's behaviour, spending, and saving patterns, then regularly offer advice.

Given these trends, what should organisations do next?

These are daunting or exciting times for companies, depending on how an organisation embraces the change that will inevitably impact the NZ market. What can you do?

Stay abreast of the global trends: Research is building fast on what is happening offshore. While the differing market dynamics and regulatory environments matter, the macro trends are common across the developed financial services markets.

Get involved locally: It may not always be called ‘fintech’ but there are strong start-up ecosystems operating in Wellington and Auckland. Go and get involved and you will discover fantastic technology innovation occurring close by.

Partner with startups that can add value: Creating an innovation ‘garage’ or launching an accelerator programme are excellent options for larger organisations. But even small companies can partner with startups. Just remember you need to give back to the startup, that is, funding and genuine business opportunities.

Examine how innovation friendly your company is: Look critically at how your risk evaluation, procurement and contracting processes are. Make sure you are not too difficult and costly for an innovative startup to work with.

Ian Dunbar is the CEO of Auckland-based tech company SuiteBox. Originally from Hamilton and a graduate of the University of Waikato, Dunbar is an experienced financial services executive, having spent 15 years in the UK, HK and Australia with global banks JPMorgan and UBS. Most recently he built and ran the investment platform business for UBS.

Smart machines and technology can turn data into customer insights and enhance service provisions, bringing the digital experience closer to human interactions.
Smart machines and technology can turn data into customer insights and enhance service provisions, bringing the digital experience closer to human interactions.

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