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The Green Sheet Online Edition

November 26, 2023 • Issue 23:11:02

Innovators need one foot in the past to win the future

By Michael Boukadakis

Innovators understandably want to move at the speed of light. Changing something that's existed for centuries, however, can take much longer than building from scratch. Banking began in Babylon as early as 1,800 BC, with moneylenders making loans. In Greece and Rome, banks accepted deposits, too.

But as banking has moved from the ancient world to the digital age, many aspects of the system have lagged behind technological progress in other industries. To be successful, fintech innovators must keep one foot in the past, despite wanting to have both feet chasing the future.

The concept of artificial intelligence, for example, is groundbreaking, but AI can't revolutionize anything without data accumulated over time. Think of AI technology like an engine; it won't run without fuel, which is quality data.

The importance of data can't be discounted

Consider a new company rolling out an AI-backed interactive virtual assistant (IVA). The application may be flawlessly built, but unless data about specific users and use cases is accessible to the IVA—securely, in real-time—the futuristic bot can't be at the customer's service.

All customer interaction information—from words used to communicate with the bot to actions taken by the user—should be stored by or for a financial institution, so that it can be analyzed and utilized in future interactions. This includes behavioral, transaction and preference data.

As customers or members communicate with the bot, again and again, the virtual assistant is increasingly well-equipped to respond to user requests. This learning loop means that the technology gets smarter over time, as the collection of data grows.

The right data points are the ingredients for a worthwhile AI-powered interaction. That's why collection and understanding of data is essential for financial institutions to realize any return on their AI investments. So, how might new fintechs procure big data from existing sources?

Like it or not, we have to play nice with legacy systems

Many fintech innovators have great visions for the products they build but forget that these solutions can't operate in a vacuum. When a user hits a dead-end in an AI-powered self-service channel, a transfer to the bank or credit union's contact center is typically in order.

To avoid requiring the customer or member to authenticate or explain the issue again (which counteracts the intended efficiency of AI), data from the self-service interaction must be transferred to the live agent.

To make that happen, the shiny new solution must tie into the contact center's software … which usually is nowhere near shiny and new. A standalone chatbot may offer a great customer experience—until a user needs to speak with a human being. An AI solution is only complete, therefore, if it is integrated with retail banking's web of technology channels, old and new.

What it takes to integrate

Generally, directly integrating with other systems is not a readily available option in financial services. Compliance requirements, lack of relationships with core providers and the need for an abstraction layer (the programming interface between a new application and the legacy operating system) stand in the way. So, how can these challenges be overcome? Utilization of an open API digital gateway. In short, a digital gateway is a set of pre-negotiated APIs that functions like a toolbox full of the features that fintech innovators need to bring their ideas to life—core integration, speedy responses through caching, fraud controls, and more partner APIs.

Open APIs can help fintechs clear cost and time-to-market hurdles by providing pre-negotiated APIs and services, eliminating the need to find partners, strike deals, and integrate with them. With an open API digital gateway, tying into legacy systems is simple, and revolutionizing financial services is within reach.

So, fintech innovators, take heart: you indeed can modernize an age-old industry, while helping its key players—banks and credit unions—unlock the revenue growth only possible by staying ahead of the digital curve (see McKinsey Quarterly, tinyurl.com/pmzbjhh5). For both financial innovators and institutions, speed to market with technological advancements is a big part of what separates the winners from the losers. end of article

Michael Boukadakis is the founder and chief executive officer of ENACOMM, a fintech enablement company (www.enacomm.net). To get in touch with him, email laurend@enacomm.net.

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