Modernization = Speed?
November 15, 2022 | 1 min read
Brandon Dewitt, Co-founder and CTO at MX, and Daniel Rosen, Founder and General Partner at Commerce Ventures, took the stage at the New World webinar series from MX to discuss the shifting landscape in the financial industry and the disruptive role fintechs will play today and in the coming years. Shayli Lones, Director of Product Marketing at MX, hosted the discussion.
Check out some of the highlights from the discussion below. To get access to the New World of Banking and Fintech webinar series register at MX.com/new-world.
The future is no longer simply technology giving people transactional information that they can then act on. Instead, technology will have enough data points to infer the information needed to ensure people are making the right financial decisions, and then have the ability to make those decisions for them proactively.
Rosen believes that the “next generation of financial services capabilities and consumer experiences are going to fundamentally be digital and automated. They’re going to make inferences based on the data that they can access and take action [on a person’s behalf].”
One example that’s at the forefront of automation is Digits. As Dewitt says, “The fintech can look at your data and know how much funds you need and move money for you without you realizing it.” In essence, humans no longer have to be in the decision-making process.
Machine learning will be able to make recommendations based on people’s financial behaviors that help them make the most of their money.
“Semantically mapping the entire world really didn't work,” says Dewitt. However, he goes on to say, “what it did lead us to was this idea of object recognition through AI and image recognition. For example, a financial institution can take transactions, like movie subscriptions, and build a semantic graph. Then it can infer that you can consolidate two of your subscriptions without losing any selection of movies. This is an inference that can benefit the lives of individuals substantially, and it starts to look like magic.”
Various financial institutions have broken the trust of consumers in big ways by how they identify individuals for cross-sell or upsell opportunities among other factors. But this breakdown in the system is a reflection of only some, not most, financial institutions.
Dewitt believes that fintechs will see this as an opportunity to “step in and say that they know how to tell systematically whether a cross-sell or upsell is being abused, and they’ll have ways to stop it from being abused.
However, Rosen adds, “[even though] fintechs have been more open to trying new financial tech solutions, banks have an ability to serve a broad set of needs that’s hard to find in any one fintech.” What’s more, Rosen goes on to say, “we’re seeing that banks have been [making a huge effort to] earn their way back by serving and being there when consumers need them.”
Great need creates great opportunities. This economic crisis is ripe for creating new ideas and innovations.
Dewitt explains that “this is a good environment to go and build something new. Pain from the economic downturn manifests problems that can be solved. And there are problems everywhere in the system. There’s a lot of pain in the economy right now, and it’s becoming so acute. There’s no time like now to launch a company. We might not see a cycle like this for another 10 years.”
Fintechs as enablers are likely to face less opposition compared to fintechs as challengers in the coming years.
Rosen expands on this by stating that “as enablers there’s no presumption of high risk. But if you look in the challenger space, then there's one more distinction, which is between large banks, who have enormous businesses and are directly serving businesses or consumers with financial services, and specialty sponsor banks, whose primary business is to sponsor banking relationships for innovators like fintech challenges. The issue is fundamentally for those enormous national or even regional banks and credit unions: Would they ever put their core business at risk to enable one fintech challenger? Because if that fintech challenger moves out of compliance or is found out of compliance, it could shut the entire bank or credit union down.”
Managing debt and spending by learning better habits is likely the fastest way to pull out of this economic downturn and come out of it financially healthier.
Rosen explains, “the path to success for a lot of consumers who will be hurt by the recession is going to be around managing debt and spending. But mainly debt. Fintechs who help consumers reduce, or restructure, or payoff debt [will be valuable].” When it comes down to it, Rosen adds, “[figuring out] the right way to manage money can help navigate out of difficult situations.”
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