open banking Archives

November 22, 2024November 21, 2024

Peter Renton’s Fintech Forecast: Banking as a Service, Embedded Finance, and the Future of Open Banking

In the ever-evolving world of fintech and open banking, staying ahead of the curve is crucial. Few understand this better than Peter Renton. He is the CEO and founder of Renton & Co., a fintech consulting firm specializing in media, thought leadership, and event support. Renton is the former chairman and co-founder of Fintech Nexus (formerly LendIt Fintech). He has been out in the lead of fintech innovation for over a decade. His work has shaped the industry during this time.

In today’s episode of the Tearsheet podcast, Renton shared his insights on the current state of fintech. He shares his insights on where he sees the industry heading. Renton has a keen understanding of the fintech sector. His insights provide valuable guidance for established companies and newcomers in the industry.

“Without doubt, the most interesting space in fintech in 2024 is the banking as a service space,” Renton states. “Because of the way the banking system in this country is structured, we need banking as a service. And it’s not going away.”

The evolution of fintech events

Renton’s journey in the fintech world was punctuated with the creation of LendIt. It is a conference that grew from a small gathering of 350 people to a major industry event attracting thousands of attendees. As the fintech landscape evolved, so did the event. It expanded its focus from peer-to-peer lending to encompass broader fintech topics and companies.

“We expanded beyond lending and started it in 2017 and got going in 2018/2019, where we became a real fintech event,” Renton explains. This evolution mirrors the broader changes in the fintech industry. These include specialized lending platforms to comprehensive financial services providers.

The changing face of fintech conferences

Large-scale events like Money 2020 and Fintech Meetup still attract many attendees. Renton observes a rising trend of smaller, more specialized events organized by fintech companies themselves. “What you’re seeing in the event space is more and more companies doing their own small events,” he observes. These specialized gatherings allow companies to showcase thought leadership. They help to engage with their target audience.

Opportunities in Banking-as-a-Service and Embedded Finance

Renton sees significant potential in the banking-as-a-service (BaaS) sector, despite recent challenges. He believes that new regulations will provide clarity and stability. This will create opportunities for community banks. As a result, they will be able to expand their reach through BaaS offerings.

“If you want to grow your community bank, it’s hard to do that geographically now,” Renton explains. “But if you open up a BaaS line of business, there are ways you can grow your bank.”

Embedded finance is closely related to BaaS. It is another area Renton highlights as ripe for innovation. He points to companies like Pipe bringing fintech solutions to non-financial businesses, particularly in the vertical SaaS space.

The promise of Open Banking

Looking ahead, Renton is particularly excited about the potential of open banking. With the anticipated release of new CFPB rules on open banking, he foresees a wave of innovation.

“Open banking… is going to be a moment in time, but then that’s going to be in place and people are going to understand the rules of the road,” Renton predicts. “I think there’s a massive opportunity once that gets going. And when all the data, when your data becomes yours and it becomes more portable. There’s going to be a wave of new fintech companies that are going to use that and take advantage of that.”

The big ideas for Open Banking and Embedded Finance

There is a need for banking-as-a-service evolution. Renton asserts, “We need banking as a service. And it’s not going away.” He highlights the ongoing importance of BaaS in the fintech ecosystem.
Renton highlights the rise of specialized events. “What you’re seeing in the event space is more and more companies doing their small events,” Renton notes. He points to a shift in how fintech companies engage with their audiences.
He observes a growth trend in embedded finance opportunities. “If you’re a vertical SaaS company today and you’re not making revenue from payments and revenue from lending, you are behind the curve,” Renton warns. emphasizing the growing importance of embedded finance.
Renton underscores the potential of community banks. He explains, “If you want to grow your community bank, it’s really hard to do that geographically now.” He suggests BaaS as a growth strategy for smaller banks.
There is a rise in open banking innovation. “I think there’s a massive opportunity once [open banking] gets going,” Renton predicts. He anticipates a new wave of fintech innovation driven by data portability.

Listen to the full episode

Tearsheet Podcast · Peter Renton’s Fintech Forecast: Banking as a Service, Embedded Finance, and the Future of Open Banking

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Resources Mentioned

Fintech Nexus (formerly LendIt Fintech)

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October 30, 2024November 4, 2024

How U.S. Bank is reinventing itself for the digital age with Chief Product Officer of Digital Platforms, Gareth Gaston

In an evolving financial landscape, US Bank has emerged as a leader in digital transformation. It has reshaped the way customers interact with their finances. Today’s episode of the Tearsheet podcast features Gareth Gaston, Chief Product Officer of Digital Platforms at U.S. Bank. He discusses the bank’s decade-long journey of innovation and customer-centric development.

“We’ve been on a multi-year journey on digital transformation across all facets that you can think of digital,” Gaston explains. This transformation has been more than just a technological upgrade. It’s been a cultural shift that has positioned U.S. Bank at the forefront of banking innovation.

The journey began with the recognition that customers were using more than just physical branches. “When we started this journey, we were renting all our digital tools,” Gaston recalls. “We didn’t have a mobile app. We were kind of renting our online banking and bill pay.”

From these humble beginnings, U.S. Bank has built its own digital platform and in doing so, laid the groundwork for successful future product development. In doing so, it has created award-winning apps and platforms that serve millions of customers.

Here’s my conversation with U.S. Bank’s Gareth Gaston.

Evolution of U.S. Bank’s Digital Transformation

U.S. Bank’s initial move was to shift from renting digital tools to creating their own. This allowed them to develop in-house products tailored to their needs. This shift allowed for greater control over the customer experience. It resulted in faster innovation cycles.

“We rebuilt our app from the ground up, below the glass and above the glass, as we call it,” Gaston shares. This effort paid off. The app got the recognition for “the best app in banking” shortly after its launch.

Expanding Digital Services

The bank did not stop at mobile apps. They expanded their digital offerings to include:

A voice assistant, now recognized as a leader in financial services

Spanish language conversational experiences

End-to-end digital mortgage applications

Same-day business loan approvals and funding

Gaston emphasizes the importance of these developments. He highlights, “Our mortgage experience has won awards and it’s fully end-to-end. Most of our applications and processes are done digitally.”

Enterprise-Wide Digital Transformation

U.S. Bank is now expanding its digital capabilities across the entire company. This phase aims to enhance digital services throughout the enterprise. “Having had great success in consumer and business banking, let’s take that across the whole enterprise,” Gaston explains.

This expansion includes creating foundational capabilities. They can be used across all divisions. From payments to wealth management and commercial banking.

Embracing Open Banking and Connected Finance

US Bank has embraced the concept of “connected finance.” It has created APIs that enable various use cases. These include embedded payments and partnerships with other financial institutions.

“We offer both real-time payments and FedNow as one API,” Gaston notes. He highlights the bank’s commitment to staying at the forefront of payment technology.

Leveraging AI and Machine Learning

The bank recognizes the potential of artificial intelligence. U.S. Bank has recently welcomed a new Chief Artificial Intelligence Officer. This move underscores their commitment to integrating AI across their operations. From personal productivity tools to enhancing the product development lifecycle.

The Big Ideas

Digital transformation is a continuous journey that requires both technological and cultural changes. Gareth says, “We’ve been on a multi-year journey on digital transformation across all facets that you can think of digital.”

Developing in-house digital tools enables more innovation and control. This improves the customer experience. Gareth says, “We rebuilt our app from the ground up, below the glass and above the glass, as we call it.”

The reusability of digital platforms across the enterprise accelerates product development and ensures consistency. “The whole idea of reuse is that we were very intentional around creating these seven different platform groups”, explains Gareth.

Open banking and connected finance are key to meeting evolving customer needs and expectations. “We embraced, uh, you know, we call it connected finance. But open banking, from the start of the journey in the U.S.”, Gareth says.

AI and machine learning will play a crucial role in the future of banking. This requires dedicated leadership and governance. “It’s so important. We, this week, just welcomed our new chief artificial intelligence officer”, Gareth highlights.

Listen to the whole episode

Tearsheet Podcast · How U.S. Bank is reinventing itself for the digital age with CPO of Digital Platforms, Gareth Gaston

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October 22, 2024October 30, 2024

FIs and fintechs can learn to partner more intelligently with Pacemakers’ Alessandro Hatami

As the financial world evolves, open banking and digital transformation are opening up new opportunities. This comes with several challenges for banks and fintechs. In today’s episode, I sit down with Alessandro Hatami. He is a managing partner of Pacemakers, a consulting firm that offers a systematic approach that allows its clients to find the partner that is right for them.

Today we discuss some of these seismic shifts in the fintech industry.

Hatami has a unique background in financial services, spanning both upstart tech companies like PayPal and traditional institutions like Lloyds Bank. His background offers a compelling perspective on the future of financial services. “Financial services is the ideal digital product,” Hatami asserts. “because there isn’t a real tangible exchange,” he says. Yet, despite this potential, many institutions are struggling to embrace digital transformation.

I’ve been saying for years on this podcast that the ability for both larger and smaller institutions to partner – to partner well, at scale, quickly, and deeply – can be a differentiated, defensible model moving forward.

Hatami explains, “They have gone through an evolution. But they haven’t gone through a transformation.” The challenge facing the industry today lies in balancing adaptation with true transformation. from legacy systems to cultural barriers.

Through Pacemakers, Hatami aims to bridge this gap. He wants to improve partnerships between established financial institutions and agile fintech innovators.

Here’s my conversation with Pacemakers’ Alessandro Hatami.

Three stages of financial services innovation

Hatami outlines a three-stage model of innovation in financial services:

Adapting – Banks begin by adapting existing capabilities to digital platforms.

Evolving – Institutions develop new digital-only services not possible in traditional branch settings.

Transforming – The toughest stage is rethinking financial services with a customer-centric perspective.

“What’s on the other side is a financial services proposition. It is not designed to sell a product to an individual. But it’s designed at understanding what the individual needs,” Hatami explains.

Overcoming challenges in fintech partnerships

Successful collaborations between incumbents and fintech face several hurdles:

Timing mismatches between fast-moving startups and slower corporate processes

Difficulty in translating innovative propositions into terms that resonate with traditional banks

Identifying the right internal champion with P&L responsibility

Hatami advises, “You have to explain to the big company what you could do for them. But you have to explain to them in their terms.”

Rise of open banking and banking as a platform

The concept of open banking is transforming the consumption and delivery of financial services. Hatami predicts, “The future in banking will be. The banks will become the gatekeeper of my financial relationship. The bank may or may not deliver the services and products I receive.

“Banking as a platform” is a major shift from the old model where banks made all their products themselves. Now, banks collaborate with others to offer a wider range of services.

Role of AI in reshaping financial services

Artificial Intelligence presents enormous opportunities for the financial sector. Particularly in data processing and pattern recognition. AI will likely support, not replace, human interaction in customer service roles.

“The way I think about AI is about it as an efficient, effective, interesting way of capturing data. Through the new visualization techniques. And also processing gigantic amounts of data,” Hatami explains.

Cultural Transformation: From product-centric to customer-centric

The biggest challenge is shifting from a product-centric to a customer-centric approach. This requires a cultural change. It needs banks to completely reorganize their operations. And change how they measure success.

Hatami notes, “In a customer-centric world, banks must use customer segmentation for their profits and losses. Not just product-based metrics. This requires a complete transformation of how banks operate.”

The Big Ideas

Digital transformation in financial services is vital. “They have gone through an evolution. But they haven’t gone through a transformation,” Hatami observes. Banks must move beyond adapting existing services. They must reimagine their role in customers’ financial lives.

Hatami highlights the importance of cultural alignment in partnerships. “You have to explain to the big company what you could do for them, but you have to explain to them in their terms,” he advises. Successful collaborations need mutual understanding and clear communication.

Open Banking is the future of fintech. “The future in banking will be. The banks will become the gatekeeper of my financial relationship,” Hatami predicts. This shift will change the delivery of financial services.

Hatami focuses on the role of AI in financial services. “The way I think about AI is as an efficient, effective, interesting way of capturing data,” Hatami explains. While AI offers significant opportunities, human interaction remains crucial in financial services.

Hatami highlights the shift to customer-centric banking. “In a world where the customer is centric, they go through the segmentation P&L, not the product P&L,” he notes. This fundamental shift requires completely transforming how banks operate and measure success.

Watch the full episode

Listen to the full episode

Tearsheet Podcast · FIs and fintechs can learn to partner more intelligently with Pacemakers’ Alessandro Hatami

Subscribe: Apple Podcasts I SoundCloud I Spotify I Google Podcasts

Read the transcript (for TS Pro subscribers)

October 9, 2024October 8, 2024

How Generative AI and open banking are redefining personalization in financial services with Curinos’ Olly Downs

Generative AI and open banking are beginning to change how banks engage with customers. Today we will look at this process with Olly Downs. He is a Chief Technology and AI Officer at Curinos. With a career spanning three waves of AI, Downs brings a wealth of experience to the table. He published his first academic paper on what we now call generative AI, back in 1999. “I’ve almost been waiting for the current wave of AI to join us,” Downs reflects. He highlights the long-anticipated arrival of today’s AI capabilities.

AI-driven personalization will change digital banking. Banks are beginning to use it to recreate the personalized touch of traditional banking. Downs explains, “Traditional banking founded itself on personalized, high-engagement relationships. That followed families and businesses throughout their entire life cycle.” Personalizing the online experience is challenging due to the growth of digital channels. Curinos’ technology tackles this by analyzing customer journeys. It identifies the best times and ways to engage customers. This ensures that personalization continues in the digital space. The result is a more effective and tailored customer experience.

Generative AI is not just boosting personalization. It addresses the entire marketing cycle for banks. This shift is redefining how banks approach customer engagement. It’s enabling and testing tailored interactions with numerous ready-to-use marketing creatives. The impact is both profound and widespread. The blend of personalization with open banking is shaping the future of banking.

1. Evolution of AI in Banking Personalization

Downs traces AI’s progress in banking, from Microsoft Research to today’s generative AI. He notes, “We’ve done so much better in understanding language. And the human internalization of concepts.” This progress has deepened our understanding of customer behavior across different communication channels. It provides a clearer picture of how customers interact, enabling banks to create more personalized experiences. Banks nowadays are focusing on data-driven customer lifecycle management.

2. Bridging the Gap Between Traditional and Digital Banking

Modern banks want to replicate the personalized touch of traditional banking online. This is a major challenge in the digital age. “The most satisfied retail banking customers engage with a branch. As well as digital services,” Downs says. This insight highlights the need for a consistent experience across all channels. AI helps unify customer journeys. It offers context for both digital and in-person interactions. Achieving this consistency is crucial for a seamless customer experience.

3. Generative AI: A Game-Changer for Financial Services Marketing

Generative AI addresses the marketing process for banks. Downs reveals, “We’ve been able to stitch in with the help of generative AI… how can we be experimenting live?” This technology allows for real-time learning and adaptation of marketing strategies. It accelerates the creative process and campaign execution.

4. Future of Open Banking and Personalization

Looking ahead, Downs contemplates the convergence of personalization and open banking. He muses, “There’s an opportunity for thinking about… pricing and packaging, both of deposit and lending products that can become very personal.” Yet, he also notes the potential challenges in data consolidation open banking might present, suggesting a need for consumer-driven solutions.

5. Micro-Personalization: The Next Frontier

The conversation touches on the concept of micro-personalization. It means “personalization for an audience of one.” The goal of personalized banking is to integrate both branch and digital services. Downs notes that open banking trends and data privacy issues make this complex. These challenges make personalization more difficult.

The Big Ideas

AI-driven personalization is reviving traditional banking relationships. Downs highlights, “Traditional banking founded itself on personalized, high-engagement relationships.” He explains how AI is enabling banks to maintain this level of personalization. It is doing this across digital channels.

Generative AI will change financial services marketing. Downs reveals, “It’s a massive unlock. It’s a hundred X unlock of the creative process in particular.” This technology allows for continuous experimentation and rapid adaptation of marketing strategies.

The future of banking lies in the convergence of personalization and open banking. Downs predicts a future where banking products are highly personalized, stating, “There’s an opportunity for thinking about… pricing and packaging, both of deposit and lending products that can become very personal.” Yet, he also acknowledges the challenges that it might present in data consolidation.

Customer engagement is key to long-term value. Downs explains, “The key use case has been about engagement and the path to primacy and maximizing quality of customers.”
AI is enabling real-time learning and adaptation. Downs describes how Curinos technology can “generate new recommended creatives”. It does so in that “flow for the marketing team.” This allows for the immediate implementation of insights gained from customer interactions.