The financial services industry is undergoing a massive transformation. Financial technology companies (fintechs) are challenging traditional enterprises, while players from other sectors such as retail and technology are entering their turf.
In addition, customers are increasingly demanding predictive, proactive and proximate services. Today’s financial institutions need to ensure that every customer interaction – no matter the channel – goes off without a hitch and delivers value if they want to be industry leaders tomorrow.
Competition from fintech is real, and established institutions are reducing their dependency on legacy systems and finding new ways to leverage digital channels – and data lies at the heart of this transformation.
I had the pleasure of discussing the transformation of the financial services industry with Spiros Margaris, venture capitalist, senior advisor, and international AI, blockchain and fintech influencer. Our conversation is presented below, and I hope it provides some useful insights.
Michel van der Bel, Corporate Vice President Microsoft EMEA
As Microsoft President for EMEA, I work with 20,000 employees across 32 subsidiaries with a single vision: to help customers transform to compete in a world where technological innovation is moving closer to the heart of every business. I’ve worked with three CEOs over 20 years and have seen first-hand how they developed the culture around them. I’ve learned that people can only be at their best if they can collaborate in an environment that encourages empowerment, which is why I believe that culture is so vital to every organisation.
Spiros Margaris, Venture Capitalist and Founder of Margaris Ventures
Spiros is a venture capitalist, senior advisor and the only person who reached “The Triple Crown” of influencer rankings by being ranked the global No. 1 FinTech, Artificial Intelligence (AI) & Blockchain influencer by Onlaytica. He was ranked the global No. 1 Insurtech influencer by InsurTechnews. He regularly appears in the top three positions of established global industry influencer rankings. He has more than 25 years of national and international experience in investment management and startups.
MvdB: What are the current AI use cases in the financial services – is it evolving as expected, or are financial institutions still trying to figure things out? How are they applying AI to drive outcomes for their business?
SM: I think banks, financial institutions and insurers should put all of their efforts and resources into AI and machine learning, because it will provide their customers with more personalised recommendations, which is what people are used to. It’s one of my key words – convenience. If you want to be really successful, you have to make products that are very convenient for the customer, because people don’t want to make complex decisions – that’s the reality.
If you’re in the financial industry, I think AI should be on the very top of your priority list – not because it will displace people, but because it can help enhance their skills. You can give them tools that will make them even better bankers, better insurance brokers, and more.
MvdB: Are financial institutions readily adopting fintech to help overcome challenges? Do they see it as an opportunity, or as a disruptive threat to their business?
SM: If fintech stood alone, I don’t think banks would rush to evolve. Financial institutions probably won’t lose much sleep over fintech in the next three to five years. On the other hand, banks and insurance companies see a number of large tech companies looking into things like fintech and insurtech, which can be threatening to their own customers – something which Microsoft is not doing. Many tech companies see fintech and startups as enablers to get into finance. All of a sudden those enablers become very powerful, very quickly, and that’s a big misconception of the financial market.
These tech companies, however, don’t want to become banks. For them, it’s about adding value for their customers. If you can give a customer multiple fintech services, then they’re more likely to choose the convenience of your platform.
MvdB: Interesting. It sounds like they aren’t aiming to become banks, then, but are looking to own the customer journey and end up as competitors for part of the business.
SM: That’s correct. We’re seeing the whole insurance business travelling towards a direction where interaction with consumers becomes the key focus. The more you interact with the customer, the closer they become accustomed to your brand.
MvdB: There are a lot of companies waiting for the technology revolution, but in my opinion, it’s already here. I see lots of examples, including artificial intelligence. What are your thoughts on the perception of digital transformation in the finance industry?
SM: In banking, I’ve noticed that it’s much easier to make better decisions when investing smaller amounts of money. Similarly, you have better performance and agility as a small business with a startup mentality. It’s the same with financial institutions. They have a legacy that needs to be maintained, renewed and sometimes politics and corporate culture make it very hard, almost impossible, to be agile – and that includes adopting new technology to help them transform.
We’ve seen large financial institutions show that it’s possible to manage their legacy operations and daily business, while at the same time, almost separately, fostering a more agile startup mentality for transformation. New business ventures mean that this startup mentality must be separated which, of course, also means that more money has to be spent.
MvdB: It’s interesting to hear how other large institutions are reflecting and managing their transformation, particularly with regards to harbouring different mentalities for different areas of the business. At Microsoft, we’re still in the middle of our transformation process, and while we’re not there yet, we’re making progress and learning all the time.
SM: I honestly think that Microsoft has done a fantastic job at transforming itself with its cloud and many other services – and that’s reflected by professionals and the market in general. It’s amazing to see how you struck lightning twice. You re-invented the business and grew, when you could have chosen to remain stagnant.
MvdB: Having been here for many years, I’ve witnessed our shift from a ‘know it all’ culture to one that encourages a growth mindset, and it boils down to culture and mentality. I think we’re in the middle of a learning experience and learning mentality, where all of these small things start to matter. Do you think these two things are becoming more of a core factor of transformation, beyond simply introducing new technology?
SM: Yes absolutely. At startups, we see a culture where, if there is a problem, people sit down, and solve it. Compare this to some large corporation’s politics and red tape, and you can see how the wrong culture can discourage people, regardless of what technology is available. People like to see that their input makes a difference, and that’s much harder in huge organisations.
MvdB: If you’re operating 100,000+ people globally it’s certainly a challenge, but at the same time, you need to be sure that you spark that startup mentality in people. I think this is where the culture element in the leadership becomes a super-critical factor in changing an organisation.
SM: It comes from the top.
MvdB: Absolutely. This is true for us as well. If you take Satya as an example, he is living what he wants this company to be.
If we focus on the technological side of transformation, specifically data – do you feel that data is the most important currency today in commerce?
SM: Yes, it is. But there’s so much data, so much noise. It’s not just the data, but more about how you use that data. Everyone, including big banks, has data, but it’s the thinking behind it that counts – using data scientists, AI, machine learning – to get something out of it. That’s where AI, machine learning, and the people behind the algorithms, come in.
MvdB: I agree. I’m asking this question because I think there’s a lot of misperception about data being the new oil for this century and it’s a great tagline on paper, but the question, of course, is that data alone, is just data, and that’s what it will be forever.
SM: Data needs to be turned into something meaningful, useful and impactful. Think of it like a car – AI and machine learning are the engine, and data is the fuel. Then, we need a driver, or nothing happens. You need to decide what direction to take the data in. You want to provide more personalized services and individual recommendations for your customers – big or small.
MvdB: There’s definitely an opportunity when it comes to using data – take fraud detection, for example. There is also, as with all technological change, the question of disruption. What are your thoughts on this?
SM: We should all accept the fact that disruption and change are ahead – contradicting this goes against reality. However, part of this reality is the fact that technology will also create new jobs, and I believe that people and organisations should look at reskilling as an opportunity. It’s possible for organisations to help people upskill, and to help them reach the next level. get to the next level.
MvdB: I agree, especially with regards to upskilling and opportunities. Microsoft firmly believes that transformation is not about man or machine, but man and machine. The topic of trust is also super relevant here. Are you talking to any institutions or governments about the need for skills or retraining, or, in the longer term, how we should look at our education systems?
SM: I was recently in Brussels for exactly this topic, with insurance regulators. AI, algorithms, machine learning and other technology will change things of course. In my opinion, we should tell people it’s important to learn new skills, and that organisations and companies are there to help them.
MvdB: Being a member on various boards, travelling and discussing key issues with so many different groups of people must very stimulating, not to mention rewarding. I also imagine it’s a great learning experience. How else do you personally learn and grow yourself these days, especially in an environment filled with so much information from so many different sources?
SM: It is definitely rewarding, and super interesting, to receive so many different viewpoints while having stimulating discussions. In addition, I make sure that I read a lot, constantly. I’m always reading things from various sources, even if they’re contrary to my beliefs. I believe that in this way, it can help me find truth in the middle ground.