April 25

Execs from Fidelity, Citi, and Kaplan say that generative AI will have a huge impact on efficiency and financial education, but it won’t replace the advisor-client relationship. 

Morgan Stanley made waves when it announced last month that it’s letting its wealth management advisors use ChatGPT – the buzzy tool that can answer questions in a human-like way – to work more efficiently. The firm trained ChatGPT on about 100,000 pieces of its own proprietary research, so that its advisors can easily retrieve and digest large amounts of data without manually combing through reports.  

Now, execs from other wealth management firms are chiming in with ways that they think AI will reshape the industry.  

For one, these tools will revolutionize financial education, Fidelity’s vice president of AI research, Sarah Hoffman, told Bloomberg. “While we may not want these tools to advise customers directly, they can help educate employees,” she said, “And even help customers prepare before they meet with representatives, so they can ask better questions.” 

Citi Global Wealth’s chief investment officer, David Bailin, agreed that AI “will absolutely improve client education” and reduce the time it takes for advisors to complete repetitive tasks. For example, adding relevant content to client communications or digesting firm research. “It will be an incredible efficiency generator,” he said.  

However, artificial intelligence won’t be able to replace human-to-human relationships, because wealth management is such a deeply personal and emotional topic, according to Kaplan Financial Services president Susan Kaplan.  

After all, there’s nuance to a person’s financial situation that AI won’t be able to parse, people want to talk to someone they trust about big financial decisions, and pure profit-optimization doesn’t always best other priorities. That’s why many big firms like JPMorgan even hire behavioral scientists to help advise top clients.  

“Often the ‘right answer’ is not mysterious, but convincing the client that it is necessary for the future of the family is the trick,” Kaplan said. “That is the moment that the psychological connection with the client and the family is the linchpin of success in the financial planning process.”  

For more insights on the future of wealth management, check out Bloomberg’s round-up here.  

Vector databases, which store and index unstructured data from text, image, or audio in a specialized way, are a critical underlying component to generative AI applications. This infrastructure will continue to grow in importance as generative AI apps take off. 

A data tool just raised a hefty Series B to enable AI application development.  

Amsterdam-based Weaviate announced $50 million in fresh funding, including from the venture arm of banking giant ING.  

Weaviate’s technology makes it easier and faster for organizations to generate, store, index, retrieve, and share unstructured data, through a format called vectors. Vectors allow unstructured data to be analyzed for semantic similarities and can provide context for generative AI models.  

“The Weaviate vector database is used as core infrastructure in the emerging AI-native ecosystem,” according to Weaviate CEO Bob van Luijt. “It allows users, from startups to enterprises, to create a new wave of applications, ranging from custom-made search and recommendation systems to ChatGPT plugins.”  

As large language models continue to gain steam, vector data management tools will too. Other firms in this space include Pinecone, QDrant, and Insight Partners’ portfolio company Relevance AI. 

Santander is the latest bank to link up with earned wage access firm DailyPay, as on-demand payments become a “must-have” benefit for workers. 

Santander just announced a collaboration with fintech DailyPay to let its business clients in the US pay out their workers as soon as they finish a shift.  

DailyPay’s tech connects with clients’ existing payroll systems to convert hours worked into cash that employees can access whenever they want (for free, if they receive it the day after a shift, or for a small fee).  

“Financial institutions that partner with DailyPay, like Santander, are looking for a new, meaningful, value-added service they can provide to their corporate clients and our solution represents the most fiscally responsible way for banks to move away from overdraft fees,” director of commercial banking, Rob Nardelli, told Insights Distilled.   

“The time, effort, and compliance risk are too great” for banks to launch this kind of product on their own, he added. Santander says the collaboration is another step forward in its aim to “deliver flexible solutions based on the needs of clients and emerging technologies.” 

TD Bank and PNC also work with DailyPay, which announced $260 million in financing earlier this year.    

Other banks have announced fintech partnerships to help their business clients buck traditional two-week pay cycles, too: US Bank works with Payactiv, JPMorgan works with Even, and Citizens Bank works with an unnamed provider.   

While incumbent financial firms have long provided trade credit and short-term loans to business customers, a new swath of fintechs is trying to make the process faster and easier. 

SMBs often need trade credit to pay for their business purchases, but, historically, the payment process has involved filling out forms and waiting several days for approval. Not anymore.  

Business-focused buy-now-pay-later startup Hokodo just raised a Series B extension from Citi Ventures to make trade credit management a breeze. The firm declined to disclose the amount of the funding, but said it adds to the $40 million it raised last June.   

Citi said it looks forward to deepening its relationship with the firm.  

“Digital marketplaces are increasingly important to our clients and their evolving business models,” according to Citi Treasury’s global head of trade and working capital solutions, Chris Cox. Those clients “require always-on and real-time digital trade and working capital solutions.” 

Hokodo sets itself apart from competitors in the space because its product includes credit scoring, fraud checks, payment processing, financing, insurance, and collections, all built in-house, spokesperson Ethan Cumming told Insights Distilled. That allows the firm “to be more agile and offer better payment terms to a higher number of buyers,” he added.  

This is just the latest well-funded fintech to take on BNPL for business, including Billie, Mondu, Insight Partners’ portfolio company Resolve, and Tranch. Though each platform is a little different, they generally tout easy applications, greater transparency and flexibility, and faster cash flow as an improvement over typical short-term loans.    

A survey of banking execs found that cost cutting is one of the most attractive aspects of working with fintechs: They’re looking for partnerships that can make time-consuming and labor-intensive processes more efficient. 

New research from Finastra reveals that most global banks plan to connect with an average of three fintechs over the next year and a half, and that their main motivation is reducing costs.   

The research is based on 783 interviews that analysis firm East & Partners conducted with execs at banks around the world.  

It found that the top motivation for integrating fintech solutions was reducing operational costs, followed by deploying new technology with greater ease, and then aligning more closely with evolving compliance needs.  

That research aligns with our own anecdotes: In the last several months, Insights Distilled has featured dozens of fintech relationships that help banks cut costs. For example, KeyBank has turned to fraud-fighting fintech Quavo to both increase its efficiency and reduce its losses, JPMorgan used Cleareye.ai to “massively improve efficiency” in trade finance document review, and Nordic bank DNB has automated more than half of its chat traffic using Boost AI’s conversational chat platform.  

It’s clear that these relationships can have a huge impact, but what’s the best way to optimize them? For tactical advice for FinServs on how to build better partnerships with fintechs and ScaleUps, read our exclusive report here.