The outstanding demonstrations from day two of the Finovate Spring conference in San Jose came from companies who have thrown down the gauntlet to challenge conventional thinking and revealed services that could transform major parts of the financial services industry in a few years. Almost all of them focused on using non-traditional forms of data to improve customer services, outcomes and achieve greater profitability.
From advisers’ perspective, Hedgeable AI was probably the most controversial. Co-founder Matt Kane predicted within a few years, we will not need advisers to carry out most of the tasks they do currently.
He went further, saying his artificial intelligence bot will be capable of doing anything an adviser can do.
Speaking to chief technology officer Sid Sharma after the show, he argued while advisers are needed for the more complicated stuff, they are not required for “things like to checking to see if you are on target to meet your goals or selecting portfolios”. He said: “Trust needs to be established – but who said it had to be by a human?” At this point I suspect there will be some readers of this column on the verge of cardiac arrest.
While I eventually see financial planning and advice as services that will be fully automated, I believe that point is at least a 15 years away. But when you see what Hedgeable have achieved, that timeline does become questionable.
In the demo Hedgeable featured its artificial intelligence bot, known as “Katana”. It identified the maximum level of contribution a person could make to an individual retirement account and the funds which can be used be make those contributions.
Katana can also present information to consumers in the event of a market downturn, and use personal financial management aggregation to examine an individual’s monthly spending and identify savings.
Another hugely impressive presentation came from Alpha Rank chief executive Brian Lay, whose firm creates social graphs to help businesses understand the key influencers among their customers. Apparently until 2012 Facebook disclosed this information with third parties but it has since been decided this is too valuable to share.
Understanding these social graphics allows businesses to predict when customers might be likely to leave and take preventative action. The same techniques have been used effectively in the mobile phone industry, with T-Mobile reducing its attrition rates by 50 per cent in three months.
In financial services the company will take two to three years of banking data, analyse it and provide maps back to their clients so the firm can understand who the crucial influencers are who are driving behaviour among other customers.
The service does not yet currently use social media data but this is seen as a natural further development.
One company already making very creative use of social media data is Neener Analytics. It is focused on improving lenders’ underwriting decisions but can also be used to improve insurance risk decisions. In each instance services are intended to complement rather than replace existing processes.
The service is built around the data that can be extracted by consumers’ giving permission to access their Facebook, Linkedin and Twitter accounts. It can be particularly valuable when trying to assess people who have a poor credit score simply because they have not previously used much credit. One major attraction is the customer only has to give a single click consent to access this data and the service conducts the rest of the analysis.
While the company is prioritising credit and insurance risk I cannot help think how the service could be used to conduct attitude to risk assessments. This might be particularly useful in areas such as auto-enrolment where savers will have had little experience of risk profiling and may find a single click approach more appealing . Current risk profiling techniques do leave much to be desired and are an area where an improved customer experience might be very valuable.
Notably, both Hedgeable AI and Alpha Rank won prestigious “best in show” awards.
An extended version of this summary can be found here
Ian McKenna is director of Finance & Technology Research Centre