There are five emerging technologies that matter to the financial services world in 2018, according to Lee Wetherington: machine learning, platforms, digital personas, sensor fusion and emotion artificial intelligence. Wetherington, who serves as director of strategic insight for Jack Henry and Associates, and is a frequent speaker on the credit union conference circuit, shared his insights during CU Direct’s recent DRIVE conference in Texas.
Many technology terms are thrown around but are not distinguished, Wetherington noted. Artificial intelligence includes machine learning, but inside that is a sub-specialty known as deep learning. Google created a machine learning algorithm that learned how to play the Chinese game Go by analyzing all the moves by all the best players. Eventually, Alpha Go was able to beat the best Go players in the world. In contrast, a deep learning program taught itself to play in a week and then beat Alpha Go.
“Everyone has had a conversation with artificial intelligence: Google search, Siri, Alexa and others,” he said.
Although “chatbots” are hot in the business world right now, Wetherington said CUs do not need to get a chatbot right now.
“People are funny about their money, especially speaking out loud,” he said. “Most chatbots are not ready for prime time, which is a problem. When people find out they are talking to a thing and not a person it is uncomfortable. The ‘Uncanny Valley’ refers to the feeling where something that is almost but not quite human elicits feelings of eeriness and revulsion. You can do damage to a relationship by using a chatbot.”
How should credit unions deploy chatbots differently than big techs and big banks? Wetherington said CUs need to be in the middle of the automation spectrum. “Don’t give up what differentiates yourselves from the big banks. They have to automate because they can’t scale service.”
Kasisto is an example of a chatbot that works well, Wetherington continued. He said Kasisto does not pretend to be a human being, which manages expectations. Penny is a virtual personal finance coach that texts the user when there is anomalous patterns in his/her spending behavior.
Credit unions are “data rich and insight poor,” Wetherington asserted.
“You have the best data in the era of big data, but you are just sitting on it,” he told the audience of credit union professionals. “You know who paid what to whom for what, but you still need more data.”
For approximately eight years, credit unions have been hearing fintechs are coming to disrupt them. According to Wetherington, “It has not happened and will not happen.”
“Today, fintechs are desperate to partner with and license their product and/or service to financial institutions,” he declared.
Platforms are expected to become the “dominant” delivery method of financial services, Wetherington predicted. He said the term “platform” can be defined as a plug-and-play business model that allows multiple participants (producers and consumers) to connect to it, interact with each other, and exchange value.
Platforms control distribution, the UX, or user experience, marketing and data, he continued.
“Amazon has a platform. What if everything a credit union has for sale is available on the Amazon platform? Amazon has partnered with Bank of America for its lending program, but loan growth has slowed. In the U.S., Amazonpayments is used by 33 million users. Amazoncash is a deposit account people can use at a 7-Eleven. Amazon wants to offer checking accounts by partnering with Chase. It must integrate financial services into its business model because it has to compete with Alibaba.”
There is a “huge” authentication problem in the financial services world today, Wetherington said. Passwords are “dead” because they are hard for humans to remember and easy for computers to guess, while Social Security numbers have been breached “multiple times.”
The solution? “We have to go to biometrics and behavioral methods,” he said. “One solution is device fingerprinting.”
The Internet of Things means sensors are packed into more and more devices, ranging from refrigerators to washing machines. These are sensing temperature, humidity and many more factors every hour of every day, which Wetherington said means “orders of magnitude” more data as more devices are connected.
“More data means more analysis, and then AI to do decisioning,” he said. “Amazongo stores in Seattle leverage sensors, machine learning and AI to allow customers to walk in and walk out without going through a checkout line. The Internet of Things and sensors will have an impact on payments and security – there will be devices paying each other behind the scenes.”
For financial institutions, real-time payments will mean “real-time everything,” Wetherington noted. He said the Federal Reserve is targeting 2020 for a ubiquitous, real-time payments network everywhere in the United States. “This will need real-time analytics to allow fast decisioning.”
Eventually, there may not be a need for loans with terms, he predicted.
There has been much talk in the business world in recent years about CX (the consumer experience) and UX (user experience), but how can a company measure these? Wetherington said the technology already is available – apps that monitor faces to determine the emotions a user is experiencing.
“Engagement is taking people from money anxiety to positivity,” he said.