What financial innovations are coming our way? And how will they change our relationship to money?
From challenger banks with all-digital experiences, to frictionless peer-to-peer lending platforms, the seamless innovations and slick conveniences we’ve come to expect from technology are finally filtering into the frigid realm of finance.
A lot’s changed in a short time, thanks in part to the huge demand for personalised, secure, and lightening-quick services. And thanks also to technology’s unique ability to navigate, at pace, the intricate and regulatorily-complex financial system.
FreeTrade – the no-commission investment platform – managed to crash Crowdcube’s website when it opened its latest, record-breaking investment round. It was a clear sign that both consumers and investors have hearty appetite for innovation.
The money is there, and so is the demand. And where the two meet, invention is bound to follow.
So what kinds of advances can consumers expect to see in the near future? What weird and wonderful functionalities can we hope to see gracing our screens? In celebration of FinTech Week in the UK – the world’s preeminent hub for financial innovation and commerce – GrantTree takes a peek down the innovation pipeline.
Intelligent Budgeting Apps
Digital services may be encroaching on our private lives – reading our emails, stalking our location, and so on – but at least we’re getting something out of it: highly tailored digital services.
More of our data is being farmed for insights about who we are and what we want. Apps infused with this (invasively collected) intelligence will truly ‘know us’. And – thanks to an array of increasingly homogenised APIs – they will know the brands, supermarkets and retailers we prefer, too. Worryingly, some say information collectors like Google may know us better than we even know ourselves.
The combination of FinTech, market data and personal insight makes new kinds of services possible, like sophisticated budgeting apps offering highly curated advice about making, saving and spending money. For example, we might see a suped-up version of uSwitch that would proactively seek out money-saving opportunities on behalf of its users, judging its users needs and wants based on an exquisitely understanding of their previous behaviours.
Imagine: ‘Hello Sharon. Judging by your average energy usage over the last six months, I’ve calculated you could save £120 a year by switching from OVO to Bulb. Click ‘yes’ to change provider.’ Or ‘Hello Paul. You don’t watch much TV these days. And the shows you like and will like mostly available on Netflix and PrimeTV. By cancelling your Sky TV subscription, you could save £35 a month. In five months, you could afford the top three items on your Amazon wish list.’
Through an AI-powered virtual intermediary, money-saving services or apps may also have the power to re-negotiate or cancel our existing contracts, removing the natural stickiness incumbent providers hold over their competitors. Freer movement between providers would cause fiercer price-based competition, and smaller margins from non-premium services like utilities, bank accounts, and grocery delivery services. This would make economies of scale more important, stimulating consolidation, curtailing choice and playing into the hands of large corporations.
Brand loyalty would also be diminished by our detachment from the brands that service our needs. We would not, on the whole, have relationships with a range of specialist companies. We would have them with algorithmic middlemen – most likely financially literate versions of Cortana or Alexa – who themselves would compete to manage our affairs.
The runaway collection of our intimate data may well be bad news for personal liberties, individual agency, and our many cherished tenants of identity, but at least we can take solace in the fact our personalised services are getting smarter. Plus we’ll be saving a good wad of cash.
Facebook, Google, or Amazon will make a bold move in the finance space.
Apple has already introduced the Apple Card, a virtual credit card tied to Apple Pay, and its latest attempt to widen and fortify the walls of its one-stop ecosystem. Other silicon valley goliaths will soon follow suit. Facebook and Google are the likeliest candidates. Their evolution from temptation to intervention is crying out for a monetary component; a financial service giving both companies crystal-clear insight into our spending habits.
Facebook or Google’s offering would be more a more sophisticated an offering than Google Pay. That is more a facilitation layer, not a stand alone service. Through a Google Card, Facebook Wallet or perhaps even Amazon Currency, each company could offer discounts, points, or some other redeemable incentive for choosing their advertisers, or making choices that align with their predictions for our behaviour.
Just as Alexa outperforms Siri, so will the insights and individualisation of Google’s or Facebook’s financial service surpass those of Apple Card. That’s because both companies are more willing to buy, plumb and employ information. Information being the fuel for virtual intelligence. Expect Facebook or Google Card’s terms to be generous. And it’s offers to be plentiful and alarmingly appropriate.
Data-based insurance is already here. Sign up for Vitality Health Insurance, and you can claim a sizeable discount on a brand new Apple Watch by walking a certain number of steps each day. Sign up for Aviva Car Insurance, and they’ll offer discounts for safer driving, as determined by a small sensor – a ‘dongle’ – installed into your car. Nifty though these schemes are, they’re pretty rudimentary. Insurance companies could be doing so much more with their customer’s data.
For instance, research is being conducted into whether the way a person uses their mouse could indicate the early signs of diseases like Parkinson’s. Ideally, the identification of such signals would be relayed to the user, followed by a referral or invitation to see a specialist. This kind of cutting-edge analysis could give patients and doctors an invaluable head start on treating or curing a disease, leading to much better prognoses and outcomes for the patient.
But, morosely, it’s perfectly possible this early warning would not be sent to the user, but to their medical insurance company. That’s if the insurer has agreed to exchange information with your laptop’s manufacturer or browser’s developer. Incredibly, neither company is under any obligation to tell you anything. And you would be none the wiser about your pre-diagnosis, until your insurance fees double and you were forced to find out why.
It’s a pretty grim scenario. But it’s unlikely to happen, at scale, soon. The near-term benefits are promising: proper monetary incentives for healthy choices, empowered by meaningful insights into our lifestyles. Bought nothing but McDonalds and Mars Bars this week? Too bad. Your insurance just went up. Bought a new pair of running shoes? Great, here’s a discount code.
Access to healthcare clearly shouldn’t depend on wealth, personal circumstance, or whether you had one too many ciders in the glorious summer of 2018. But health insurers – the gatekeepers to medical luxuries like private rooms and flexible scheduling for non-urgent surgeries – could create an ethical, opt-in market for, say, the occasional buying of lettuce.
The A.I. Banker
AIs, Machine Learning, and highly complex algorithms are powerful tools for financial analysis. Their speed and data-processing capabilities allow them to identify subtle predictors for market change, or discrepancies between value and share price, that are usually invisible to human analysts.
A growing number investment banks are turning to these technologies to drive their investment strategies, and gain an informational advantage over other investors. As a milky-eyed, Wolf of Wall Street sort probably once said: ‘information equals opportunity’.
The use of AIs in investment banking has drawn some criticism, partly because of the black box problem. Companies using so-called black box models don’t know what calculations their AI is performing. They can see the data that’s inputted, and the decision the AI makes, but what happens in-between is a mystery, obscured by the unfathomable complexity of the machine. The system’s opaqueness, coupled with the large amount of money riding on its judgements, is making financial regulators nervous.
Still, AI-driven investment strategies are proving effective. Sadly most of us can’t afford the minimum buy-ins demanded by investment banks like Renaissance Capital and Two Sigma. It’s just too high for us mere low-to-medium Net Worth Individuals. But our luck might be about to change. Consumer-facing investment platforms like Nutmeg invest on their users’ behalf, offering access to their financial expertise. We will soon see a retail investment platform integrate AI or ML strategies into its retail investment offering. To promote this, the company will offer investors the ability to specifically invest in line with its AI’s strategy.
It would be a real PR boon for whichever company does it first.
Fund Your Innovation
If you’re developing a new FinTech solution, or an innovative service to help people manage their finances, you probably qualify for large government subsidies through grant funding or R&D Tax Credits.
Get in touch for a free consultation, and see how much you could claim.