Modularity offers new way to keep pace.
By Michael Scheibach
As the threat of disruption continues unabated, financial institutions are moving ahead aggressively to offer omnichannel banking. Yet this might not be enough. Now enter artificial intelligence and bots, software algorithms that can mimic human interactions. Amazon’s Echo with its “Alexa” persona is just one example of a bot capable of engaging consumers in financial transactions as it listens with speech recognition and responds with speech synthesis.
According to Kobi Magnezi, director, product strategy, digital channels, at Fiserv, software architectures will continue to enhance human machine interaction. Moreover, he is excited about the potential of AI and bots opening up a new world of financial interaction and accessibility.
“A lot of the disruption could come from the growing use of AI and bots,” acknowledges Magnezi. “Machine learning and conversational commerce will certainly extend into the financial industry. Bots and AI will enhance interactions with consumers and could replace humans in some cases. Consumers will interact with bots to conduct financial transactions, ask financial questions and solve issues.”
The advent of these technologies requires financial institutions to be much more agile in responding quickly to consumer demands and market changes. And in order to achieve this agility, FIs must create a new environment based on modularity, a term that will no doubt become part of the banking lexicon.
In an article titled, “How Modularity Delivers Fintech Innovation Without a Total IT Makeover,” Magnezi suggests that the best way to understand modularity is to visualize building blocks. New modules (or blocks) can be added to the base platform without changing the underlying technology framework. For example, a bank with modular architecture can give cardholders the ability to set parameters for card use or to turn a card “off” or “on” simply by adding a new block. No platform modifications or framework customization are needed. Because the Fiserv platform is created with a standard API (e.g., REST) and open architecture, FIs can even develop their own modules within the framework.
Magnezi points out the success of two recent modules, ACH and Wires, that enable Fiserv clients to offer these business banking capabilities on the same platform used for retail customers. With this modularity, business and retail banking can coexist on the same platform. This capability provides banks that currently don’t have business clients with the ability to offer business banking, thus opening a new market with new revenue opportunities.
Magnezi agrees that FIs have come a long way in responding to the needs of consumers and in adopting new technology. Yet FIs are often slower to respond than a fintech startup or non-bank primarily because they are heavily regulated and focus extensively on security risks. After all, banks are still the most trusted providers for consumers and businesses, and they must continually weigh the risk before taking on any new technology.
“Unlike start-up tech firms,” says Magnezi, “established FIs have more to consider when navigating technology changes. Technology adoption can have a huge impact on multiple generations of customers, so changes must be evaluated closely to ensure success and reduce risk. Financial institutions, large or small, are judged on how well their products and services align with market and consumer expectations.”
Flexibility and speed are essential to remaining competitive in this environment, Magnezi adds, emphasizing that FI size and geographical boundaries matter little. For FIs to stay relevant and protect and grow their customer base, they must be able to respond to changes resulting from the increasing use of technologies like AI and bots. And modularity can help them compete and stay relevant not only by facilitating the addition of innovative capabilities but by driving higher return on investment.
Michael Scheibach is executive editor of BankNews.