How to Win in Today’s Battle for Deposits
December 1, 2023 | 1 min read
Most conference breakout sessions don’t include bibs, barf buckets, and bowls of ranch, but one did at Money Experience Summit 2023. In "Hot Takes: Fintech on Fire" Jason Henrichs, CEO of Alloy Labs, guided the panel of industry leaders through hot questions and even hotter wings in this fintech take on the “Hot Ones” series. Neff Hudson, Founder of Castle Hills Consulting, Mary Wisniewski, Editor-at-Large at Cornerstone Advisors, and Wes Hummel, Chief Technology Officer of MX joined Henrichs on stage to share their honest, and often spicy, opinions on the latest trends in fintech.
Between bites of hot wings and gulps of milk, the panelists shared their thoughts on these key topics:
AI fundamentally changes how banks operate: not just the interface, but also the strategy. From the tactical level to the strategic level, how does AI impact how all financial institutions think about strategy?
Hummel: Tools like ChatGPT use data inputs to respond to prompts. If that data isn't correct, the implications could be severe. Making any kind of decision in an automated way requires the data to be good, especially in cases like lending decisions. There’s significant work to be done to overcome today’s challenges with data validation, user validation, data security, and producing accurate and appropriate responses.
Wisniewski: The software industry built applications that don't learn from user inputs, so the next 10 years will be rewriting these applications to make them smart. That's where generative AI will have a significant impact in creating code. Financial institutions should embrace this because the pace of innovation in the banking industry is glacial compared to the pace of innovation among competitors. The big tech companies have trust, will develop safety, and specialize in convenience. Meaning the main competitive advantages in the consumer market have already dissipated and I anticipate will only continue to dissipate faster.
NPR’s podcast had a recent segment exploring “Is it a bank”? What does it mean to be a bank today?
Wisniewski: Banks need to become fast and easy. Who is fast and easy? Amazon. Return something and it shows up in my balance, easy to spend again later. I think one of the biggest challenges is financial institutions viewing the world through this lens of what it means to be an incumbent in the future, especially in this shift toward embeddedness. Fast and easy means the transaction is part of a bigger story.
Hudson: The provocative conversation used to center around banks evolving from dumb pipes to smart pipes. We have to rethink what being a bank means. Instead, banks should focus on the safety offered through regulation. Consumers care about the safety of their money and assets. I think the only thing that a bank is to a consumer is: is it insured or not? Does it have FDIC coverage? While there needs to be a focus on safety and convenience, it’s essential to care more about customers and less about profits. That's why I think credit unions will compete well in what appears to be another market contraction over the next five to ten years.
Will we say fintech in 5 years or will fast banks and fintech meld together?
Wisniewski: Five years ago people asked when we would drop FinTech and just use banking. Today, it’s still distinctly team fintech, team bank. I think that will stick because it's like the stereotype of entrepreneur versus tried and true.
Hudson: I think someone will invent a new clever buzzword. FinTech will remain because RegTech is our hidden salvation underneath. The whole reason to build these open APIs was to keep pace with the innovation outside of our walls and meet our customers where they are. Younger generations don’t visit bank branches or think of banks as places. It's a service. And that service should be wherever they want it.
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