The year 2016 was a banner year for bank technology lingo and acronyms.
If you weren’t promising to deliver a mobile- / customer-first app on distributed ledger / blockchain and you weren’t using AI (Artificial Intelligence) / AR (Augmented Reality) / VR (Virtual Reality) / and machine learning to deliver your BaaP (Banking as a Platform) services and open APIs (Application Programming Interface) well then, good luck to you because fintechs had probably already eaten your lunch.
Not so fast 2016 trends and acronyms! 2017 might just usher in a new wave of regulations and moderated technology expectations. Let’s take a look at what could be emerging…
1. Reasoned Technology Adoption
While many hot fintech trends and technologies are still showing promise, some expectations have been moderated, particularly in the artificial intelligence and blockchain spheres.
Artificial Intelligence and Machine Learning
As Neural Networks, Deep Learning, and Reinforcement Learning incrementally improve on larger available data sets, customers should expect enhanced robo advisory and customer service delivery. Unless technology development hits a wall (a.k.a. an “AI winter”), it seems that most big and medium sized banks will deploy some form of AI customer service chatbots with enhanced natural language processing by the end of 2017.
In addition, banks have realized the need for digital customer acquisition and appointment booking with an AI assist. Brett King CEO/founder of Moven adds from Jim Marous’ report that “2017 will be the year of the digital-direct effort by banks. ... Banks will finally figure out that customers aren’t visiting branches to open accounts anymore and that digital acquisition is imperative.”
Blockchain was the darling technology of 2016 but it has been slow to take hold as several major projects are being held back in experimental labs and collaborations. That being said, blockchain based cross-border payment and contract applications are gaining traction, particularly in Africa, South America, and Asia. North America (infrastructure and construction spending increase) and Europe (migrant remittances to war torn regions) may also follow this trend in 2017.
The combination of mobile device hardware features and big bank data may provide some big security gains in 2017. Several companies have made breakthroughs in AI assisted Fraud Detection. Authentication tools such as thumbprints scanners, biometrics, facial recognition (selfies), and contactless payments have become commonly adopted providing multi-layered security and identification methods for customers.
As banks transition legacy system architectures onto cloud based services, customers should notice improved responsiveness, speed, user interfaces (UI), and security features.
3. Regulatory Changes
It is still too early to tell what the new Congress and President will do when they address 2017 bank regulation, but if the market accurately predicts future results (which isn't always the case), US banks could see major gains in 2017.
Relaxed capital standards could free up bank capital and spur new home and business lending. Relaxed compliance in general may lead banks to trim compliance budgets and personnel and refocus those dollars on customer service staffing (or robots), technology adoption, cyber security, or investor dividends.
Of course, relaxed compliance is at times a double-edged sword. It certainly helps banks free up capital, but it has been known to result in an overheated marketplace. As Richard Parsons shows, when loan growth exceeds GDP growth by an large enough margin, there is usually a reversion to the mean. If regulation becomes more and more relaxed, this is something to keep an eye on.
2017 is set to be an interesting ride as AI, blockchain, security, and regulatory changes overturn the status quo. Stay tuned for additional coverage on the latest trends in fintech.