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This is the second in a series of articles which take an in-depth look at the content of SVIC’s Navigating Fintech Disruption Executive Immersion Program. A five-day experience in the heart of Silicon Valley bringing together financial service executives from across the world, the program consists of meetings, presentations and hands-on workshops hosted by a range of fintech startups, tech companies and innovation practitioners. It provides established firms in the financial services industry with a broad overview of Silicon Valley’s fintech ecosystem and helps them engage with the fast-moving world of fintech. With digital-first businesses appearing regularly in the financial services space, now is the time for established banks and financial institutions to delve into fintech and discover the opportunities behind the threats of emerging technologies.

In this article, we cover day two of the Navigating Fintech Disruption Program: Banking and Personal Finance. For a report on day one – ‘Fintech Revolution’ –  see the first article in this series.

The second day of SVIC’s Navigating Fintech Disruption executive immersion program focuses on digital innovation in banking and personal finance. It consists of interactive meetings with companies pioneering new approaches in a range of areas including payments, lending, communications, and marketing. These sessions, alongside a keynote presentation on the future of banking from Andy Zhulenev, SVIC’s corporate innovation advisor, combine to make a day which provides a wealth of insights into the multi-faceted change now taking place in retail banking.

The Future of Payments

One area we explore on the Navigating Fintech Disruption Program is payments. Once slow-moving and dominated by banks, payments are now one of the most active areas of innovation within fintech. To help executives understand the changing nature of payments and to show them where the future of the industry lies, day two of SVIC’s Navigating Fintech Disruption program includes a meeting with payment processor Worldpay. In this session, program participants learn about current and future payment trends directly from a company making those trends happen.

In payments, a key goal for merchants is to make the payment process as seamless as possible. This decreases ‘cart abandonment’ when a customer leaves a webpage or mobile site without completing a purchase.

Payment processors like Worldpay are actively working toward achieving seamlessness in the entire payment cycle. Inside the industry, this is often referred to as ‘invisible payments’. An example of this can be seen inside ride-hailing app Uber. When a ride ends, the customer pays Uber and Uber pays the driver. Yet these two transactions happen ‘invisibly’, without input from the customer.

“The logical extreme of a seamless payment is one in which the payment actually disappears entirely. That’s what we’re starting to see,” says Kevin Dallas, chief product officer at Worldpay.

Looking further into the future, these sorts of invisible payments will have wide application as the internet of things becomes more widespread. When machines can talk to other machines and transact with one another, money will be able to change hands without any human intervention whatsoever.

Digital Lending

Cutting person-to-person interaction out of banking processes is not a phenomenon reserved for future years. We see it already today in many segments of the financial services marketplace. Among the most prominent of those segments is lending, where fintechs are digitizing and simplifying the process of loan issuance.

Among the most notable innovators in this space is Roostify, a six-year-old company which in February 2018 completed a $25 billion Series B financing round. A regular contributor to day two of SVIC’s Navigating Fintech Disruption program, when we take executives to a presentation and Q&A with Roostify they learn about the innovations the company has introduced into the lending industry which have established it as a leading Silicon Valley fintech.

Roostify’s product is aimed specifically at the mortgage market but it shares the broader goal of today’s other digital lending platforms: to give potential borrowers – either directly or through a banking partner – a smooth, painless customer experience.

For banks, pleasing customers is undoubtedly a keep attraction of offering digital lending. But apart from that, partnering with a digital platform brings further advantages in terms of automating key processes, streamlining workflows and allowing for easier collaboration between the various parties involved in the lending process.

The benefits which digital brings to both sides of the lending marketplace ensure that it is a growth area. But the data shows that disruption of traditional lending models is still only just beginning. “Less than 1% of all loans are originated online,” says Mike Sigal, a partner at venture capital firm 500 Startups and a speaker on SVIC’s Navigating Fintech Disruption program.

According to market intelligence firm Autonomous Research, the volume of loans originated via digital channels has been growing steadily, from about $25 billion in 2015 to an estimated $90 billion by 2020, a figure which equates to some 10% of the projected 2020 U.S. lending market.

Those relatively modest numbers confirm that banks that have not yet implemented digital lending still have time to do so. To take a slice of the revenues going forward, they will need to partner with a digital platform, build their own digital channels for loan origination or earn referral fees by sending clients they reject to an online lender.

The possible entry points into digital lending are therefore several. Whether or not to ‘go digital’, in the first place, meanwhile, is not an area of choice for financial services providers that want to prosper in the 21st century. Interaction with customers and the provision of services to them through digital channels is increasingly essential. This is especially true when it comes to engaging with the millennial generation, 71% of whom would rather visit the dentist than their bank, according to the Millennial Disruption Index.

Customer Engagement

By 2019 millennials are projected to surpass baby boomers as America’s largest living generation, says the Pew Research Center. This should make effective communication with millennials a top priority for businesses everywhere if it is not already an item high up on their agendas.

As the statistic quoted above on millennials and dentists illustrates, banks have an especially tough battle to wage in this regard. That’s why day two of SVIC’s Navigating Fintech Disruption Program also includes sessions with innovative companies focused on the customer journey within the financial services industry.

Eltropy is one such company. When we introduce executives to Eltropy, they learn about the firm’s messaging and analytics platform through which businesses can connect with their customers via SMS and text messaging apps such as Whatsapp, WeChat, Telegram, and Viber.

“Humanity is addicted to messaging,” says Eltropy co-founder Ashish Garg. “95% of text messages are read within three minutes and responded to in 90 seconds.”

Coupled with these metrics is the fact that Google, Apple, and Facebook are all opening up their messaging apps for business use. So, for the banks and other financial institutions willing to invest in learning how to use messaging platforms effectively, there are big opportunities to engage with clients in new ways and provide customer service which is fast and convenient yet also highly personalized.

Talking to customers through messaging apps and social platforms which are already deeply embedded in their daily lives can produce significant results. Eltropy reports that when India’s ICICI Bank deployed the Eltropy platform for six months to sell financial products through WhatsApp, the bank’s conversion rate jumped 300%.

Time to Connect

Financial services providers still have time to get on board with the digital innovations taking place in retail banking. That may mean partnering with fintechs or building digital platforms in-house. Regardless of the strategy, the first steps will be to identify the areas in which to pursue digital innovation. Payments, lending, and customer service are just three domains that we highlight on day two of the Navigating Fintech Disruption immersion program. There are many more; fintechs are attacking the personal banking value chain from multiple angles.

For established finance organizations this means now is the time to look outward and engage with the disruptive trends threatening to upend their industry. Companies that do not attempt to carve out opportunities from the threats they face today risk being put out of business by new entrants and agile competitors.

Silicon Valley Innovation Center helps financial sector executives experience and connect with the Silicon Valley fintech startup ecosystem through a fintech executive immersion program. As Silicon Valley is a hotbed of fintech innovation, company executives will benefit greatly from visiting the innovation hub and interacting with startups like the ones mentioned in this article. Through this immersive experience, executives will also gain deep insights into how partnering with Silicon Valley startups can be a game-changer for their businesses.


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