Innovation trends in financial services

Transcript provided below

The 2022 BAI Global Innovation Awards drew a large number of nominations from all types of organizations across the globe. This year, we saw a focus on practical innovations that made a meaningful difference for customers, employees and communities.

Holly Hughes, chief marketing officer at BAI, recently hosted a discussion with Debbie Bianucci, president and CEO of BAI, Dennis Gada, financial services industry head at Infosys, and Puneet Chhahira, head of product management and marketing at Infosys Finacle about the current state of innovation in the industry, learnings from the BAI Global Innovation Awards and where they see innovation being focused in the year ahead.

Key Takeaways:

• The latest practical and tangible innovations in financial services
• The impact of digital transformation innovations on the customer experience
• The importance of collaborations between financial institutions and fintechs
• An increase in innovations in financial inclusion and community development
• Where innovation will be focused in the future

‎

Debbie Bianucci, President and CEO of BAI, 2022 BAI Global Innovation Awards Judge

Debbie leads the BAI leadership team and is a member of the BAI Board of Directors. She has worked in financial services for more than 40 years, including senior positions with several major financial services companies. She is recognized as an industry thought leader and is a frequent speaker at industry events. Debbie has authored numerous books and articles on a wide range of financial services topics and is passionate about helping leaders drive positive change.

Dennis Gada, Executive Vice President, Head of Financial Services – North America, Infosys

Dennis is part of the Global Financial Services Executive Leadership team and is passionate about leveraging the power of technology to address challenges facing the financial services industry. His expertise spans across various business competencies, including sales, strategy, consulting, marketing and general management. Dennis is also focused on bringing cutting-edge technology solutions to established financial institutions through collaborating across his professional network, including a wide ecosystem of experts, startups, and established industry players.

Puneet Chhahira, Head of Product Management and Marketing, Infosys Finacle

Puneet is the global marketing, product management and platform strategy leader at Infosys Finacle. Puneet has led multiple roles across consulting, product management, marketing, startup engagements, and platform strategy during the last 16 years at Infosys Finacle. With his close collaborations with global banks, startups, and industry thought leaders, he brings along a deep understanding of the evolving financial industry landscape and how modern technologies can help unlock new possibilities. Before joining Infosys, Puneet was a regional business leader at Bajaj Allianz Life Insurance.

Holly Hughes, CMO, BAI

Holly leads strategic marketing, digital thought leadership, events and strategic programs for BAI. She joined BAI in 2014, bringing with her more than 20 years of marketing and leadership experience across a number of industries. Most recently, she served as SVP and Marketing Director for Fifth Third Bank. Prior to Fifth Third, Holly held a senior marketing leadership position at MidAmerica Bank, a leading community bank in the Chicago market (now PNC).

DISCUSSION TRANSCRIPT

Holly Hughes: Hi everyone. My name is Holly Hughes and I’m the Chief Marketing Officer at BAI. It’s my pleasure to host a conversation today focused on innovation and financial services, including important learnings from the BAI Global Innovation Awards. I’ll be speaking with Debbie Bianucci, president and CEO of BAI, Dennis Gada, industry head financial services at Infosys, and Puneet Chhahira, product management and marketing at Infosys Finacle.

I’ll be gaining their perspectives on the innovation trends that they’re seeing and opportunities that lie ahead for financial service leaders to drive positive change in their organizations and the industry more broadly. Debbie, Dennis, Puneet, it’s great to be speaking with you today. We’re in different parts of the US as well as India. But I thought to kick things off, Debbie, I’d love to start with you as a judge for the BAI Global Innovation Awards, you’ve got really great insights into the trends that emerged from the nominations as well as the winners. Can you share what stood out to you this year?

Debbie Bianucci: Thanks, Holly. Great to be here, also with Dennis and Puneet, appreciate the opportunity. I’ve had the privilege of being part of the judging panel for each of the last 12 years, and it’s been quite a journey as we’ve seen how innovation has evolved over these years. In the early days, it was all about technology and it certainly has expanded into many, many other areas and issues as the banks and other financial services companies have just gotten so good at staying close to their customers and understanding what those needs are.

What was really interesting this year, which I think may have been the result of the decision we made to open up the nominations to a broad range of topics without specifically defined categories, is we saw lots of different kinds of innovation. But the one common theme that I think we saw more this year than in the past was how practical and tangible they were. The innovations were about pain points that the financial services companies were able to identify for consumers or businesses that would give them direct value. It was tangible, it was real, it was very practical. And practical doesn’t mean unimportant, it just means that it really works well.

Holly Hughes: I think those are great points. Dennis, I know you work with a lot of innovators across the globe, especially in the area of technology and digital transformation. Would love to know what you’ve been seeing.

Dennis Gada: Some of the trends, from a business perspective, there are many things that are changing. The prominent ones in my view are how the entire payments transformation is happening around the world, whether it’s real time payments, digital payments, wallets as we know it, payments will change significantly in the next few years, and we are already seeing that in several countries. I think also the focus on customer experience, but really getting a 360 degree view of the customers to create either personalized experiences, managing fraud, better integrated relationship management. These are a couple of things that stand out from a business perspective.

I think this is enabled obviously by technology and from a technology point of view, we see a much more rapid adoption of cloud to really drive the modernization of certain platforms and infrastructure as well as use of AI, generative AI technologies to really drive the transformation of business operations, business processes as well. And then on the pure innovation side, there are trends like metaverse, which are more buzzworthy than others, and we do see that things will get real with some of those trends as well.

Few years back or a decade back, people thought digital only banks may not be possible and today they’re all over the place. And I do feel that looking into the future, metaverse only banks with all transactions being done through generative AI, may also be a reality. So we have to prepare for that. In my view, there’s some very exciting trends happening around the world and really the pace of adoption is faster than ever before.

Holly Hughes: Definitely, lots of things going on. You pointed to a lot of really great areas that are advancing very quickly. Puneet, Dennis touched on customer experience, would love to get your thoughts about what you’re seeing as it relates to customer experience, innovation, such an important part of the overall ecosystem. What’s standing out to you in that area specific to financial services and the advancements being made there?

Puneet Chhahira: Sure, Holly, and thank you again for having me. It’s wonderful to be with you, Debbie, and Dennis today. And congratulations to all the BAI Innovation Awards winners. I have been associated with awards in the early days and it’s good to be back again. Now when it comes to customer experience, I think this topic will never go out of relevance forever. That is an area where banks across the globe are extremely focused on because that’s the only way they can stay relevant, but the change is happening so fast that very few banks are able to keep pace. Let me give you a quick data points and sense of the way we are seeing it.

If you roll back 20 years ago, irrespective which country you looked at, which bank you looked at, you realize a large part of banking interactions, transactions used to happen in an assisted channel. And for many banks, over 50% of engagement at the start of the century used to happen in branches or through call centers or through the relationship managers. If you look today, and particularly with that digital adoption which happened in the last three years, so more than 95% of basic transactions, which could be balance inquiry statements, bill payments, all have moved completely on digital self-service channel.

Some of the journeys such as new to bank customer onboarding, new deposits, new loans as nuances, mortgages are moving for many progressive banks, over 60% of these customer journeys are also purely digital. But that’s just one wave of the digital transformation happening wherein customer engagements and transactions are moving out of branches or banker managed to interaction, to self-service, digital interaction. There’s another wave which is unfolding in parallel and much faster than this wave, while banks are getting grip of their online banking experience, their mobile banking experience, the chatbots. The second wave, which is touching us in a very, very quickly is the wave of entire open finance and embedded banking.

What’s happening in parallel is a lot of these interactions and journeys are moving to the primary journeys of a customer. So if a customer wants to buy a consumer appliance, the lending is moving there. If you are booking a flight, ticket payments are already moved there. Similarly, every product is moving to the primary journey not only for retail customers, but for business customers as well. Business customers are integrating banking interactions into their ERP solution, treasury management solution, human resource management application, invoice processing platform.

And in that sense, the entire definition of customer experience is changing dramatically. It’s no longer the UI, which is important. Now the product innovation becomes very important and that innovation will happen increasingly with non-financial services organization. And of course the technologies like APIs, events, cloud, all will pay a major part. I would like to say everything what Dennis said, when you combine with all these major transformations happening, these are very exciting times. And at the same time could be very scary times.

Holly Hughes: Definitely. We view it as financial services leaders also. We experience it as consumers. So we definitely see both sides of that. And definitely a lot of companies have focused on the front-end customer facing innovations and you’ve talked about a number of them. It’s really become table stakes in many ways, but in a lot of cases digital transformation stops there. And Dennis, I know this is something that you’ve been looking at. Where do you see opportunities for more innovation through the full end-to-end process, that middle office back-office opportunity?

Dennis Gada: Yeah, I think we really see that that’s a big pivot that has happened that the innovation or digital transformation has to be more end-to-end, front to back and going beyond just the customer experiences. That will always be a priority, but looking at the middle to back-office processes, what happens behind the scenes, especially with regard to several complex business processes, very important. Just recently as a very live example, it has been announced by one of the fintech firms that they would offer a one-day mortgage. And that’s a great example.

You can have a great website to apply for a mortgage, but if it is coupled with the fact that you can actually get a mortgage in a single day, that really shook the power of end-to-end business transformation because you have to digitize the entire value stream or the value chain of the process to be able to deliver to that. And several 2022 BAI Global Innovation Award winners also reflect that. I think Debbie mentioned that as well, that a lot of the innovation has been more practical and more impactful on the business.

For example, Bank of America won the award for the digital security project, which provides a very centralized client-friendly solution with security authentication all in one place or TIAA won an award in the fraud prevention space, which looks at evaluating various phone attributes for assessing the risks of the calls. These are not awards for the best mobile app or the best website. All of that is a given, but these are awards for really end-to-end transformation of certain business processes which make a significant impact to the customer experience on one side, but also on the efficiency side. And hence, that’s something which is really having a significant impact in the market today.

Holly Hughes: Yeah, great point that it can impact both, so it’s in the middle and the back office, but does lend to a great customer experience. Also, some operational efficiencies. Puneet, would love for you to comment a little bit on that piece. Anything that you would add to what Dennis said in terms of how it relates to end-to-end transformation and using technology to reduce costs.

Puneet Chhahira: Absolutely. I think cost optimization is yet another evergreen goal for every institution, and thankfully today’s digital technologies and automation capabilities allow you to achieve that far more meaningfully. When we look at numbers, if you look at global numbers of cost income ratios for banks, most of the banks, at least top thousand banks, have average cost income ratio of 51%. If you compare with the digital pioneers, this is way too high. Some of the digital only banks are operating at nearly half the cost income ratio of that. In fact, we serve a client which operates at 18% cost income ratio. Imagine the power they can yield in terms of pricing when we have this cost structures.

So I believe every customer interaction has an element of how do we optimize our cost, how do we become more digitized? And we see there are three levers most organizations using. The first lever is a lever which has been used for several years and decades. It’s about bringing automation by using traditional tools such as business process automation capabilities on rules-based straight through processing or API based automation across platforms or traditional workflow capabilities. More modern contemporary capabilities, we saw in the last few years where most banks focused were robotic process automation or cognitive automation, which has been extremely popular in the recent years.

But increasingly we also see some of the pioneers trying to use technologies like blockchain to automate inter-organization processes, which were typically very difficult to automate because you’re talking to not only two different set of systems, systems which are owned and are run by two different organization. And so we see this entire spectrum of these three capabilities coming in conjunction to help banks meaningfully automate their processes. And I believe there is still so many journeys which can benefit, particularly corporate banking and business banking journeys, which are a little behind the retail banking journeys, which have progressed quite well in the last few years.

Holly Hughes: Definitely. Let’s talk a little bit next about collaborations. And in the 2022 BAI Global Innovation Awards, we saw innovations of all types from all of organizations. And we’re also seeing more collaborations between banks and credit unions and fintech partners. It’s been a journey in terms of how they’ve viewed one another, but I think we’re seeing a lot more collaboration as of late. I’d like to hear from each of you on this one, and Debbie, I’ll start with you. What are some of the different ways that you’re seeing these collaborations play out within the industry?

Debbie Bianucci: Well, we certainly have experienced a change over the last even five, six years in the ways in which financial services companies of a traditional nature have come to see the value of collaborating with fintechs, large and smaller startups. And we saw that a lot in the awards this year. I think one of the things that really shows up is we talked about innovations being tangible and practical.

But where fintechs bring agile, nimble, fast-moving thinking to the table has actually helped some traditional financial services companies in the ways in which they think about having a more iterative approach to the market, more of an MVP introduction, which has been a great benefit of the experience and collaboration between fintechs and traditional financial services companies. We also saw though, even a mid-size bank in West Virginia came up with a program to help fintechs become better bank customers, so that it would help them be better prepared to work with their banks as they are customers of banks. So the benefits of the collaboration go in many directions.

Holly Hughes: I love that and it’s great to see how that’s evolved. Dennis, what are you seeing in this area of collaboration?

Dennis Gada: Yeah, I think I completely agree with what Debbie said, and we almost see that the lines between banks and fintechs are blurring. Banks think of themselves as large fintechs and fintechs think of themselves as large financial services firms, and some of them are pretty big in size as well. And I think it’s more about how they can benefit from each other’s strength, through deepening the partnerships. We’ve seen a lot of core banks either acquiring fintechs or actually investing in fintechs so that it can really benefit from the innovation and the new technology that they bring to the table.

I also feel that the regulatory environment is changing, so there’s more of a level playing field. Fintechs also need to comply with certain regulations that the large banks and financial service firms are subjected to. So that brings in some complexity in their business models. And at the same time, banks are trying to see how do they leverage some of these new capabilities that fintech’s bring to place. I always say the notch for or any financial services institution is to really have an Apple-like experience, Google-like targeting, and Amazon-like fulfillment. And this blend between fintechs and banks really helps them to get closer to that end-to-end experience.

Debbie Bianucci: We see this too, and it’s so true that the increased regulatory scrutiny as it affects the fintech segment actually helps in the way in which traditional banks and fintechs are collaborating because banks understand regulatory compliance. They’ve been doing it forever and they bring a lot of perspective that helps these fintechs that are really new to some of the regulatory requirements that you mentioned.

Holly Hughes: Definitely. And Puneet, anything you would add that we didn’t touch on when it comes to collaboration? A lot of really great points raised by Debbie and Dennis.

Puneet Chhahira: Other than the already points which are discussed. I think one more point, which is interesting is in some markets where you have regulatory driven open banking or open finance regulations, then you see sometime partnerships flourishing very quickly because in some sense where you have those regulations, they’re already approved entities, whether it is payments entities, account aggregation entities, or different services entities which are approved by the regulator. And then suddenly even a bank who may not have a very active fintech partnership practice can reach out to those fintech or work with those fintech through the platform, which is created by regulators or industry bodies.

So we see partnerships driven by fintech and banks. We see the investments driven by fintech and bank. Only thing I’ll add, what Dennis was saying. In some markets it’s already happening where fintech are acquiring banks, so it’s not always the banks acquiring fintechs. And that’s going to be interesting because every time we said that’s a mindset change, perhaps we’ll see a very different combination coming when a fintech acquires a bank.

Holly Hughes: I think staying open-minded to what the opportunities are, it’ll be interesting to see where this evolves in 2023 for sure, and beyond. Another area where we’ve seen innovation tied to some other important areas within financial services, the areas of financial inclusion, community development. So to those earlier points on innovation doesn’t always equal technology. I think we’ve seen really interesting innovations happening in those spaces. Dennis, what has stood out to you as it relates to financial inclusion efforts, community development efforts?

Dennis Gada: Yeah, that’s a great question, Holly. I think as we speak to more and more CXOs in banking organizations, one thing is clear that the alignment of purpose and profit is getting more dominance in inclusion. Community development plays a very important role in that. There are a few great examples. I think a lot of firms are focusing on small business banking, and that’s a sector that’s evolving very fast, providing digital capabilities, end-to-end marketplace capabilities for small businesses on one hand helps banks to grow their revenues, but on the other hand really creates a very strong foundation of financial inclusion and support for these small businesses, around US especially.

I think a similar one is around enhancing financial literacy for LMI borrowers. We’ve seen some of the fintechs, some of the banks as well, introduce special products, which will help LMI borrowers build the credit history so that when they are ready for their first house or their first other personal loan, they can work towards that. And that again, is a great way of really enhancing the financial literacy and then getting them into the banking system from a long-term wealth creation perspective. And then finally, in some of the countries, like in India, the whole wave of digital payments has been a tremendous force for financial inclusion. There are more people having mobile phones in India than bank accounts.

And then once payments were digitized, everybody started using their phones to do financial transactions and that brought them into the financial ecosystem, and then they were able to leverage the other products and services that are available. So I think these are some examples in my view where financial inclusion is getting a lot of dominance because of some of the digital transformation that’s happening, and it’s clearly something which is a boardroom agenda in many companies.

Holly Hughes: Great, for sure. And it’s such an inspiring area, I think, of innovation. And Debbie, I know you’re close to this as well, you talk with a lot of financial services leaders. What else is standing out to you in this area?

Debbie Bianucci: I have to say how you’re right that the most inspiring innovations that we’ve seen over the years are the ones that fall into this societal impact category. Some of them, you bring tears to your eyes when you see the impact that these financial services providers have had. This year, we had a really interesting one that was a winner, that was MMI, Money Management International, which is a nonprofit credit counseling agency that’s based in Texas, operates in a number of states. But they brought some special services. And we recognize this as innovation that for people who are challenged and in need of financial counseling, who find themselves in situations involving some disaster recovery, whether it’s a natural disaster or otherwise, and they’ve been able to package their capabilities specifically to meet the needs of consumers who find themselves in these really difficult situations. And it was so impressive to see not only what they were able to do, but how quickly they were able to respond to the unique needs of a family that’s involved in some sort of disaster. And it’s a great way to see how financial services companies give back to consumers, businesses, and the communities that they serve.

Holly Hughes: Definitely, that’s great. And a wonderful example from the awards to share, for sure. Another emerging trend that we’ve been really watching closely and speaking with a lot of leaders about is ESG. BAI hosts an executive roundtable for leaders who are focused on integrating ESG strategies into their organizations. And certainly there’s a lot going on in this area. As of today, there’s pending SEC regulation here in the US. And I know Dennis, you were recently at Davos and that was a hot topic as it relates to financial services. What did you hear coming out of Davos? What ESG issues do you think are most prominent that should be on the minds and plans for financial services organizations?

Dennis Gada: Yeah, absolutely, Holly. I think at the economic firm in Davos, ESG was really content center. And I think the main theme that I took away as well was that more financial services firms as well as across other industries, are looking at ESG as something that is core to the business. It’s not just a metric or some reporting that you do, but how you can actually either change the operating model of your business or build products and services, which will help towards the ESG agenda. I think especially in the financial services industry has a very prominent role to play.

Huge amount of investments need to happen for the green transition across different industries and financial services firms by prioritizing towards those investments, by supporting those investments can play a very significant role. So I think ESG is clearly going away from just being something that you report metrics on, something that is very core to the business. And all large financial services firms have a very clear roadmap on how building model will evolve to support ESG initiatives for their end clients. And I think overall, the investments that they will themselves make towards green transitions towards net-zero goals that they’ve set for themselves and for the clients that they support.

Holly Hughes: Definitely. And I would add there that with the ESG roundtable, I think what we’ve heard is really tying it back to the organization’s core values and just good solid risk management. So there can be some noise in this area, but at the end of the day, that’s really what it should be about. So interesting that you’re seeing some of those similar shifts as well. And just that thinking around it. Puneet, I know you see a lot around ESG as well. Anything that you would add onto what Dennis shared with us?

Puneet Chhahira: I think Dennis has been on the spot. We have opportunity to do both as an industry. Ours is a more ESG-conscious organization and in many ways the entire digitization journey of being more, using cloud-centric approaches, being more paperless, driving more automation. All that digital maturity is going to also help meet the ESG requirements of the organization. But as an industry, I think our impact will be far, far higher if we actually support the ESG-conscious business and become ESG-conscious lender. The lending has an important role to play.

When we speak to our clients, I think we typically recommend three consideration. First is have clarity on what ESG goals you want to align your lending strategy with, and the 17 ESG goals that are set out by UN are a great starting points. I see more and more banks actually aligning their ESG strategy around that framework. Second is, how do you go about building the ESG lending products. And again, answer lies in the customer segments they serve and the impact they can make by serving those segments well. The third area is essentially around building ancillary services around the green loans. These could be compliance monitoring and certification, finding the right green partners, green investment services, how they can go beyond lending and serve customers so that the customers they serve can also be more ESG-conscious businesses.

Holly Hughes: Yeah, great points, Puneet. I think good places for people to start if they’re still newer on in their journey. We certainly see here in the US banks are at different points in their evolution there. Thank you for sharing that. We’ve covered a lot of great topics, a lot of ground. Would love to close with a quick take from each of you on what do you see as a banking related trend that’s going to really emerge with more energy, more focus, in the next 12 months? Let’s leave our listeners here with your predictions of what they should be looking out for. And Debbie, I’ll start with you.

Debbie Bianucci: I think there’s no question that AI will continue to be a big focus as the whole industry tries to find ways to get better using this evolving technology and understanding along the way. But I also think that what we will see with the increased complexity of fraud, and not only the types of fraud, but the nature of the fraud incidents that consumers and businesses face, that that’s going to be something that will get an increasing amount of attention.

I see great opportunities for financial services companies to collaborate on the ways in which they fight fraud to mitigate the risk. It’s a painful thing, it’s expensive, and it’s time-consuming, and not great at all for the customer experience. I think that’ll be an area where we see even more attention this year.

Holly Hughes: Definitely. AI fraud, really good important points. Puneet, how about you? What are you thinking in the next 12 months here?

Puneet Chhahira: I see great significant focus on six areas, to be fair. One would be the area we talked about, how do we go about improving the customer engagement and experience across the customer life cycle. Second area would be how do we stay relevant, amidst non-traditional competition as well as take advantage of all that new business model, like embedded finance and banking as a service we briefly talked about. The third area would continue to be, how do we reduce cost, particularly if there is economic downturn going to come, this will take even greater important. How do we digitize more effectively? How do we control frauds? How do we manage risk? The fourth area would be, how do we find a way to constantly transform the organization, which will be also about ways of working culture talent. Fifth area is, definitely about reducing the technical data and embracing the modern technology. And six, I would say is the last topic we discussed, how do we become a more ESG-conscious organization and contribute in a holistic manner to the communities we serve and the world we live in.

Holly Hughes: Yeah, great points. Great list for people to reflect on within their organizations, for sure. And Dennis, I’ll give you the last word here. What’s your view on the next 12 months?

Dennis Gada: Yeah, I think a lot has been covered by Debbie and Puneet, and I agree with most of those trends. I think the one which I think should get more dominance in the next 12 months, especially here in the US, is around the whole open banking and open finance. There has been some great success with respect to open banking in other parts of the world, really enabler for better customer experience, enabler for having higher efficiency. And also something which has gained a lot of maturity in terms of how it can be made more secure. More and more customers are looking for banking as a marketplace, where they can do everything that is part of their lifestyle. And open banking, open finance will enable that. I do think that there is a great opportunity for it to get more acceleration in the US and I would put my bets on that for the next 12 months.

Holly Hughes: Well, great points. I’m sure we’ll be chatting throughout the year, but certainly we’ll revisit these next year as well. It’ll be interesting to see where we’re at. But I think we’ve left people with a lot of really good information, some things to reflect on, think about how can they drive positive change within their organizations and the industry more broadly. And just improving the overall ecosystem is so important to helping communities and businesses and consumers do everything that they want to do.

Dennis, Puneet, Debbie, thank you so much for joining me today, sharing your insights as it relates to financial services innovation and the BAI Global Innovation Awards. And thanks to all of you who are watching. You can learn more about the BAI Global Innovation Awards and find other valuable thought leadership on our website, which is bai.org. Thanks again and have a great rest of your day.