Leading Edge of Financial Services

podcast

Leading Edge of Financial Services

Tyrone Canaday, a managing director with Protiviti and leader with Protiviti’s Technology Consulting and Strategy group, with a strong focus on the financial services industry, discusses the rise of artificial intelligence, payments innovation and other key themes from the Money 20/20 conference.

Protiviti Podcast Transcript Transcript

Kevin Donahue, Protiviti
Kevin 
Hello. This is Kevin Donahue, senior director with Protiviti, welcoming you to a new installment of Powerful Insights. One of the leading conferences in the world that touches on innovation and new technologies being introduced to the financial services and payment industry is the Money 20/20 Conference, which took place recently in Las Vegas. Attending that event was one of Protiviti’s managing directors, Tyrone Canaday, who’s going to share with us some of the highlights and key points that were discussed at the event. Tyrone is a managing director with our firm, and he’s a leader with Protiviti’s Technology Consulting & Strategy group and has a strong focus on the financial services industry. Tyrone, thanks for joining me today.
Tyrone
Thanks for having me, Kevin.
Kevin Donahue, Protiviti
Kevin 
Great. Let me get right into this, Tyrone. I know there were several areas that emerged as things that were creating a lot of dialogue and conversation. One of them was artificial intelligence. Talk to me a little bit about that and how it’s viewed to be a key future growth driver.
Tyrone

Yes. I think with artificial intelligence, they actually dedicated a whole track to that on the first day at Money 20/20. I think the way to describe artificial intelligence at this point is, definitely, if you look at the proverbial Gartner Hype Cycle, it’s at the top of the hype cycle. I think a lot of firms see the promise for it in the future, just from the sheer fact of the adoption of digital channels and really reshaping businesses toward the customer experience. One thing that stood out is when I was actually out in Asia Pac earlier this year at a conference, the Global Payment Summit, was just the sheer number of transactions and the adoption of mobile out in Singapore, and some of the volumes that they’re dealing with, companies like Tenpay and Alipay.

They’re working on volumes in hundreds of thousands of transactions per second. When you have transaction volume that large, there’s just a lot of activity that needs to happen operationally at the bank. Also, from a regulatory and transaction monitoring perspective, from regtech, you’re starting to see new technologies that are starting to merge as well in parallel with artificial intelligence. You’ve got organizations moving to these more modern architectures that are API-centric and data-first.

They’re starting to tap into new ecosystems of information and data. Whether they’re fintechs or innovative third parties, or even as we start to get into this world of IoT, you’re going to start to have new data sources that are out there. As you start to create better channel experiences for the customers, we’re seeing a lot more uptake and a lot more focus on other channels such as Alexa and some of the work around voice recognition. You got some of the facial-recognition things that they have with the new iPhone X, and natural language processing.

All these different factors are starting to come in and converge. That’s all getting translated into data. You have this big-data aspect to it, where it’s no longer going to be sufficient to have semimanual and manual types of processes to address it. It’s getting to the scale now where you’re going to need more automation around that. That’s where AI starts to come in and starts to drive a lot of that processing, starts doing a lot of that analytics and machine learning around customer behaviors and things that you can’t do when it’s not automated with AI. That’s what a lot of the focus was on around artificial intelligence — where it’s headed, and how it can start to support different companies’ business models.

Kevin Donahue, Protiviti
Kevin 
Tyrone, in tandem with that, or maybe the flip side of that, is, among financial services organizations, this strong need for, or interest in, advancing customer experience. I know that AI actually can help drive and advance, but at the same time, firms need to make sure it doesn’t hinder that personal touch that comes with customer experience.
Tyrone

That’s very true, and I think that’s where a lot of firms are starting to look at it. How do you start to advance customer experience — customer experience 2.0? One of the main topics that were discussed in the conference was this whole concept around multimodality, where they are even starting to look at interpreting emotions, either through facial recognition or, if you’re doing things like chatbots and you’re using natural language processing, looking at emojis, and how you can start to factor that in and use AI to start to interpret that, to be able to provide better responses and better experiences to your customers.

While technology is driving a lot of the change now with new technologies in the space in how you deliver products and services, I think once you get a lot more organizations on these modern platforms, it’s going to start to move and shift all the way back toward the customer experience and customers’ interest in making sure that you’re operating where the customers are at and making sure that that experience is superior to any competitor’s.

Kevin Donahue, Protiviti
Kevin 
Now, Tyrone, with this drive to advance customer experience, you mentioned CEX 2.0, and then the emergence and growth of artificial intelligence. There’s also a need, as you noted earlier, with regard to innovation and maybe increasing the role of regulation, and this whole emergence of regtech. What’s involved with that, and how are firms looking to marry that with the development of AI and advancing customer experience?
Tyrone

Yes. I think, with regulation, there’s two ways to think of it. First of all, I think more at the regulatory-body level, how do you start to look at emerging technologies, and how do you have regulations start to get ahead of that and start to shape innovation toward the future? I know that if you look at different jurisdictions, there are different ways that they’re handling that. I know, in Singapore, with the AMS, they've got functions there where banks can tap into API's, where they’re able to do a common way to do anti-money laundering and know your customer, and not pushing that back onto the banks to do that, but do that in a way that’s more consistent, more cost-effective and transparent to the banks.

You’re going to start to see concepts like that emerge and start to permeate to other jurisdictions. We’ve heard recently in the UK, with their stance on GDPR and some of the regulations that they have around their own Revised Payment Service Directive. Those are ways to think forward on open banking and open financial services where we’re going to start to see a lot more of that adoption here in the U.S. I think at the regulatory level, you’re going to start to see that shape new future innovation. I think that’s the way regtech is going to help as that starts to shape regulation and policy for the different banks, just through the sheer number of transactions that had been mentioned before in addition to all this new data is are coming in, whether structured or unstructured.

We start to see new information coming in from IoT where you’ve got beacons and sensors. Different organizations are using data in different ways to be able to parse through all this information, to be able to report out to the regulators, whether it’s through regular regulatory reporting or whether it’s through suspicious activity on various transactions. Just to deal with that sheer volume, you’re going to have to leverage functions like regtech to help simplify that, to make it consistent and provide the operational efficiency that you’re going to need going forward.

Kevin Donahue, Protiviti
Kevin 
Tyrone, I know another big issue. It was discussed a lot at the event: the future of banks. Now, in the context of everything you’ve been talking to us about today with regard to AI, customer experience and regulation, in your view, what is the future of banks?
Tyrone
I think the future of banks is very interesting. There have been a lot of different conversations around it. I think a lot of organizations are really trying to transform themselves to really operate as financial service institutions of the future, but it really boils down to looking at data and building everything up atomically from the data, and being able to source data as a commodity. As you start to look at it from the source to the internal systems of your organization, how can you structure and store data that’s clean, that’s organized and that you can do multiple things with, right? You can start to look at customer behaviors. You can start to look at how you create new products and services, how you start to marry that with other types of data from other institutions to come up with multipliers, or new types of insights that you didn’t have before.
 
One of the sessions, I thought, that was the most insightful about speaking toward it was, in the last day, the one with the CEO of ING and the head of Goldman Sachs’ Marcus talking about how they envision digital banking in the future of that platform. Some of the takeaways from that, I thought, were pretty interesting, and, what you’re starting to see, a lot of the institutions’ thought, a lot of the technology companies that are coming out there, they are coming out with these platform plays that are gaining a lot of market share with customers that are on the platform. You’ve got platforms like WeChat, you’ve got platforms like Venmo, which are, from a customer-experience standpoint, just easier to use, so you’re seeing a lot of adoption with those types of tools.
 
The future of banking is going to resemble something where it’s going to be in a platform or needs to integrate with other types of platforms. It’s going to need to be open and built on these open architectures where data is going to be able to be shared between different institutions. Obviously, mobile adoption is going to be huge. As you start to operate where the client is through these different digital channels, most people are in mobile right now, but as that starts to evolve and you start to move away from mobile and start to get more toward interfaces and voice recognition, we’re going to start to see a lot of nondevice types of interfaces.
 
Also, around customer experience, how do you start to look at that data? Once you’re able to gather that and start to collect other channels of data, how do you start to look at that and start to personalize it more? How do you start to make it a little bit more accessible to the individual based on their specific situation? That’s becoming more and more of a trend. Also, with these new modern architectures, how do you start to scale that? One of the issues that we’re starting to see at organizations now as they start to move toward this digital future is that, and then we start to see the unsexy side of innovation and fintech. How do you start to scale across organizations? This cloud architecture, we’re able to spin off and get new data, get more processing power. Those are going to be important aspects. That’s what we’re starting to see in terms of the future of financial service platforms.
Kevin Donahue, Protiviti
Kevin 
Thanks, Tyrone. Let me ask you one last question that ties in with some of the themes you’ve been talking about today. Technology, clearly, is creating a sea change now, but the future of financial services likely will settle back on distribution, consumption and customer experience. What exactly does that mean for banks and financial services firms today?
Tyrone
Well, I think what it means is that there’s going to be an imperative to get off legacy systems as quickly as you can, because I think that’s going to be the largest inhibitor to making sure that you can deliver the customer experiences that your customers today and in the future are going to demand. As you get to these modern architectures, it’s going to be really about not just getting there, but about a continual destination of how you start to continually perfect the customer experiences, anticipating needs, looking through data, understanding your customer behaviors and really providing that high level of personalization.
 
This may require partnerships with other innovative third parties, or other types of firms that you never contemplated before. It’s going to be interesting to see how this plays out over the coming years. I think it’s going to be that battle for keeping the stickiness of the consumer and how you incent consumers going forward to stick with your platform.
Kevin
Tyrone, I guess this would be especially a challenge, these legacy systems for firms that are competing with other companies that were “born digital” and aren’t battling with these legacy systems but started with these cloud-based systems already in place.
Tyrone
That’s true. It’s going to be difficult. It’s going to be increasingly so for the institutions that continue to stay on legacy. What we’re seeing is that the institutions that are moving toward these modern architectures — we’re calling them the digital leaders — they’re starting to collaborate with other digital leaders and, with that, exponentially growing different capabilities and services that the digital laggards are not going to be able to provide. You’re going to start to see a big widening of the gap between the digital leaders and digital laggards.
 
We just put out a recent study, Wealth and Assessment Management 2022, and it actually quantifies some of these penalties that these digital laggards are going to face: For every $1 billion of revenue annually, there’s going to be roughly $79 million in penalties that they’re going to face if they don’t move to these modern architectures and platforms. However, on the flip side, I think for the digital leaders, institutions that are investing in technology well are going to see major performance gains in assets, on their management, in revenues and in market share. These are in the high 6 percent to 8 percent increases in growth.
Kevin
Tyrone, thanks very much for joining me today to discuss some of these very topical and truly hot issues for financial services organizations. You mentioned the wealth asset management study that Protiviti was a part of. I want to invite those in our audience interested in more information to access that study, as well as a wealth of other information on customer experience, fintech, blockchain, digital transformation and so forth. All of these can be found at Protiviti.com.
SUBSCRIBE TO PODCASTS:

Ready to work with us?

Tyrone Canady, Protiviti
Tyrone Canaday
Managing Director
+1.212.603.5435
Linked