This full-day event on Open Banking and the digitisation of financial services focussed on areas including building society strategy, legal liability, technology, and engaging with fintechs. The main debate looked to 2030 and the future of building societies beyond Open Banking, drilling into how they can best adapt to the changing financial services landscape.
Tanya Andreasyan, Editor in Chief at FinTech Futures / Banking Technology introduced the theme of the debate by exploring the word "Legacy" in the banking industry and the impact of the technologies that should be embraced by Building Societies such as the Cloud and Blockchain.
She also pointed out how a focus on Customer Experience and on Digital Development at the forefront of services is fundamental for the future. AI and Machine Learning are technologies everyone needs to keep an eye on. Her tips on how and why to embrace new technology are:
- Make the digital a priority
- Move away from the competitor
- Take no more than 2 years to transform
- Make sure to reach the end of the process
- It can slash financial cost by up to ⅓
We then kicked off the debate with the panelists:
- Penny McLoughlin, Director, Financial Services Marketing, KPMG
- Simon Healy, Industry Director, Financial Services EMEA, Unisys
- David John Gardner, Partner, Technology & IP, TLT LLP
- Mark Lusted, Managing Director, Dock9
1. What five technologies will building societies need to be using by 2030?
There is no doubt that Machine Learning and AI technology will play a significant role in the future of banking and Building Societies. Beyond that, Building Societies need to think how we will enable innovation and leverage its risks.
The key technologies or areas to focus on are data transfer security, the rise of Sup-tech and how Building Societies can better understand and manage their risks. The Customer personalisation that offers more dynamic predictions for users, the omnichannel experiences or platformication that removes the need to embed entities in a system and gives the agility to plug and play, have also been mentioned. How can BS diverge from the algorithm based decision for complex cases where the automated decision isn’t enough? How this same data could then be used in a proximity beacon as soon as the user enters a branch for example?... So advisers can make an effective use of their time.
2. What impact do you think fintechs and big technology companies like Amazon, Google have on building societies?
According to Penny the role that Apple, Google and Amazon play as hyperscale companies is one of delivering a great brand experience. Indeed, that ensures the trust in their brand is stronger than Building Societies and other existing financial providers. This means they’re able to invest as much as they do and that is hard to compete with. In direct opposition to companies that have been around for a very long time and can’t take that level of risk, these companies can fail fast.
A lot of innovation comes from the tech world and they are major enablers in terms of security and tools as they are investing money and resources. According to Simon the opportunity here is for Building Societies to partner with these companies and combine expertise as long you focus on what you want to play with.
The positive side of their impact is giving away technology or charging a small amount for the user and it means that proof of concepts can be tested quickly according to Mark, who mentioned the benefit of using Google Cognitive services as an example.
3. The current next step for many building societies is placing their systems on a cloud based platform – what are the opportunities and risks from this?
The overall benefits are in terms of scalability and the speed to make decisions. However, according to David we are certainly at risk as guidelines no longer leave a degree of certainty as they did a couple of years ago. The key challenge for institutions is the need to think carefully who they partner with and the terms in which they contract with their partners. While Simon agreed that the fundamental concern comes back to security he also points out that there are tools and solutions out there that can create micro segmented security arrangements to stop attacks from spreading through the network once it happens.
4. In terms of future technology, what role could blockchains and quantum computing play if either are adopted across the market?
Mark suggests that Building Societies have a great history, and a vast amount of data across theirs systems and platforms. At the moment, putting that through a machine learning algorithms would take a great amount of time. Quantum computing could be a massive game changer as it is possible to put in a hundred years worth of data to get two years later an algorithm which could change the way you access underwriting data.
According to Simon, keeping an eye on blockchain technology is fundamental, but the reality is to understand the customers, what are they looking for and using technology to reach them. Don't innovate purely for the sake of innovating.
5. Will building societies need to change the way they are organised and structured?
According to Penny, segmentation, focusses on customer journey and how to integrate the front and the back office are key ways of re-organising. The mindset needs to shift as Building Societies will be managing ecosystems, alliances, and joint ventures - the cultural change on Building Society as an organisation perhaps need to move away from an innovative culture to an agility culture.
Mark then posed the question of ‘Who owns digital in your organisation?’ Having someone owning it and having a strategy in place to implement it is a great way to structure. The advice is to invest in the process, make it agile and focused on the customer journey - customer first mindset embedded in the process, user testing to help shape the service and drive change at board level.
6. What will good service look like in 2030?
Mark: APIs and ecosystems will be very important and you need to make sure the foundation is in place, and that's where you should focus first.
Penny: Scenario planning, looking at parallel opportunities and focus on empowering the customer.
David: Think carefully about who you collaborate with and do take the time to think about and not just jump in at the first opportunity but don't take too long as the landscape it’s changing very quickly.
Simon: Start small but start now - small steps, less risks, get the right partner and start the journey.