Can fintech compete with football? The answer is yes, especially if the topic is AI
A critical tie at Euro 2024 didn’t deter fintech enthusiasts from attending Aperture and FiveT Fintech’s event on June 25th at Restaurant Amore Amore in Geneva. An expert panel discussed AI’s potential in financial services.
It’s impossible to ignore the hype around AI. As Florian Stasch of digital exchange Rulematch pointed out, the power of AI is that you can plug it into every part of society and the economy. For our panel, the interesting thing about financial services is that the potential impact of AI is so huge, but the challenges to be overcome are also substantial.
Banks have been using various forms of AI since the 1950s. However, according to panelist Chuck Stoops (formerly of PayPal and Tradeshift and recently appointed Aperture board member), generative AI feels different: “ChatGP took the world by surprise last autumn. It could express itself in natural language and you could interact with it.” For banks, this is an incredible opportunity to make banking feel like a personal service again. As Lino Finini, an advisor and former COO of Swissquote, observed, “It’s very difficult to attract a retail customer to work with a machine. Now that the machine can talk, it’s a different story.”
This opportunity isn’t just about customer communication. It’s also very much about data. According to Chuck Stoops, around 90% of the data sitting on banking systems is unstructured – the kind that can’t be put neatly into rows and columns: “Advances in natural language processing, knowledge graphs and compression technology mean that banks can finally use all this data to create really amazing predictive models”.
This raises one of the biggest challenges to the deployment of AI in financial services: data protection. Financial services is a highly regulated industry so “Our data is staying on our premises” is often the default position, according to panel moderator Adrien Treccani (former CEO of Metaco—a standout Aperture portfolio company that exited for CHF250m last year).
However, where there is a challenge in financial services, the role of fintech is to resolve it. Panelist Sonal Rattan is Co-founder and CTO at eXate, a start-up focused on data governance. “It’s not just personal customer data, it’s material non-public information, market data, contract clauses and a host of other things,” says Sonal. She adds that banks were already grappling with this problem in relation to the cloud and SaaS. Advances in AI just make the problem, and the opportunity cost, even more pressing.
In the meantime, several of our panelists predict a “two-speed” deployment of AI in financial services, with internal functions inevitably moving faster than customer-facing services. Lino Fanini sees opportunities to improve efficiency in middle office tasks, while Florian Stasch highlighted the growing use of AI in market surveillance and fraud detection.
The big question is what all this means for smaller companies and fintechs. On our panel, there was some consensus that, in terms of the underlying AI technology, the “Champions League” will be hard to beat. “What Google and Microsoft choose to show us is probably just the tip of the iceberg compared to what’s going on in their laboratories,” says Lino Finini. The larger players also have some other “home advantages” – huge data processing power and perhaps the ability to persuade banks to trust them with their data. However, all is not lost for smaller players.
“You need to see this as a new kind of infrastructure that you can leverage, in the same ways as blockchain,” says Adrien Treccani. Many of the AI models are open source, so it’s more about implementation and finding innovative ways to solve banks’ problems. This is what start-up fintechs have always been good at.
Finally, we wanted our panel’s view on whether AI is a bubble waiting to burst. Here, there was clear consensus. There is hype, and the bubble could perhaps burst in terms of stock market valuations, but the technology is real and here to stay. Financial services could take longer than some other industries to reap the full benefits but, particularly with innovation from fintechs, they’ll get there in the end.
In case you missed the event, you can watch the full panel here:
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