Finance is always undergoing technology-led transformation. Yet some of the keynote presentations and panel discussions at the FinTech Connect Live! event – held at London’s ExCeL on 6-7 December – highlighted several key reasons why new technology and regulation, alongside evolving consumer expectations, could lead to profound changes in the sector.

One recurring theme of the presentations and debates was the impatience that many FinTech entrepreneurs feel about the way in which the financial sector operates today. Some FinTech concepts have been inspired directly by the frustrations that entrepreneurs have experienced when dealing with banks. Many could drive major improvements in the processes that underpin banking, insurance, investment management and payments, benefitting financial services providers as well as their customers.

Another theme was the need for collaboration between FinTech companies and existing financial services providers. One driver for this will be Open Banking, once the new Payment Services Directive (PSD2) comes into force in January 2018. During a panel discussion on day one of the show, participants considered the challenges and opportunities that will arise once banks are compelled to share current account information with third parties through APIs. Megan Caywood, chief platform officer at Starling Bank, declared that this would allow banks and their customers “to connect with an entire ecosystem of products”, by bringing more choice and transparency to the market.

Louise Beaumont, co-chair of the Open Bank Working Group, stressed the need for banks to harness APIs to speed up processes, enabling consumers to start using other services with a minimum amount of time and effort. But she also complained about the wording used in mailouts already sent to UK consumers to explain Open Banking. There was, she said, “a sense of ‘don’t do this, it’s dangerous’. Communication needs to get better and… concentrate on the benefits.”

The second half of the first day included a conference stream dedicated to the role of artificial intelligence (AI) and machine learning in financial services. This included a panel discussion that considered how best to use FinTech to alter the world of investment management, with participants including new entrants Wealthify and Nutmeg, and longer-established players Schroders and Aberdeen Standard Investments. The former group of companies are basing business models in part on finding entirely new customer segments who may not have invested at all before – Nutmeg chief investment officer Shaun Port said this is true of 46 per cent of his company’s customers. He made a persuasive case for why consumers are increasingly likely to embrace such services: they are simply much more user-friendly than many offered by the incumbents or by IFAs, and are delivered in ways much more in tune with the online habits of growing numbers of consumers.

AI can play a big role in interactions with consumers. As Wealthify CEO Richard Theo pointed out, a robot can actually understand the investment needs of a consumer more quickly than a human IFA can complete the data-crunching required to establish what a customer’s next move ought to be. In another presentation, Susanne Chishti, CEO of FinTech community FinTech Circle, explained why and how she believes consumers will interact with robot assistants working for financial services companies in future, including via swiftly improving messaging apps and voice-based interfaces built into connected devices. She noted the work being done by technology companies such as Comarch, which specialise in the connected car – “a huge mobile device” – and asked the audience to imagine driving along the street while talking to an AI interface about their current financial status and weightings in different asset classes.

Another focus was the role AI can play in improving some security functions. The AI Finance track at the conference was chaired by Andrew Bud, founder and CEO of iProov, which uses machine learning-based facial recognition technology to authenticate identity. It also included a presentation from Omar Yaacoubi, co-founder and CEO at Barac.io, who explained how his company’s technology uses AI to detect cyber attacks in real time within the movement of encrypted traffic flowing between connected devices, or through APIs.

The final keynote of the first day focused on the question of how incumbents will use AI techniques to meet the expectations of younger consumers. It was delivered by Lilach Bar-David, CEO at Pepper, the first mobile-only bank in Israel, which is backed by the incumbent bank Leumi. Its services, which include a peer-to-peer payment app, are managed through a Facebook-like interface on the consumer’s phone. Pointing to statistics that suggest many people still only engage with their banks a couple of times a month, Bar-David said Pepper aims to create “engagement … on a daily basis”.

If Pepper’s progress is based on a combination of cutting-edge technology and the reassurance of an existing bank, the subject of the first presentation on day two looked at how new types of financial provider are taking more revolutionary approaches. Matthias Kroner, CEO of German challenger bank Fidor, explained the role of the bank’s “community” of customers: social media-like interactions between bank and customer serve as a means of communication, brand-building and product development. The bank’s business model is based on sharing information with customers, on asking their opinions and even on rewarding them financially (in small numbers of bitcoin cents) for ‘liking’ or sharing other interactions, contributing to discussions and for reviewing products or services.

Fidor customers are also encouraged to ask open questions about investment choices, for example, secure in the knowledge that the answer will not be based on trying to sell a product, as Kroner claims the bank has no sales people. With a conventional bank, he suggests, a customer asking whether or not to invest in a particular type of asset will be directed towards the bank’s own relevant product. At Fidor, the community will try to answer the question. “This is why you need to do it as a community,” Kroner explained. “It’s a place to learn.”

Another panel discussion tackled the issue of how incumbents can harness the potential of FinTech. Graham Kellen, chief digital officer at Schroders, highlighted the advantages of being a long-established institution seeking to make the most of new technologies. A company like Schroders, he said, was perfectly positioned to work with innovative technology companies and offer them swift access to markets and to sources of funding and support. He pointed out that previous visits to Silicon Valley had left him with a strong sense of the value of cooperation between different companies to solve a given problem. Schroders is developing a partnership programme to try to use the best new FinTech ideas to enhance its proposition, he noted.

Pepper CEO Lilach Bar-David was also part of this panel. She talked about the way Pepper has been able to combine the approach of a new entrant FinTech with the trust customers put in its parent bank. But, she added, while trust in the brand was vital, so too was the customer experience. At present it is too often the case that there is a gap between the expectations of digitally literate customers and the service they receive from banks, she suggested.

It may be that this is the most important message that established financial services providers need to take away from FinTech Connect Live!, whoever their customers may be. As Bar-David put it: “Trust is an issue, but so is experience. Banks that create products people love will win the market.”

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