BNP Paribas, Barclays invest in AI startup for digital transformation

Banks are trying to fix the messy data situation inside their massive organizations. BNP Paribas led a $30 million funding round for an artificial intelligence startup called Digital Reasoning that closed Tuesday, when the French bank also announced Angel Rodriguez-Issa, its global head of strategic investments for the global markets business, has joined the startup’s board of directors. Barclays and Square Capital also participated in the round as well as Goldman Sachs and Nasdaq, both previous investors of Digital Reasoning. The bank is on a mission to digitize its operations to become faster and more efficient for both money saving and money making purposes. Rodriguez-Issa said the bank likes that Digital Reasoning provides a platform “that can be used into a large variety of use cases,” adding that financial services are so fragmented that trying to digitize an entire organization often requires a number of different solutions to tackle each silo in a company. “We don’t want to contribute to that fragmentation more.” With platforms, he said, banks can find solutions that are horizontal and use the same core technology the platform provides and with little tweaks here and there find different ways to apply it to different areas. “The way that the digital transformation of banks and financial services has historically evolved has been driven by specific use cases where the same underlying technology is provided by different vendors,” Rodriguez-Issa said. “It becomes a fragmented vertical approach to solving problems that fundamentally requires the same core processes, such as sourcing, analyzing and sharing data or transfer value and information from A to B.” According to a recently published report by the World Economic Forum in collaboration with Deloitte, data will become a growing point of differentiation for banks, which, for that reason, will have to use “a combination of data strategies to collect the depth and breadth of data needed to follow the lead of tech firms in data monetization.” Three or four years ago, the dominant model among financial institutions was to completely remove and replace the core system, which was an expensive path and had a high risk of failure. Now banks are carving out particular functions or processes and moving them to a more agile environments. By investing in the company and taking a seat on the board, BNP Paribas intends to help guide the company’s success and delivery of products and services it needs, Rodriguez-Issa said. Already, the two companies have created “working groups” with staff from both companies tasked with solving non-obvious problems, “where there’s no productized version of AI solving them already." In addition to improving productivity within the organization, BNP also wants to create better experiences with its clients, by taking all the client-generated data which comes through chat and voice channels or email, and translating them into business insights with AI. “Many use cases could be handled by the same technology,” Rodriguez-Issa said. "In the case of Digital Reasoning’s AI, it’s about activities that require capturing unstructured data and transform it into something that’s actionable.”