Money 20/20 2017: The Customer-Driven Innovation Agenda

We recently had an opportunity to attend this year’s Money 20/20 conference in Las Vegas, immersing ourselves in the latest dialogue around trends, issues, and opportunities across the financial services industry. Now in its sixth year, Money 20/20 continues to be the world’s leading event in payments and financial services innovation. With events in the U.S., Europe, and Asia, the U.S. event alone attracts over 11,000 attendees from over 4,500 different companies, with representation across the entire financial services ecosystem.

Within the sessions, it was the customer – and designing products and services around their needs – that repeatedly emerged as the industry’s common focal point. As organizations in the industry increasingly vie for the hearts of their most important stakeholders, several driving trends emerged at the conference:

  • Increasing competitive demand in payments
  • Competing on Artificial Intelligence (AI) and machine learning
  • The role of partnership in innovation
  • The rise of full service digital banks

Increasing Competitive Demand in Payments

Products, demographics, spending patterns, technology, and customer demands are driving change in payments. In one session, speakers underscored the rapid growth in the payments market and corresponding importance of making payments hyper-relevant to consumers. For example, Oliver Jenkyn, North America EVP Group Executive at Visa, shared that the last 60 years have seen 3 billion cards and 44 million merchants. In the next five years, this number is expected to grow to 30 billion cards and a half-billion merchants. This means that more payment providers, processors, and enablers will compete to share the market—ultimately raising the bar on competition and shifting the industry’s competitive battleground to experience. Other customer-centric trends we observed are the phenomena of “Payments Everywhere” (e.g. PayPal, Venmo and Zelle models), going cashless (e.g. funds disbursement by Uber, Lyft at the end of the shift), and Faster Payments with real-time settlements (e.g. Fire & Forget - ACH, Credit, Debit rail).

Competing on AI and Machine Learning

Money 20/20 dedicated an entire day to AI with world-class speaker keynotes and panel discussions. Prominent inventor and Futurist Ray Kurzweil believes that “by 2029, we will have passed a valid Turing test” – in other words, we’re roughly a decade away from humans’ ability to make machines that are comparable in intelligence to humans themselves.

For now, we are moving into what Dr. Swami Sivasubramanian (VP Amazon AI, AWS) refers to as a “Machine Learning Renaissance.” AI is being applied at increasing speeds and with greater sophistication to the massive amounts of data that reside within both the walls of financial services institutions and in the cloud. Throughout the conference it became clear that machine learning is the future of growth, and a key driver of seamless customer experiences—whether it’s developing conversational chatbots to replace costly call center processes for simple interactions, or developing data-led insights to power and enhance personalization.

The Role of Partnership in Innovation

Discussion at Money 20/20 also reinforced that the rate of partnership between industry incumbents and FinTechs is occurring at an unprecedented pace. These partnerships are a win for both parties involved. FinTechs receive a partner who can help them scale quickly, improve their product with inputs from a broader customer base, and learn the ropes on credit risk, compliance, privacy, and security. At the same time, incumbents gain access to an agile product and simple and effective front-end interfaces that are essential to competing for the hearts, minds, and wallets of consumers today. While we believe this trend will continue in the near-term, FinTechs face several emerging threats. Digital-only, mobile bank services such as those from Wells Fargo (Greenhouse) and Goldman Sachs (Marcus) are starting to make waves in the market, replicating and enhancing the same capabilities and offerings that made FinTechs attractive partners in the first place. As a result, we’ll likely see undercapitalized FinTechs that will continue to exist or consolidate, and better capitalized players that will develop scale of their own.

The Rise of Full Service Digital Banks

In the past year, the evolution of mobile banking (m-banking) has taken hold. Increasingly, consumers demand digital financial products to meet their needs. Marked by speed and seamlessness, companies such as Kabbage offer consumers simple, but effective, onboarding processes and offer unsecured loan approvals in as little as 10 minutes with a 24-hour cash disbursement. Beyond digital, consumers increasingly demand fully mobile experiences. For example, Ralph Hamers, CEO of ING Group said that 14 percent of ING customers use only their mobile app. Simply put, a material share of customers have zero interaction with ING in any other digital or analog channel.

In addition, new entrants and challenger banks are realizing that customer needs are simpler than they originally thought. In fact, there’s a consensus that consumers need only five core products: current account, savings account, investment account, credit/loans, and a mortgage. As Harit Talwar, Head of Marcus at Goldman Sachs, described at a conference panel, the key to differentiation is “a maniacal obsession with customer experience.” How successful has Goldman Sachs been with its new Marcus platform? (Hint: it charges no fees and it earns revenue only on competitive interest rates on loans). By focusing on meaningful interactions, slim and module design principles, and a relentless pursuit to meet customer needs, it achieved the $1B loan origination milestone in eight months of operation, making it potentially the fastest growing online lending platform in U.S. history.

Throughout the Money 20/20 Conference, we gained insight into the trends shaping the future of financial services, from payments to strategic partnerships. Although both formal sessions and informal hallway discussion shed light on varied trends across the financial services ecosystem, one common theme is here to stay: the customer – and designing products and services around their needs – will continue to drive the financial services innovation agenda as we look ahead.