One of the fascinating areas of fintech is how companies aggregate and interpret data. The types of data they can use and the speed they can interpret the info are changing how fintech companies operate.
One of the companies at the forefront of information technology research is Gartner. Founded in 1979, Gartner provides technology-related insight to more than 9,100 companies worldwide.
Gartner research director Stessa Cohen is a featured speaker at the 2015 Fintech Global Expo, taking place on May 28 and 29 at the San Diego Convention Center. Ms. Cohen specializes in retail banking delivery technologies and trends such as social media, financial social networks, multichannel integration, remote deposit capture, mobile banking and mobile financial services, online banking, branch automation, and teller and sales and service technologies.
Ms. Cohen will speak on how technology is impacting fintech and the role it will have in the future.
“One of my favorite parts of running the Global Fintech Expo is learning about all of the revolutionary new companies changing the way that business is done within financial services and banking,” says Andrea Downs, CEO of Coastal Shows. “Seeing how the market has matured and grown over the last few years is incredible.”
Technology is all about doing things better and faster. That is what consumers are used to, and their patience is limited for slower technologies which do not measure up with the competition, especially in a highly competitive sector like banking and finance. If they have a bad experience, another option is a few clicks away.
That means CEOs and CIOs have to also work better and faster to plan for how they will succeed in this rapidly changing environment.
That is when they call companies like Gartner and talk with people like Stessa Cohen. Ms. Cohen said she helps banks with customer delivery on the technology side while also advising clients on how to manage transformation and innovation.
Traditional financial institutions have a reputation for being slow to adapt to change, and while that can be the case, it is by no means universal, Ms. Cohen said.
“Some credit unions were ready yesterday, some today. That is true for large banks too. I’ve also seen the opposite, so the pace at which they adapt is not simply due to size though that can be a challenge,” she said.
If they want to survive they better get ready fast, for change is here, with more on the way. No area of operations will be left unaffected. That means Ms. Cohen has to be an educator, as she explains to her clients how disruption is affecting every aspect of their operation – payments, banking operations, data architecture, enterprise architecture, open banking, and app design.
She quickly points out how banks face an organizational challenge. If they want to remain competitive, they have to erode the silos that often exist between products and services. Gaps, repetition, and slow or indirect communication are killers.
Innovation is happening in many verticals, Ms. Cohen said, citing student and commercial SME loans. Even though these areas are relatively new, that should look to peer-to-peer lending for a hint as to how fast their sector may change.
“The sector began in 2008-2009 with the Kiva and Prosper models, but it has grown. Lending Club isn’t the same now as it was then.”
Simplification can also work against fintech companies, Ms. Cohen advised, especially as they labor to expand their reach.
“It is difficult for people to find sites,” Ms. Cohen said. “Most people don’t and they’re not changing, especially when they have other options like bill pay and Simple.”
Ms. Cohen looked back to 2009 when many people had multiple online accounts along with mortgages, student loans, and other products. There was a need for these processes to be simplified.
Small businesses have many more funding options available to them than they did just a few years ago, she added, and how the SME loan market developed is an interesting lesson how needs are identified and filled.
“In the past, if a small business was looking for an amount under $10 million, they had to cobble together services,” Ms. Cohen explained. “It was inevitable someone would step up and offer them.”
For all the recent developments in data gathering and interpretation, we are only in the early stages of growth in this sector, Ms. Cohen believes.
“There are a lot of possibilities for traditional banks,” she explained. “They face real time challenge. Some are starting digital banks with fresh databases and architecture.”
Ms. Cohen said it has become easier to leverage data with the emergence of many tools. The next step is for these institutions to create platforms that can make use of that new data, but it needs to reflect a new philosophy in order to be successful, one affected by the growth of social media.
“They have to be able to do things with the data, but just not to sell. They have to develop a relationship with the customer.”
“Do I want to be marketed to on the phone?” she asked. “They have to bring empathy to the relationship.”
Ms. Cohen illustrated her point by giving the example of a bank working with a small business owner. Through their data collection and cash flow analysis, they know the points of the year when similar operations need bridge financing and can proactively provide that product option to the business owner before they experience the pain point. This also works by comparing business at similar development points.
“Lenders can proactively offer in options in advance. They can anticipate more.”
Ms. Cohen also watches social media’s impact on fintech, though she has a few concerns about recent developments in the sector such as the mining of a person’s social media footprint to determine their credit risk.
“It has to be balanced,” Ms. Cohen said. “If I have many friends, does that mean I am less of a risk? There are many unanswered questions.”
“Any entity working with social media has to be very careful because of the potential for age or race discrimination.”
There will be plenty of change in social media data mining because of the differences in how the generations philosophically approach the whole realm of social media.
“Younger people have a different experience with social media,” Ms. Cohen said. “They understand it is a game.”
The first generation to be born during the advent of social media knows they are being watched, and are constantly susceptible to targeted ads and other intrusions, Ms. Cohen explained. Many people create multiple online personalities, some of which play with the algorithms designed to track their behavior by employing half-truths and other misleading information.
All financial entities need to ask themselves where their clients will be at various points in the future and start planning to serve them at those points, Ms. Cohen said. Plan on reaching them through multiple avenues. Build it into your applications, which is one challenge for digital education, she added.
“If I have student loans how do I manage that throughout my life?” she asked.
“How can companies use technology to prevent them from defaulting? It is far better to prevent an NSF situation with assistance that could be other products and services.”
These companies can build stronger relationships with their customers by using digital technology to provide services to help them better manage their finances, Ms. Cohen said. They can automatically generate a budget that identifies spaces to reduce spending. Should a client g to pay with a credit card they can receive a suggestion to use direct debit instead.
Some banks will develop their own solutions, while others will form partnerships. Some will buy their solution through an acquisition.