In 1866 the first transatlantic cable was successfully laid from New York to London. It would provide the first in over a century of technological advancements that have reshaped financial services. 1918 saw the creation of the Fedwire, the first electronic fund transfer system enabled by telegraph and Morse code. And the rest is history.
In the last 60 years, technological change in financial services has greatly accelerated. The manner in which consumers and businesses interact with their banks, insurance companies and wealth advisors has been reshaped. As in other industries, technology has broken down old models and created a democratization of financial services. Underpinning this change has been the increased digitization of the industry.
Financial Services Journey to Today’s Digital World
Over the last seven decades, technological changes have created massive, systemic changes in the way we interact with our money. In the 1950s, credit cards were introduced, and we began the move away from cash towards digital payments. In the 1960s, ATMs provided the means to access cash without having to visit a branch bank. The 1970s saw the introduction of electronic stock trading, a predecessor to the lightning quick trading infrastructure that exists around the world today.
With the advent of the internet in the 1990s, new models were launched including online banking and stock trading, internet-based payments, and digital peer-to-peer money remittances, making it easier for consumers to directly access financial services. In the last decade, mobile technology has moved financial services to the palm of our hands - in 2019, more than 75% of Americans used a mobile device to check their bank balance, and the total value of payments made using mobile devices will have reached more than $500 billion in 2020.
Opening the Door for Digital Disruption
While these new technologies have transformed how we engage with financial services, they’ve also opened the door for disruption of the financial services industry. Enter the rise of the “fin techs” - non-banks who are providing critical financial services to businesses and consumers. Often, these companies are meeting the needs of populations that were previously underserved.
During my career, I’ve worked at two of the largest fin techs in the world, both of which leveraged technology to take on incumbents and create new waves of growth. The first is PayPal, which built the infrastructure to provide secure and convenient online payments and help facilitate the rapid growth of e-commerce. Today, PayPal enables the movement of almost a trillion dollars a year around the globe. The second is Square, which leveraged AI to provide financial services to previously underserved small businesses and underbanked consumers. By using machine learning to automate risk and reduce customer acquisition costs, Square has enabled millions of individuals and small business owners to access payments, loans and data to manage their financial lives.
The Opportunity with AI
The rise of artificial intelligence is poised to deliver the biggest change to financial services in decades. It will transform how the industry serves its customers, manages risk and leverages data to drive growth and achieve efficiency gains. Our new research with The Economist and ThoughtSpot, which surveyed 200+ leaders from across financial services, illustrates just how significant an impact AI will have on the industry. Despite being early in the adoption cycle, already 37% of respondents indicated that AI has reduced operational costs, 34% reported on the ability to adopt advanced analytics to make data-driven decisions, and 32% reported enhanced customer personalization and customer satisfaction.
We’re already seeing this impact in our customer base. One of ThoughtSpot’s customers - one of the largest banks in the US - is using AI in its wealth management business. With millions of customers accessing a wide range of products from investing, cash management and mortgages, they wanted to customize their offerings to serve the needs of each of its customers, rather than offering a generic template of products. With AI-driven analytics, their wealth advisors could use simple searches to build a complete, 360 degree view of their customers. This gave them the ability to look at everything from investment products, credit cards, and mortgages that the customer had adopted and identify new relevant products and services for them, helping the bank grow their assets under management and expand their customer lifetime value.
As AI ushers in a new wave of innovation for financial services, today’s leaders must embrace change, or risk getting left behind. No aspect of financial services will remain unchanged by AI. It will help drive automation and greater employee productivity. It will facilitate new customer acquisition, customized marketing and customer retention. It will enable more granular assessment of risk, reducing fraud and credit losses. And it has already given rise to modern fin techs who are leveraging AI to attack new market segments with innovative solutions.
With a new cycle of disruption comes the opportunity for daring, visionary leaders ready to take the chance to build stronger, enduring companies. At ThoughtSpot, we’re excited to help companies make this transformation.