Should Banks Behave Like FinTech Companies?
This was the topic at the recent CB Insights’ Future of Fintech Conference. With all the news focused on how fintech companies are disrupting the global marketplace, one might conclude that banks need to make a serious U-turn. The consensus among speakers, however, was that banks should avoid the fintech innovation personality and do what they do best: provide high-quality banking services to their customers.
Failure as the Path to Innovation
This is not to say that banks should not innovate or incorporate technology into their services. However, the personalities and attitudes of fintech companies are something that banks should avoid. For instance, Cathy Bessant, a conference speaker, stressed that the motto of “fail to succeed” prevalent among fintech startups is not something that banks should try to replicate.
Bessant is chief technology and operations officer at Bank of America. Banks, she observed, are still looked upon as stable institutions in the eyes of individual and commercial customers. Bessant suggested that the fintech attitude is not wise for a bank’s constituents or its stockholders.
Banks, Bessant said, must certainly take advantage of new technology innovations, even to the point of creating their own. Bank of America is one of the top filers of technology patent applications among not only financial institutions but among US businesses in general.
Technology Innovation Cannot be Ignored
Bank of America is devoting significant resources to technology development. Such a level of investment makes sense, Bessant said, considering the Bank’s belief that “technology underpins the entire customer journey.” Technology is integral to providing the highest levels of service to Bank of America customers. At the same time, low-technology services such as processing checks, loans and transferring cash remain as vital components of the Bank’s basic services.
Bessant sees artificial intelligence as one technology innovation with an important role in improving banking services. Bank of America’s virtual assistant Erica is one example. The Bank has invested considerable time and resources to develop Erica’s capabilities.
Bessant doesn’t see AI as replacing traditional roles at the bank. However, AI such as Erica can enhance the customer experience and free up staff for other tasks. Bessant stressed that banks should be careful about incorporating AI into their model. The goal, she said, should only be to enhance traditional banking services to the benefit of both employees and customers, but not to replace employees. The auto industry, she observed, is a good example of what not to do.
The Bank-Fintech Hybrid
Echoing Bessant’s sentiments about fintech was Goldman Sach’s Harit Talwar, who manages the Marcus Division. Talwar noted that even though banks may not be innovating in the exact same way as fintech companies, they still need to be tech-savvy. After all, technology is today’s reality. Banks cannot survive if they shun technology innovation.
Talwar said that Goldman Sachs had no desire to be anything other than a bank. However, looking at trends and current weaknesses in the financial industry, it made sense to develop Marcus, a loan platform, to correct deficiencies in the credit industry. In his opinion, a bank can be a hybrid between fintech and a traditional bank. This is what Goldman Sachs is aiming for.