Data, AI and financial inclusion: the future of global banking

Traditional banks have millions of customers, are worth billions and are hundreds of years old. But they are still not digital. Fintech startups, on the other hand, have a purely digital vision, but still struggle to earn customers’ trust. And finally, we have large tech corporations – the so-called GAFAs (Google, Apple, Facebook and Amazon) in the U.S. and BATs in Asia (Baidu, Alibaba and Tencent) - which have millions of customers, billions in cash, decades of history and a digital vision.

This is how Chris Skinner outlined the current financial scenario speaking at ‘Desafío Ingenia', an event organized by Oracle in Madrid. The fintech expert addressed the profound social change triggered by the rise of mobile technologies, and the possibilities they are enabling in terms of global reach and financial inclusion, which banks need to understand if they want to be part of this digital revolution.

“For the first time ever in history, every single human can connect with every other human on earth, and trade, and transact. And that is massively transformational for everything that has to do with money,” said Skinner, who explained how Ant Financial is using technology to drive financial inclusion, after “having understood” the current paradigm shift: “In the future we won't make money out of loans, payments or credit. We'll make money thanks to data. Thanks to knowing the customer and offer them customized products enhanced by artificial intelligence.”

“There are banks, like BBVA, that have understood that coding is a new way of banking"

Compared to the new players, born in the digital world, Skinner remarked how the legacy and history of banks makes it harder for them to go completely digital: “Banks were built during the industrial revolution. And that's when a banking model based on paper and physical distribution was created,” he explained. The subsequent automation of processes built on this model, first through ATMs, then through internet, and finally through mobile technologies. But competing against the new players, said Skinner, requires more than just rolling out new technologies: banks need to completely move away from a model based on the “legacy of the industrial era.”

The last obstacle

And for this, according to the expert, there is still one last obstacle that banks need to overcome: their own internal culture and talent. “The problem for banks is that they still do not have enough digital profiles, how is a bank going to be digital if it does not understand technology?” In this sense, it is necessary that the bank’s professionals understand and embrace the use of digital tools, coding and software as the industry’s new core skills.

"Banks need to completely move away from a model based on the legacy of the industrial era”

But there are exceptions in the sector, according to Skinner: “There are banks that have understood that coding is a new way of banking. At BBVA, for example, they are doing all the right things to be a digital bank,” he said. Skinner also praised the way in which BBVA is driving the digital change “from inside” the organization, forging partnerships with fintech startups, “investing and co-creating.”

Also, according to Skinner, a clear indication that a change is needed is the fact that most banking executives, specially executive board members, lack the required technological knowledge or background. And then we have people like BBVA Group Executive Chairman Francisco González, who started his career as a programmer, and understands the importance of technology in operations. “That for me is the big difference, if the bank's culture doesn't change, then the bank won't be digital,” he added.

Also, according to Skinner, a clear indication that a change is needed is the fact that most banking executives, specially executive board members, lack the required technological knowledge or background. And then we have people like BBVA Group Executive Chairman Francisco González, who started his career as a programmer, and understands the importance of technology in operations. “That for me is the big difference, if the bank's culture doesn't change, then the bank won't be digital,” he added.

The arrival of AI

Carlos Kuchkovsky, CTO of New Digital Businesses at BBVA, had the opportunity to pose some questions to Skinner about his take on the convergence of finance and technology. Specifically, he inquired about the impact of artificial intelligence on financial services: What will be the most visible and interesting effects of this technology on the sector?

Skinner noted several practical cases. First, the already widespread use of algorithms to automate fraud detection, risk measurement and customer support through chatbots. He also mentioned the tremendous potential of this technology to make certain industry processes more efficient, such as the analysis of commercial contracts. JP Morgan is already using AI algorithms to juggle these tasks, reducing an activity that used to take more than 300,000 hours per week to a matter of seconds.

However, the expert noted other types of applications that he considers more interesting for the user: smart services.  In this case, he made reference to the possibility that companies can offer better products and services to customers based on what they know about them through their data. “There is where I really believe AI will make a difference: in analyzing people's financial habits, offering them advice and personalized services".