Report series

All In On AI? An New EY Study Reveals Eagerness Among Leaders in Financial Services

All In On AI? An New EY Study Reveals Eagerness Among Leaders in Financial Services
By David Penn Posted on
Categories: David's column, Report series

“Fired up and ready to go” is not just for political campaigns any more. According to a new survey from Ernst & Young, that sentiment aptly describes the attitude of a growing number of leaders in financial services when it comes to their eagerness to deploy artificial intelligence (AI), particularly generative AI (GenAI).

How eager? According to Ernst & Young’s 2023 Financial Services GenAI Survey, “nearly all (99%) of the financial services leaders surveyed reported that their organizations were deploying artificial intelligence (AI) in some manner. All respondents said they are either already using, or planning to use, generative AI (GenAI) specifically within their organization.”

Given the popularity of AI and GenAI, overwhelmingly positive responses like these may not be surprising. The FOMO in this field is reminiscent of the dot-com gold rush of more than two decades ago. After all, are many of the companies appending “ai” to their names that much different from their predecessors who donned “.com” back in 1999? Today’s eagerness has a similarly fearlessness. In the EY survey, expressions of anxiety and skepticism about the potential impact of GenAI on their business were few at just over one in five. For what it’s worth, insurers were the most nervous; bankers the least.

Other color pops in the EY Survey included “feeling supportive and optimistic about using AI in their organization” (55%), seeing GenAI “as an overall benefit to financial services within 5 to 10 years” (77%), and believing AI will improve the customer and client experience (87%).

The survey did reveals discontents. And within these discontents are potential opportunities for fintechs, especially those involved in the “picks and shovels” of the AI gold rush. Respondents to the tune of 40% reported that there was a lack of proper data infrastructure for successful deployment of AI solutions. And with regards to technology infrastructure, the survey noted that 35% of respondents believed there were still significant barriers. EY Americas Financial Services Organization Advanced Analytics Leader Sameer Gupta spoke to this problem, noting that while “generative AI holds the potential to revolutionize a broad array of business functions … with each new wave of AI and analytic innovation, it becomes increasingly clear how important it is to have a tech stack with a solid foundation.” Gupta added that it is critical for legacy data and technology to be “unimpeachable” before introducing AI.

Another challenge is talent. The mainstream conversation on AI still orbits concerns about AI-induced job losses. But the real job challenge with regards to AI right now is finding enough people qualified to implement AI-based solutions. “Our data showed that 44% of leaders cited access to skilled resources as a barrier to AI implementation,” EY Americas Financial Services Accounts Managing Partner Michael Fox said, “but there’s only so many already skilled professionals in existence.”

Fortunately, leaders seem to be embracing an AI-enabled future, making it that much more likely that these challenges will be met and overcome. In our own informal surveys with financial professionals, we have learned that buy-in from leadership is seen as key – for everything from DEI initiatives to digital transformation. And it is no surprise that EY has a role to play in making sure this is clear to its financial institution partners. “We like to take an ‘innovation intelligence’ approach to putting artificial intelligence to work,” EY Americas Financial Services Innovation Leader David Kadio-Morokro explained. “Planning, education, and an agile test and learn strategy for implementation are imperative for those looking to make the most of AI’s potential benefits.”

Conducted in August, the 2023 Financial Services GenAI Survey queried 300 financial professionals at the level of Executive or Managing Director or higher. All respondents worked at financial institutions with more than $2 billion in revenue. Organizations in banking, capital markets, insurance, wealth management, and asset management were surveyed, with 100 responses per sector collected.

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Trulioo Examines Challenge of Business Identity Theft in New Survey

Trulioo Examines Challenge of Business Identity Theft in New Survey
By David Penn Posted on
Categories: Report series, Trulioo

A new survey from identity verification platform Trulioo reveals that nearly 80% of responding organizations have suffered from business identity theft. Business identity theft involves defrauding, extorting, or stealing money from a company. The data comes from Trulioo’s Global Know Your Business (KYB) Survey, conducted last month. The review included responses from 705 professionals in banking, payments, e-commerce, trading, health care, and the public sector.

“Our global KYB survey shows that 79% of companies have been affected by business identity theft,” Trulioo Chief Product Officer Michael Ramsbacker said. “Fraudsters all too often find an open door by using stolen business identities.”

In addition to the high number of companies reporting experience with business identity theft, the survey noted that more than a third of those responding (34%) said that they were not happy with their current business verification vendor. These respondents cited issues with data accuracy, international coverage, and meeting compliance regulations as the major challenges to effective and efficient business verification.

To this end, Ramsbacker underscored that Trulioo’s approach helps businesses deal with this specific attack vector by enabling companies to conduct business verification as part of the onboarding process. “(Our) platform allows our customers to deploy onboarding workflows that verify the user submitting the business information is affiliated with the business,” Ramsbacker explained. “Trulioo provides multilayered business verification and global data sources, all through one platform, to help organizations thwart those fraud threats and achieve compliance in countries around the world.”

More than 50% of survey respondents came from businesses reporting annual sales of more than $500 million. A majority of the survey respondents reported verifying more than 100 businesses a month. The survey respondents were geographically diverse, hailing from North America, Central and South America, Asia-Pacific, Europe, the Middle East, and Africa.

A Finovate alum since 2014, Trulioo won Best of Show for its demo at FinovateEurope last year. The company returned to the Finovate stage this March, showing how its global identity platform provided a comprehensive suite of services to verify both individuals and businesses. More recently, Trulioo launched its Advanced Global Person Match Services with Intelligent Routing offering. This solution adds to the capabilities of Truiloo’s Workflow Studio, a component of the company’s identity platform.

“The Trulioo breakthrough approach eliminates the need for redundant, complex multivendor verification systems,” Ramsbacker explained, “enabling organizations to quickly and intelligently onboard customers and gain a competitive advantage.”

Headquartered in Vancouver, British Columbia, Canada, Trulioo provides real-time identity verification of more than five billion people and 700 million businesses around the world. Founded in 2011, the company has raised more than $474 million in funding from investors including Goldman Sachs and Blumberg Capital. Steve Munford is CEO.

Be sure to check out Trulioo’s upcoming webinar – Optimize Onboarding to Maximize Revenue – coming at 10am Eastern on Tuesday, October 31.

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CB Insights on 2023 Fintech Funding Woes; Strength in Early Stage Investment, ex-U.S. IPOs

CB Insights on 2023 Fintech Funding Woes; Strength in Early Stage Investment, ex-U.S. IPOs
By David Penn Posted on
Categories: Report series

CB Insights shared its State of Fintech Q2 2023 report last month. The top takeaways? Fintech funding continues to take a hit, with the report noting that both funding and deals globally have retreated to “levels not seen since 2017.”

But wait, there’s more. Mega-round funding, deals valued at $100 million or more, fell to a six-year low. And payments – which were memorably referred to by the VCs on our Smart Money Power Panel at FinovateFall last year as “the gift that keeps on giving” – stopped giving. CB Insights reports that funding for payments-related companies fell 75% quarter over quarter. It was the largest decrease for any fintech sector.

What about upsides? The report noted increases in fintech funding in Latin America and the Caribbean, the only region to see significant gains. CB Insights also highlighted the fact that the five exits in the quarter all came from fintechs based outside of the U.S.

Read the whole report. There are a number of interesting observations, some of which give some reason for optimism in the second half of the year. For one, early-stage companies dominated deal volume in Q2 2023. The strength of fintech funding in Latin America, mentioned above, was also a promising sign. Some of this deal-making involved cryptocurrency and DeFi related firms – and geographies like the Cayman Islands that are outside traditional Latin American fintech powerhouses Mexico and Brazil. But much of the investment in Latin America was driven by strong trends like digitization and financial inclusion. Investors have also been encouraged by the success of fintechs like Brazil’s Nubank. The report also saw positives in the market for companies going public in Asia last quarter.

For more on CB Insights’ examination of fintech funding so far in 2023, also check out the firm’s Fintech Midyear Review: The Data Behind the 6 Year Low webinar released last week. Lead Fintech Analyst Anisha Kothapa puts the current fintech landscape into context, and highlights where investors see opportunity around the world – and why.

“I think some of the biggest drivers of capital being invested in (Latin America) is due to, one, financial inclusion,” Kothapa explained. “There are many unbanked and underbanked people in Latin America that need innovative financial solutions. The second is that the region has seen rapid digital adoption, especially with the use of smart phones, and growing internet connectivity. The third thing is around a more favorable regulatory environment.”

By the way, Finovate’s weekly Finovate Global column is a great source of news on fintech developments around the world. With regard to Latin America in particular, recent columns have focused on fintech innovation in Brazil and Colombia.

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Fintech, Financial Services, and the LGBTQ Community

Fintech, Financial Services, and the LGBTQ Community
By David Penn Posted on
Categories: Diversity in Fintech, Report series

What are the biggest challenges, concerns, and factors that impact LGBTQ financial consumers in 2023?

A wide-ranging survey by the Center for American Progress (CAP) from the beginning of the year actually sheds some light on the relationship between financial services themselves and the LGBTQ community. This knowledge can help guide banks, fintechs, and financial services providers better tailor their products, services, and experiences for a more diverse customer base.

Here’s one interesting example. The LGBTQ respondents tended to have higher employment rates compared to the non-LGBTQ respondents. At the same time, members of the LGBTQ community were more likely than members of the non-LGBTQ community to be engaged in part-time, freelance, or gig economy work. In the latter category, LGBTQ respondents outnumbered non-LGBTQ respondents 5% to 1%. With regard to transgender respondents, they were twice as likely as non-transgender respondents to report working part time.

These survey results have significant implications for financial services companies. Among other things, the responses underscore the importance of mobile and remote access to financial services. This includes features like virtual assistants to ensure 24/7/365 service for workers with atypical or irregular working hours. Offerings like Earned Wage Access can help workers smooth out irregular cash flows for part-time workers. Additionally, LGBTQ respondents to the CAP survey reported incomes that were on average lower than those of non-LGBTQ respondents. Providing cash flow services can be a way of helping this community avoid the temptation of more costly and potentially predatory financing options.

These responses also suggest a new approach for financing and lending services companies. In order to compete, they may need to think differently about creditworthy potential borrowers who don’t have traditional employment histories. The trend toward an embrace of alternative data in credit scoring is a good development, and one that is likely to benefit LGBTQ communities. The same is true about initiatives to deal with the challenge of bias in AI.

Both as workers in the financial services industry and consumers of financial services, members of the LGBTQ community suffer from discrimination and harassment. This can range from verbal harassment to the denial of equal access to services. While many companies in the financial services industry have been commended for their LGBTQ-friendly policies and environments, ensuring that the financial services workplace is free from anti-LGBTQ behavior is important for both workers and customers alike.

Photo by Markus Spiske

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Checking in on Fintech in Africa

Checking in on Fintech in Africa
By Julie Muhn (@julieschicktanz) Posted on
Categories: Diversity in Fintech, Report series

Fintech in Africa has experienced a growth spurt in recent years. Last month, investment banking firm FT Partners took a deeper look into the state of fintech in Africa in a report titled Fintech In Africa: Momentum is Building and the World is Taking Notice. The report examines underlying drivers of recent growth, offers details of the fintech investment scene, and provides an update on the state of important trends such as challenger banking and open finance.

Below are a handful of highlights from the 207-page report, which you can check out in its entirety on FT Partners’ website.

Underlying drivers of growth

The report highlights the multiple factors currently creating the perfect storm for fintech growth in Africa at the moment. The continent’s young, underbanked, tech-savvy population has long-favored cash, but is showing increasing favor for mobile-first technologies as mobile adoption rises and governments seek to further financial inclusion.

Some of the supporting statistics include:

  • Almost half of the world’s mobile money customers reside in Africa
  • More than half of Africans are unbanked or underbanked
  • 65% of those in Sub-Saharan Africa are unbanked or underbanked
  • 90% of payments are still made using cash
  • Mobile penetration is 80%
  • 47% have access to internet
  • The African Continental Free Trade Area Agreement went into effect in 2019, opening up cross-border payments and creating the potential for a single currency.

State of Open Banking

It is well known that open banking and open finance create a wealth of benefits to end consumers– including increased control over use of their data. In addition to this, Africa is poised to benefit from open banking, which is expected to extend banks’ reach to rural populations and lower costs and barriers to entry of banking services by facilitating innovation in the space.

Nigeria, Kenya, and South Africa have each made inroads into creating formal regulation surrounding open banking:

  • Nigeria’s Central Bank issued its regulatory framework for open banking in 2021 and is currently working on operational, technical, and security guidelines
  • Kenya’s Central Bank emphasized open infrastructure as a strategic pillar for the financial services industry as part of its four-year-strategy announced in 2020
  • South Africa is home to six banks currently offering customers open banking services.

Challenger banking scene

Many fintechs have risen to serve the underbanked or unbanked populations in Africa, a group that makes up more than half of the country’s total population. FT Partners reports that many challenger banks are finding initial success in serving as alternative lenders to customers that lack access to traditional banking channels, and then building out a more robust set of services on top of their lending offering. Key to this, the report notes, is an efficient and reliable underwriting model.

Fintech investment scene

In 2022, African fintechs garnered $1.5 billion in funding across 135 deals. This is up significantly from 2019, when the continent’s fintechs brought in $340 million across 27 transactions.

In such a cash-heavy, underbanked society, it is no surprise to see that payments and banking technology was the most popular sub-sector for investors in 2022, having received more than $2 billion in funding volume. The report also notes that the payments and banking technology is responsible for more than half of the fintech financing deals over the course of the past six years.

New investors in the African fintech space over the past two years include:

  • Vitruvian
  • QED
  • Silver Lake AQD
  • CommerzVentures
  • Dragoneer
  • Fidelity
  • Insight

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Intelligent Identity Security Innovator Sontiq Urges Customer Engagement to Fight Fraud

Intelligent Identity Security Innovator Sontiq Urges Customer Engagement to Fight Fraud
By David Penn Posted on
Categories: Alumni News, Alumni profile, Daily news, Mergers & Acquisitions, Report series, Sontiq
  • Intelligent identity solution provider Sontiq has issued a new report on security in financial services.
  • The report, 2022 Digital Safety and Security Report for Financial Services, underscores the importance of engaging customers and members in the fight against cyberfraud.
  • Sontiq made its Finovate debut in the fall of 2021 and was acquired a few months later by TransUnion for $638 million.

Intelligent identity security firm Sontiq has warned that the growing sophistication of cybercriminals and increased awareness and concern over the challenge to digital security from the public have created both new challenges and new opportunities for financial institutions. In a new report, the 2022 Digital Safety and Security Report for Financial Services, Sontiq highlights the way cybercriminals have leveraged advanced technologies – including automation and AI – to achieve what Sontiq called a “historic level of data compromise” in 2021.

“Consumers are increasingly anxious about cyber threats, but feel unprepared to take action or deal with the fallout,” Sontiq SVP of Enterprise Risk Solutions Al Pascual said. “Notably, they don’t want generic security advice. Financial institutions can combat increased identity risks with personalized, self-service tools that are seamlessly embedded into the digital banking experience.”

Here are some of the key takeaways from Sontiq’s report.

Financial institutions must understand the threat landscape

“What consumers, organizations, and the media often misunderstand,” the report noted, “is that the data breaches with the greatest impact on individuals are often not the high-profile ones that capture headlines.” Sontiq’s research distinguishes between high-profile breaches at institutions like Facebook/Meta and LinkedIn and high-risk breaches at companies like Gallagher and Waste Management. This is because “high-risk” breaches, while involving fewer victims, tend to involve compromises of more valuable personally-identifiable information compared to “high-profile” breaches.

Synthetic identity fraud is a bigger threat than identity theft

A growing number of financial services companies are recognizing the challenge of synthetic identity fraud, with Sontiq observing that 72% of financial services firms believe that synthetic identity fraud is a “much more pressing issue” compared to traditional identity theft.

Why so? And what’s the difference?

Traditional identity theft involves stealing a real person’s PII (personally-identifiable information) and using that data to engage in criminal activity. And make no mistake: traditional identity theft is still an issue, costing $24 billion in losses and victimizing more than 15 million individuals in 2021. Synthetic identity fraud, by comparison, involves a blending of both real and fictitious information. This enables the fraudster to create a completely new, made-up identity that can then be used to fraudulently open accounts, and apply for loans and credit cards. A newer arrival on the cybercrime scene, synthetic identity fraud also comes at a significant cost. The Federal Reserve has estimated that synthetic identity fraud losses have climbed to $20 billion, making it the “fastest growing financial crime.”

Personalized, proactive identity protection gives financial institutions the opportunity to differentiate themselves

In its report, Sontiq makes it clear that consumers are uncertain about who to turn to in the event of a security breach. “Nearly half of Americans,” the report notes, “say they would not know what to do if their identity was stolen.” Because of this, more than half of American fraud victims (54%) have indicated that they believe their financial institution can play a major role in helping them “navigate and resolve their identity fraud issues.” Breach victims across generations – under 35, between 35 and 54, and over 55 – all turned to their financial institutions for assistance in comparable numbers (50%, 48%, and 44% respectively).

This has resulted in a significant growth in the identity theft protection services market. Analysts project that this market will grow at a compound annual growth rate of 9.4% over the next 10 years.

There are a variety of ways that financial institutions can seize this opportunity by deploying better anti-fraud tools and partnering with fintechs and cybersecurity specialists. But key to all of these efforts, according to Sontiq, is customer engagement. Educating financial services consumers on what to do to enhance their own online security – and what to do in the event of a security breach – is critical. Also important is the role of empowerment, and helping consumers understand what they can do to enhance their own defense against fraud.

“Getting consumers to adopt a self-service approach to identity protection also has the potential to help a financial institution better invest resources,” the report noted. “Informed, engaged customers who actively protect their identities become potent allies – finding fraud earlier and reducing overall risk to them and the financial institution.”

Download the free white paper to read the full report.

Sontiq made its Finovate debut at FinovateFall 2021. At the event, the Nottingham, Maryland-based company demonstrated its BreachIQ solution. BreachIQ identifies and diagnoses a consumer’s security breach history to provide personalized, protective actions the consumer can take to improve financial health and enhance security. The technology effectively leverages AI to turn ID fraud risk into a consumer financial health opportunity.

Launched in 2019, Sontiq was formed when EZShield acquired identity theft protection provider IdentityForce. Last spring, Sontiq announced its acquisition of Breach Clarity, a post-breach fraud specialist and Finovate Best of Show winner. In October 2021, Sontiq itself was acquired by fellow Finovate alum TransUnion for $638 million. In a statement, TransUnion said that Sontiq’s identity security technology compliments its own digital identity assets and solutions.

“TransUnion is committed to empowering consumers to shape their financial futures,” TransUnion President of U.S. Markets and Consumer Interactive Steve Chaouki said. “With Sontiq, we will ensure that consumers and businesses have a comprehensive set of tools to protect the financial profile they have built.”

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Filling the Super App Gap in the U.S.

Filling the Super App Gap in the U.S.
By Julie Muhn (@julieschicktanz) Posted on
Categories: Report series, Thought Leadership

There is a Super App-shaped hole in the U.S., and earlier this year, F.T. Partners published a report titled The Race to the Super App that examines the most eligible companies to fill the gap.

The report details three major categories of potential Super App contenders in the U.S., including challenger banks, large fintechs, and big tech companies/ retailers. Here is a breakdown of U.S. players in each category:

Challenger banks

  • Upgrade
  • Dave
  • Avant
  • Varo
  • Chime
  • MoneyLion
  • Current
  • Mission Lane
  • Oportun

Large fintechs

  • PayPal
  • Square
  • Robinhood
  • Figure
  • Betterment
  • H&R Block
  • M1 Finance
  • TrueBill
  • American Express
  • Wealthfront
  • Affirm
  • SoFi

Big tech companies/ retail

  • Amazon
  • Apple
  • Facebook
  • Google
  • Uber
  • Walmart

The report takes an extensive look at the super app industry and details two Super App models. The first is the winner-take-all model. In this approach, the Super App provider begins by offering a banking service and then expands to provide a wider range of services, aiming to eventually become users’ primary financial services tool. The second model is an aggregator approach in which the Super App provider acts as a marketplace that connects users to existing financial services.

Ultimately, banks have a choice to leverage either the winner-take-all model, in which they will build their own Super App to compete with third party players, or to take a hybrid approach in which they both host their banking products on third party marketplaces and offer third party tools to their clients within their own ecosystem. In the former approach, banks will incur competition from major players. However, when taking the latter approach, banks risk relinquishing the primary banking relationship status with their customers.

Photo by Susanne Jutzeler, suju-foto

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From Investment to Innovation: What Can We Learn from a World of Unicorns?

From Investment to Innovation: What Can We Learn from a World of Unicorns?
By David Penn Posted on
Categories: FinovateSpring 2022, Report series

Earlier this year, PwC’s Vicki Huff Eckert published a report that looked at the impact of VC investment on the technology industry. Eckert is Vice Chair for Technology, Media, and Communications – and the global leader of New Ventures and Innovation – for PwC. She will be featured at FinovateSpring next week in San Francisco as part of our Fireside Chat series.

Eckert’s report, Living in a World of Unicorns, examines the role that venture capital has played in not just funding, but in actually helping transform a variety of industries – including fintech and financial services. Some of her key takeaways as they relate to fintech specifically include:

“Tech is now influencing so many verticals that the investments and business processes in those verticals are evolving and beginning to blur industry lines.”

“In the U.S., companies are mostly using AI to improve performance, gain greater insights from their data, or automate business operations. In China, AI companies are primarily focused on facial recognition and computer vision. Alarmingly, investment in cybersecurity hasn’t kept pace …”

“The growth of the platform economy and e-commerce created an unprecedented need for seamless, cross-border, highly scalable digital payments.”

“The digitization of the economy is also establishing the foundation and infrastructure for digital currencies to eventually go mainstream.”

“Today’s unicorns aren’t just shaping capital markets and investment strategies, they are shaping and redefining the industries in which they operate – by developing new products and services, expanding rapidly into new geographic markets, and using their cash (and valuable stock) to attract talent.”

Check out the report from PwC’s Vicki Huff Eckert, and then be sure to join us next week for our Fireside Chat at FinovateSpring in San Francisco, Friday morning, May 20th at 9:30am.

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Revenue Got You Down? Accenture Offers Four Keys to Get Out of the Slump.

Revenue Got You Down? Accenture Offers Four Keys to Get Out of the Slump.
By Julie Muhn (@julieschicktanz) Posted on
Categories: Report series

As we survey the damage from the pandemic and its multiple variants, technology services and consulting firm Accenture has some advice, “It is critical that every bank becomes a challenger.”

In a recent report, the firm uncovered that banking has moved from vulnerable to volatile on its Disruptability Index. Underlining this point, Accenture found that bank revenues declined in 2020, then rebounded last year. “Although COVID hasn’t been a solvency event for the banking industry, we have seen material profit compression that has reordered banks’ priorities,” the report states. “Leading institutions have witnessed double-digit net income declines of 7 percent in Asia-Pacific, 37 percent in North America, and 51 percent in Europe in 2020.”

This profit compression, along with an increased cost of risk and accelerated digital transformation, has resulted in what Accenture is calling a “neo-normal.” The more level playing field has resulted in a more crowded industry. Fortunately, Accenture leaves readers with four “imperatives for success” in this new, post-COVID arena.

Understand your market

While it has always been imperative for banks to understand their customer base, customers’ needs and wants have changed since the pandemic. For example, Global Banking Consumer Study found that when dealing with a bank, customers rank value as the number one priority. That’s up four slots from just two years ago when customers ranked it number five.

Also as a part of this, Accenture noted that banks must balance managing costs with customer acquisition. “Banks can no longer spend multiple years on complex integrations—they need to build a technical stack that can quickly onboard and migrate acquired portfolios and customers so the economic value of the acquisition can be realized swiftly,” the report said.

Future-proof your business

If this was important before the pandemic, it is even more so now. That’s because what we once thought was “the future” is here today. One of the best ways to do this may be cloud partnerships, Accenture explained, because the partnerships can accelerate digital transformation via partnerships.

Banks can’t take a blanket approach, however. There is no one-size-fits-all business model, especially for larger financial institutions. Instead, banks must adopt tailored models for each business sector in which they operate.

Focus on becoming digital

Accenture suggested that a mobile app is just a ticket to the game. Banks can’t rely on the app alone as their digital strategy. Instead of relying on their mobile app as their entire digital strategy, banks should shift their thinking outside of their budget. That is, digital tools shouldn’t be put in place just to decrease cost. Banks should also leverage digital to enhance differentiation, increase revenue, and boost customer acquisition.

Adopt technology

Simply put, “there is a high correlation between technology adoption and revenue growth.” That’s what Accenture found in two separate studies recently. Similar to the point above, banks shouldn’t just look to technology to decrease costs and increase efficiencies. Instead, in order to get ahead, banks need to consider how technology can enable growth, boost differentiation, and facilitate productive partnerships.

This is, of course, easier said than done, so Accenture suggests two jumping off points for banks. First, banks should improve their boards’ knowledge about technology. Second, banks need to align their IT strategy and their growth strategy.

These four tips are just highlights. There is a lot more to the full report, including graphs and many more stats. Check out Accenture’s brief and download the report.

Photo by Susan Q Yin on Unsplash

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IDology Study Examines the State of Privacy, Trust, and Consumer Digital Identity

IDology Study Examines the State of Privacy, Trust, and Consumer Digital Identity
By David Penn Posted on
Categories: IDology, Report series

Earlier this week we shared our conversation with IDology CEO Christina Luttrell on the challenges and opportunities in the digital identity verification space. This fall, IDology was honored at the 2021 Finovate Awards, winning recognition as “Best Identity Management Solution.”

A few weeks later, IDology released its 4th Annual Consumer Digital Identity Study. Surveying nearly 1,500 U.S. consumers over the summer of 2021, the study sought insight into what it called “the insecure, COVID-weary consumer.” How have preferences shifted in the balance between security and privacy on the one hand, and the willingness to share their personal information in order to access services that in many instances became especially valuable during the pandemic on the other? How have expectations grown as consumers’ reliance on new digitally delivered services has increased? And what steps can companies take in order to gain and keep valuable trust relationships with their customers?

These are just a handful of the questions addressed in IDology’s latest “heat check” on consumers and digital identity.

Finovate: IDology just published its 4th Consumer Study. What is the goal of this report and what can you tell us about your findings? 

Christina Luttrell: This marks our fourth year publishing the Consumer Digital Identity Study to help businesses understand important shifts in consumer perceptions and preferences about fraud and identity verification. This year’s study showed us that, more and more, consumer trust hinges on the ability of businesses to safeguard identities and keep consumer data private, particularly during online account opening and onboarding.

Needless to say, consumers today have experienced seismic shifts in how they live and work, becoming increasingly reliant on all things digital. When we conducted this survey, the COVID-19 pandemic was entering its 16th month and the Delta variant accounted for the lion’s share of new infections. The results of our survey show a weariness that only a once-in-a-lifetime global pandemic can create and, with the emergence of variants such as Omicron, the potential for more uncertainty.

Customer fatigue has undoubtedly impacted consumer practices and preferences relative to the security of their identities, particularly their willingness to hand over personal information. We also observed a growing need for trust-based online relationships, which was evident in the level of protection consumers expect companies to put in place to safeguard their data and ensure privacy.

This report pays close attention to how consumers view the threat of fraud and the never-ending waves of cyber breaches. We also spotlight consumer expectations regarding privacy, why they do not trust businesses to be good stewards of their data, and what can be done to foster trust, especially during the online account opening and onboarding experiences.

From our vantage point, this survey shows that the intersection of fraud, trust, privacy, compliance, and new customer engagement continues to grow in its significance. Consequently, excelling in today’s environment requires embedding identity verification at the center of every digital interaction.

The full study can be downloaded from our website, but a few of the trends we uncovered are:

  • The safety and security of the mobile channel are of critical importance to consumers and companies alike. Twenty-four percent of consumers report that their mobile devices have been compromised since the pandemic began. Consumer concern about smartphone malware attacks has increased 34% year-over-year, and nearly half believe their mobile device is more vulnerable than their personal computer.
  • Consumers expect more identity fraud. Ninety-six million Americans expect the number of fraud attempts involving their identity or accounts they own to increase over the next 12 months. Amid the rise in unauthorized account openings, 61% are concerned their personal information will be used by criminals to open a new financial account. At the same time, many Americans appear ill-prepared to protect their data. Only 45% believe they have the wherewithal to defend themselves against cyber-attacks and fraud.
  • Trust in companies to responsibly use consumer data is on the decline. Seventy percent suspect that companies gather data without their permission, and 59% don’t think companies do enough to safeguard the Personal Identifiable Information (PII) they possess. This raises significant worries for consumers, with 53% very or extremely concerned with the practice, which explains why 90% support legislation similar to the California Consumer Privacy Act (CCPA) in their states or at the federal level.

A well-respected industry thought leader, Christina Luttrell was recognized in 2018 by One World Identity as a top 100 influencer in identity verification. She has been named one of the leading women in security by Security Magazine and in 2019 was selected as one of Atlanta’s “Women Who Mean Business” by the Atlanta Business Chronicle. In 2021 she was recognized by Global InfoSec Awards as a top “Woman in Cybersecurity.” Under Luttrell’s leadership, IDology has experienced dramatic growth.

Photo by RODNAE Productions from Pexels

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3 Things Plaid Found in its Fintech Study

3 Things Plaid Found in its Fintech Study
By Julie Muhn (@julieschicktanz) Posted on
Categories: Report series

Open finance network Plaid commissioned a survey from Harris Poll earlier this year to provide insights and analysis on fintech’s consumer impact in the U.S. and U.K. This fall, Plaid published a report based on the survey that detailed three overarching conclusions about the state of fintech.

Here’s a look at each of the findings below, along with what they mean for banks and fintechs in 2022.

Users’ switch to digital is permanent

Plaid’s survey found that for about half of the respondents using technology to manage finances is a habit. In fact, 58% said that they, “can’t live without using technology to manage their finances.”

Additionally, almost 70% of survey respondents said they use technology “as much as possible” to manage their money due to the pandemic. And it appears that this trend isn’t isolated to pandemic times. The study found that between 80% and 90% of respondents who used fintech in the past year plan to use it the same amount or more in the future.

Fintech spans demographics

According to the answers from respondents in Plaid’s survey, fintech is helping to level the playing field of financial management. Respondents across racial lines and generational divides are turning to technology to help them not only manage their finances, but also get further ahead.

For example, 37% of Black respondents and 31% of Hispanic respondents use online-only banking services to minimize fees they may incur with accounts. Additionally, 32% of Hispanic respondents use earned wage access tools to receive their pay early and avoid payday loans. In addition to offering access to tools, fintech also enhances financial education. Plaid’s study found that 28% of Black respondents and 24% of Hispanic respondents didn’t track their credit scores at all before they started using fintech.

The survey indicated that the youngest generation surveyed (Gen Z) and the oldest generation surveyed (Baby Boomers) have been the most impacted by fintech. More than 70% of Gen Z respondents said that fintech helps them build better financial habits. When it comes to Baby Boomers, almost 70% of them reported that they feel confident using technology to manage their finances. This figure is up 16% from the year prior.

Fintech is becoming part of every day life

Perhaps the most noteworthy statistic in Plaid’s survey is that almost half (48%) of Americans use fintech on a daily basis. This figure is up 30% from the year prior, when 37% of respondents said they use it daily.

Interestingly, the survey indicates that this usage is more heavily weighted toward positive aspects of financial management, such as budgeting and investing, versus negative ones, such as billpay. In its analysis, Plaid suggests this is because the negative aspects are often automated.

In its conclusion, Plaid indicates that fintech is no longer separate from traditional financial institutions. Rather, because of embedded finance, fintech is simply the new way of conducting finances digitally.

Looking ahead

What do these shifts mean for banks and fintechs in 2022? In short, they indicate that there’s no going back on the road to digital. Even some of the most reluctant user groups have switched to digital and their usage is only increasing. The findings also indicate that the sector is poised for even more growth. The increase in demand, combined with new capabilities brought forth by enabling technologies, ultimately means that there will be new opportunities to serve users in new ways in the years to come.

Photo by SHVETS production from Pexels

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Opportunities for AI in Financial Services in Asia

Opportunities for AI in Financial Services in Asia
By David Penn Posted on
Categories: Crayon Data, DreamQuark, FinovateAsia 2021, Report series

FinovateAsia 2021 is over. But we’re keeping the doors open and the lights on for a few more days to let those of you who attended our digital fintech conference last month to check out any of the keynote addresses and panel discussions that you might have missed. The platform will remain available to FinovateAsia 2021 attendees until July 6th.

One of the hot topics in Asia – like in the rest of the world – is the rise of artificial intelligence, or AI, and its potential impact on fintech and financial services. At FinovateAsia this year, DreamQuark’s Mikko Hietanen and David Destemberg led a virtual meeting on how to use AI in order to help customer to select ESG investments. Among our demoing companies, Singapore-based Crayon Data demonstrated its AI-led platform, maya.ai, that enables enterprises to create highly personalized experiences for their customers.

The latest Big Read on AI in financial services in Asia comes from TechWireAsia, which reviewed a report from McKinsey titled AI in banking: Can banks meet the challenge? as a way of opening up the discussion. The TechWireAsia overview has been making the rounds throughout the fintech Twitterverse, and its support of McKinsey’s conclusions – that banks, including those in the Asia-Pacific, need to be wary of competition from digital challengers that may be quicker to embrace AI – reminds us of how big the stakes are for traditional financial services providers.

Importantly, innovations in AI are not limited to front- or customer-facing solutions. In fact, in Southeast Asia – countries like the Philippines, Indonesia, Malaysia, and Singapore – some of the biggest gains for AI technology deployment have been in backend operations. This is an area where banks can experiment and test new, AI-powered, solutions – and even develop a more AI-friendly culture, if necessary – before attempting to deploy more customer-facing, (and potentially brand-impacting) AI-based technologies.

That said, as far as the McKinsey report is concerned, for those financial institutions that do pursue what the report calls an “AI-bank” strategy, the rewards could be huge. McKinsey estimates that AI “can potentially unlock $1 trillion of incremental value for banks, annually.” This value is represented in more than 25 different AI use cases capable of helping banks grow revenues, lower costs, and “uncover new and previously unrealized opportunities” due to an AI-given ability to generate key customer insights from massive volumes of data.

And while offering much in the way of a carrot for banks to move carefully and quickly to adopt AI-based technologies, the McKinsey report does wield a stick, as well. “Banks that fail to make AI central to their core strategy and operations,” the report reads, “will risk being overtaken by competition and deserted by their customers.” The report highlights four key trends – rising customer expectations, the accelerating pace of AI adoption by financial institutions, the challenge of digital ecosystems, and competition from Big Tech – that are most likely to compel banks and financial services companies to act.

Photo by Amy Chandra from Pexels

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