Posted on 16/8/2019
Despite their purported revolutionary capabilities, it is probably fair to say that these technologies are poorly understood by the general public and often brushed aside as theoretical concepts that are years away from having any real or practical impact on our daily lives.
The reality is quite different, and the transformation is already happening – whether you’re aware of it or not. Across the globe, financial institutions are already exploring how they can adopt these new technologies to transform the delivery of their services, create and use data, or interact with their customers. In fact, according to a global survey of more than 30 major banks conducted by Accenture, 90% are currently exploring the use of blockchain technology in payments.
AI is even further advanced and is already being utilised by financial institutions across Australia to increase efficiencies and deliver new models of service to their customers. In a recent article, we explored the concept of robo-advice as a way for large financial institutions like the big banks to deliver a basic level of financial advice to copious investors. This model effectively utilises AI to create a recommended investment portfolio-based information provided by the investor. We are also seeing a swathe of new market entrants, such as fintechs, that are leveraging AI as a key point of difference. For example, home loan fintech Tic:Toc boasts that it can approve a loan in as little as 22 minutes by utilising AI to assess loan applications as they are completed, in real-time.
Another layer to this changing market dynamic is the introduction of new open banking legislation in Australia, which is being progressively rolled out over the next two years. In short, open banking means that consumers now own their financial data as opposed to the financial institution where it is held. This means that you can now choose who can access your data and it is designed to increase transparency and make it easier than ever to switch banks or to have different products with different banks.
Sourcing a home loan presents another good example of open banking in practice. At present, if a person banks with bank A on a regular basis and is applying for a home loan through bank B, they would need to source all of their bank statements and other relevant financial data from bank A, provide it to bank B in hard copy before bank B assesses and verifies the information manually. It is a slow and arduous process. Theoretically, under open banking legislation, that same person would allow bank B direct access to their financial data held within bank A through a digitally enabled and highly automated process, ultimately reducing complexity and saving all parties time.
“To maximise the opportunities that centralised information and open data present, it is crucial for financial services to be fluid with the changing environment,” explains Bruce Debenham – Director, Perks Finance.
“For example, at Perks, we’ve been able to pass on the increasing opportunities that this changing landscape offers to the client through the establishment of strong working relationships with several fintechs, who specialise in producing short term working capital solutions to SMEs. Working with these fintechs gives us the ability to process a loan application in a matter of hours, versus a matter of weeks.”
Think about how this has the capacity to fundamentally change the property market and the dynamic of purchasing a home. For small businesses, not having to sit on your hands for six weeks while you await a loan approval is a game changer making it much faster to take that next step than ever before.
“We see that one of the key opportunities that technological advances in the financial space offers is a centralised view of your financial picture – combining information on your investments, loans, cashflow and expenditure (personal and professional) in a singular view,” explains Mark Roderick – Managing Director, Perks.
“Back in 2005, we saw that the tech finally had the capabilities to be tailored to the ever-evolving needs of our clients. We knew that for the technology to deliver true value to the end user, it needed to be driven by clear, real-time data and insights. With this in mind, we embarked on the development of a robust proprietary, cloud-based software platform called Xeppo.”
Xeppo was the missing piece for Perks integrated strategy, enabling clients to view all their financial information in one place.
So alongside the benefits of time, fintech now offers unprecedented financial visibility. But what about security?
Blockchain is more of a long lead approach. While the concept is becoming increasingly normalised thanks to the proliferation of Bitcoin and other cryptocurrencies, it is not yet heavily used in the mainstream finance world. That’s not to say that it won’t be, and the opportunities are massive.
There is a natural synergy between blockchain and open banking. Where open banking increases the ability for data sharing, blockchain may protect it to ensure data integrity, privacy and security can be upheld.
Blockchain is all about decentralising data ownership, using it to increase security and minimising the risk of manipulation. Instead of data being housed in a central resource, e.g. a bank, identical copies of that data are hosted across a vast peer network – or chain of blocks – with each block in the chain having to authenticate the data before any changes, e.g. a transaction, can occur. When used effectively, these technologies have the capacity make your financial life easier, more secure, more centralised and more efficient.
While these new technologies currently exist in silos outside of the mainstream world of finance, the future opportunities for seamless integration are boundless.