Finance more evolution than revolutionary change

Finance more evolution than revolutionary change

New technologies have burst onto the scene but may take years to mature

Over the past few years, new entrances to financial technologies like machine learning and cryptocurrency were touted to change the industry. However, their promised changes have yet to be fully realised. During last week’s Money Next virtual summit, finance professionals were asked their thoughts on where certain trends and topics are on the Gartner hype cycle in which products first get a ‘peak of inflated expectation’, dropping into a ‘trough of disillusionment’ before maturing and finally gaining acceptance in mainstream markets.

The consensus among the panel was that while open banking and open finance have been much hyped about for many years, the idea is starting to show promise with plenty of opportunities for growth.

“Open banking for a while was hyped along with some delays around rollout and adoption”, says Lucy Demery, global head of fintech banking at Standard Chartered.

“Now its going pretty well, it’s really ramping up. There’s been some really impressive strides, pushing further into other financial products. There’s much more to be seen in connecting that with wider e-commerce and big tech platforms here in the UK and Europe.”

Scott Abrahams, group head acceptance and emerging payments at Mastercard said that the concept of open banking still hasn’t done enough to sway consumers to adopt.

“Old payment methods that are still kicking around because they are still pretty good for a majority of consumers.

75, 77 and 74 percent of Samsung Pay, Apple Pay and Google Pay users said they either use a credit or debit card as their default payment method respectively for mobile payments in a report by Deloitte in 2019.

Abrahams added that the main value proposition payment providers like Mastercard, Visa and American Express provide is predictability and reliability.

“The main piece of value in Mastercard isn’t that billions of people have a means of payment with two circles on it. It’s the shops both physical and online, where you use a payment product and it’s exactly the same whether you’re in Brazil, in North America, in Poland or the UK. Not many [new providers] businesses have sold on that over the years.”

Financial consultancy firm, 11:FS’s Deputy CEO, Jason Bates said that “[Open banking] is a technology in need of a problem.”

“What is the thing that’s going to drive millions, if not billions of people to use open banking? It’s not going to be the ability to see statements from three or four banks in one app. For me it will be intelligence services, private banking for the mass market. Having an intelligent agent help with your spending, your utility switching and moving around savings, to be that financial advisor.”


“Cryptocurrency is overhyped”, said Bates. “I think crypto assets and distributed ledger has amazing opportunity. In the end, cryptocurrency isn’t a currency. We don’t use it for transactions. There are however, great opportunities for the technology behind cryptocurrency to find its way out of the pit of despair of the Gartner curve.”

Many of his panel members agreed and said that as a payments method, cryptocurrencies have a long way to go.

“From a payments perspective, [crypto] is starting to creep back up. However, the use of cryptocurrency and distributed ledger technology is much wider than just payments. From our perspective, there’s still a lot of opportunity there, but it’s past the high praise,” says Abrahams.

The most immediate use AI and machine learning right now is in the back end said Demery, conducting data collection and analytics. On the consumer side, both the technology and customer are still not ready to fully adopt.

“For portfolio analytics on the institutional side or credit, both consumer and institutional is one area to look out for. There’s a lot more that can be done to help incumbents get better and more efficient often in partnership with fintechs, but also incumbents in their own right.

Another use case for machine learning is pushing/nudging consumers towards financial products or services that would suit their needs but Demery said this can often be tricky.

“It’s tricky in terms of complexity, but also in terms of risk around suitability and mis-selling especially in the retail space.”

Consumer trust in AI remains low, a survey conducted by Capegemini in 2019 found that three quarters of respondents wanted more transparency is AI-powered  services. A similar number also indicating they believed further regulation for the use of AI was needed.

“The key for AI is there’s a real opportunity about the human engagement alongside a digital twin but it needs to be delivered effectively,” said Stephen Ingledew, chief executive at FinTech Scotland.

Another 2019 survey done by Pegasystems found 68 percent trust a human more than an AI to approve bank loans, while only 30 percent feeling comfortable with a business using AI is consumer interaction.

Abrahams said that future for AI in the retail space needs to partner with a person. He gave an example of an AI assistant who could identify areas of financial improvements for a customer but ultimately any decision is only made with a financial advisor.

“I think people are ready for that. I don’t think they’re ready at the moment to go one step further and say I trust [an AI] to tell me to do the right thing, and that’s what I’m going to do blindly.”

Related reading