editions

While the full promise of the metaverse remains distant, financial institutions like Société Générale and Deutsche Bank are experimenting with ways to use virtual reality to create stronger connections and more dynamic presentations.  

French banking giant Sociéte Générale started hosting client presentations for its investment bank in virtual reality about three years ago and hasn’t looked back:  

“First you have the ‘wow factor,’ and then you can use the format to present content in a way that’s really relevant and valuable,” SocGen’s Klaus von Massenbach told Insights Distilled. The bank has onboarded ~250 clients and hosted many meetings in VR through a platform from Arthur Digital, which lets it create dynamic meeting rooms and interactive presentations.  

According to von Massenbach, the format encourages personalization – “we make fewer slides that are more interactive and let us follow the road the client wants to take” – robust discussion – “the atmosphere breaks away hierarchies” – and focus – “you cannot read emails or WhatsApp next to it – so there’s even more focus than in a board room.” 

The technology also allows SocGen to bring its top research analysts to more clients in a very person-to-person way, without having to lose time hopping on planes or trains.  

This year, SocGen aims to start experimenting with virtual reality for more internal purposes, too, like HR or cross-team meetings. Similarly, Deutsche Bank recently announced plans to use digital avatars to help employees navigate internal systems or answer questions.  

“It can be one of the technologies where you break silos,” von Massenbach said. “It’s a new way to work together.” 

With banks under fire for falling short of their racial-equity promises, software that helps chip away at specific issues – like building a more diverse workforce – can ensure forward progress.

2020’s racial reckoning included reflections on how bias impacts the entire financial system – from home loans to money management education – as well as how many banks have dismal internal diversity statistics.  

To that end, several financial services firms have deployed unconscious bias training from recruitment company Rare, according to a report in FNLondon. Rare’s software gives workers from the likes of BlackRock, Credit Suisse, HSBC, and EY insight into how they might bring racial or socio-economic biases into interviews and other interactions.  

After employees complete the 90-minute program, they’re given feedback on ways they appear to treat people with certain traits or demographics differently, delivered in a sensitive way intended to help them interrogate their biases without getting defensive. 

“That is quite powerful for some people,” Rare director Raphael Mokades told FNLondon. The aim, he added, is to make sure that biases “aren’t creating distortions and unfair outcomes,” which is “a significantly different message to ‘you are a bad person.’” 

This ultimately helps institutions better recruit and retain diverse candidates and move towards achieving their DEI hiring goals.  

Software like Rare’s offers a concrete way for firms to improve their recruitment practices as diversity, equity, and inclusion issues remain in the spotlight in 2023. Late last year, activist investors called out JPMorgan’s racial-equity audit for being “deficient” in several ways, including because it didn’t examine any internal DEI issues, while other banks are under fire to conduct third-party audits as well. 

Instead of cyber protection, firms should focus on cyber resilience, which includes plans for response and recovery.

The tides are shifting on how financial firms think about cybersecurity, thanks to a combination of heightened threats, sophisticated hacking tools, and increasing compliance requirements, including incoming US regulation to get corporate boards more involved.  

One way that will manifest itself is through the shift from cyber protection to cyber resilience, according to the CEO of security firm Immersive Labs, an Insight Partners portfolio company. Companies need to take the position that they’re inevitably going to be attacked and form a plan for continuity and recovery that avoids significant damage.  

“Cybersecurity is a means to an end, but really, what you need is your business to keep going following a cyber incident,” CEO James Hadley told Insights Distilled. “That’s a huge change: It’s much more strategic versus tactical.”  

Building resiliency in an organization requires a clear-eyed understanding of gaps, with comprehensive benchmarking to demonstrate improvement, both internally and for regulators.

“It’s a business-wide issue and a one-size-fits-all approach doesn’t work,” Hadley said. “Organizations need to turn what a lot of people used to call the greatest threat – your insiders – into your greatest asset, in terms of how you protect yourselves.” 

That means training all workers – both technical and non-technical – to boost their judgement, skills, and speed in dealing with security risks and attacks. 

“Companies are just becoming more aware now that cyber isn’t this stand-alone thing,” he said, “It’s everywhere.” 

Large financial institutions will continue to embrace cloud computing this year and execs predict that the hunt for talent will remain competitive, artificial intelligence still has lots of personalization potential, and sophisticated developer tools will help teams shine.

While big FinServs have made major progress in their shifts to the cloud, there’s still a long way to go.  

In that spirit, executives from some of the biggest financial firms shared their thoughts on cloud strategies and trends with Insider: 

• The talent wars will rage on and banks should lean on upskilling to cope: “While talent might become more available, I would say that high-end talent in the cloud security and data space, where you’ve really got niche skillsets, is going to remain competitive,” Morgan Stanley’s head of cloud, Allison Gorman Nachtigal, said, adding that upskilling employees will be a key way to help fill the gap.  
• AI and automation are perfect for personalization: Vanguard CTO Michael Carr said that the firm will continue to build cloud-based AI tools for personalizing investment portfolios and retirement income tools. For example, “we can implement nudges or next-best actions.” 
• Banks will stop overlooking state-of-the-art developer tools in 2023, Goldman Sach’s CIO Marco Argenti predicted. “The real big results are an increased developer productivity,” Argenti said. “That’s the new way companies are looking at their cloud spend, where the return of investment is mostly measured with regards to velocity and developer productivity, rather than capital expenditures versus operating expenditures.” 

For much more strategies and trends, read the rest of the report from Insider. 

Despite recent turmoil in the crypto markets, Visa is “doubling down” on its efforts to prepare for blockchains to become mainstream payments infrastructure. 

Visa expects blockchain technology to transform consumer payments within the next ten years and it’s dedicated to being on the forefront of that transition, according to head of crypto Cuy Sheffield. The firm’s strategy revolves on the “DeFi mullet” assumption that the blockchain will eventually become a standard, backend technology that users don’t need to understand in order to use. In other words, fintech in the front, DeFi in the back.  

In the meantime, Visa aims to “crank out research in demos and proof of concepts to show what’s possible,” like its recent proposal about automating recurring payments on the Ethereum blockchain, Sheffield told Tearsheet.  

Following FTX’s implosion, the firm has seen a shift away from crypto exchanges towards fiat-backed stablecoins that allow consumers outside the States to access the dollar. “Many of the products we’re working on with our partners tend to be consumers holding dollars in stablecoins on a crypto platform,” Cuy said. “How can they spend that form of a dollar at any place that accepts Visa?”  

Read the rest of Sheffield’s interview with Tearsheet here.   

Traditional banks are at risk of losing Gen Z customers to new players unless they can find ways to appeal to younger audiences.

The kids are alright, but incumbent financial firms and traditional banks may not be unless they can find ways to win over Gen Z: 

A recent JD Power survey found that large national banks are seeing declining satisfaction among younger customers while a BAI report from late last year found that more than half of Gen Zers and millennials would switch financial service organizations for a higher commitment to ESG and DEI. 

In that vein, neobank Greenlight just released a new financial literacy game, while sustainability-focused fintech Twig acquired French neobank for young people, Vybe, as it aims to become the “go-to platform for the Gen Z market.” Education is a cornerstone of both offerings.  

Citing research that found that 93% of teens believe they need better financial knowledge and skills to achieve their goals, Greenlight has created “an engaging, gamified curriculum that teaches financial literacy in a fun and relatable way.” Interactive education can both rope in young people and prepare them to be stable customers in the future.  

Along with the focus on learning, neobanks are attracting young people by targeting specific niches like catering to LGBTQ+ issues, battling climate change, or serving immigrants.  

To be fair, some incumbent FinServs are also finding ways to up their appeal to young people: For example, Amex created a giving-as-a-service feature to simplify charitable giving andTruist acquired interactive mobile savings app Long Game, while Chase and Capital One offer dedicated youth debit cards for building good habits.   

Recent news highlights why financial institutions need to revamp their compliance culture to be real-time and continuous – or face the consequences.  

Fraud protection is already hijacking headlines in 2023: 

Both PNC and JPMorgan are facing lawsuits that blame them for their customers’ fraud losses through insider threats or phished credentials, while Coinbase agreed to a $100 million settlement related to its anti-money laundering (AML) and know-your-customer (KYC) controls. 

While each story contains its own unique details (and PNC and JPMorgan’s cases are still ongoing), at their core they involve accusations that the financial institution should have caught red flags before it was too late.  

That’s where sophisticated fraud-fighting tech comes in. As one exec recently put it to us: Technology is “transforming the culture of compliance to be real-time, continuous, and complete.” 

While FinServs have historically viewed KYC protection as a customer onboarding issue that requires manual processes, paperwork, and legacy systems, technology is now allowing them to shift to a customer lifecycle management mindset, according to a recent Moody’s Analytics report.   

Perpetual KYC uses AI-powered data crunching to transform from “an activity that occurs irregularly every few years after onboarding to an automated trigger-based activity that works in real time,” the report says. 

As a real-world example, Standard Chartered is using tools from Chekk for real-time risk assessment and anti-money laundering. 

Efficient development is often highlighted as the key differentiator between big banks and fast-moving fintechs, and by reorganizing itself behind the scenes, Wells Fargo is trying to buck the trend.

To create a more cohesive digital experience – and ward off fines and fintech competitors – Wells Fargo revamped its digital strategy to create teams that bridge disciplines and products.  

Wells Fargo historically had a very fragmented corporate structure that segmented workers based on region and product, but it realized that it needed to simplify, expand, and blend its teams. The bank now divides itself into multi-disciplinary “garages” within its departments; each includes people in product, tech, business, marketing, risk, compliance, and legal. 

For example, it has a “money movement” garage that combines a swath of people with different specialties working across ACH, real-time payments, and credit cards.  

The idea is to break the silos between tech and business-focused staff to create better products, more quickly.  

“You have to teach business people about tech development and tech development people about how the business works,” the head of Wells Fargo’s strategy, digital, and innovation team, Ather Williams III, told Insider. 

The bank credits this new structure with allowing it to develop its robust new business portal, Vantage, in only 11 months. It’s also part of its plan to better fend off future regulatory action, like the $3.7 billion fine it recently received in part because of technological errors. 

Meanwhile, dedicated Distilled readers may remember reading how other banks have disrupted their own tech strategies: JPMorgan now deems its product leaders “mini-CEOs” and relies on a mindset of “controlled autonomy,” and Truist built a dedicated innovation team called Foundry. 

Artificial intelligence-enhanced virtual assistants that can quickly and easily answer questions via text or voice chat are becoming table-stakes for consumers; partnerships can help big FinServs launch them more efficiently. 

Nordic bank DNB has partnered with artificial intelligence firm Boost to help it better handle customer requests through its website.  

Building its virtual agent took about two months and the bot now handles more than 50% of DNB’s chat traffic, while increasing customer satisfaction scores. The bot, which has already interacted with over 1 million customers, allows DNB to provide customer service around the clock, while freeing up employees to focus on more impactful work.  

Those employees benefit from the Boost partnership in other ways too: DNB also built an internal tool to help its nearly 12,000 workers replace employee handbooks with a bot that can surface information and answer questions. That tool has over 5,000 daily users and accuracy rates of 80%.  

“This is just the start of our journey too,” DNB head of emerging technologies Jan Thomas Lerstein said in a press release. The firm is interested in integrating voice APIs and additional personalization, he added: “In improving efficiency, the sky’s the limit.”

There’s a slew of tech firms that financial institutions can partner with: Truist uses Amazon Lex, Wells Fargo leans on Google Cloud, WestPac, JPMorgan Chase, Standard Chartered, and TD have tapped Kasisto, US Bank, Ally, and Santander rely on Personetics, and BNP Paribas and Deutsche Bank use Glia (an Insight Partners’ portfolio company).  

Business-to-business transactions have been stuck in the past: Experts estimate that a stunning 40% of all B2B payments in the US are still made via check, making it a segment ripe for modernization.

American Express intends to acquire Israeli fintech firm Nipendo as it builds out its platform of tools to make B2B payments simpler and more efficient.  

Nipendo’s tools use artificial intelligence to allow businesses to add automation to finding suppliers, making orders, and digitizing and managing invoices (including flagging discrepancies). Businesses will be able to use Amex’s platform to reduce the time and expense of payment processes that were previously paper-based.  

Because American Express already has relationships with both buyers and suppliers, it’s well-placed to dominate the space and create a “Venmo of B2B payments within the Amex platform,” an exec told American Banker. The firm has been building its B2B ecosystem through partnerships for some time: In 2019, it acquired acompay, and in 2022, it partnered with accounts receivable players BillTrust and Versapay. 

American Express and Nipendo declined to disclose the terms of the deal.