Banks See ‘Scale’ As Their Advantage Over Digital Disruptors

With the incredible riches of the next wave of commerce awaiting, it’s a race of the incumbents versus the innovators. “The race is for the incumbents to fix things before innovators get distribution,” ” suggests Global Payments SVP of Global Product Frank Young. That was one of the basic themes this week at the fourth edition of Money2020, a four-day event in Las Vegas with 500 speakers and 10,000 attendees.

Initially conceived by former Google Wallet leaders as the place for disruptors of banks, credit card and point of sales companies to fight for the next generation of transactions, payments, savings, loans and data, Money2020 has become a catchall of all things commerce. And clearly, the incumbents are intent on defending their turf.

It is the very intensity of commerce disruption that gives the incumbents a legup in the new generation – if they can get their act together and also, think out of the box. “There are so many categories of disruption,” notes Carey O’Connor Kolaja, Global Chief Product Officer for Citi FinTech. “The banks are tremendously disrupted. (But) this is where scale absolutely matters. (Consumer and business) needs haven’t changed.”

Industry-wide partnerships among the digital and mobile players will prove essential. At the conference, for instance, we saw PayPal team up with Facebook to create commerce and social synergies.

But the ultimate responsibility is on the incumbents to execute, notes O’ Connor Kolaja. If there is too much friction, customers come back and say “they don’t even get moving money right,” she warns. At the same time, everything must be in the background, and it can’t be too complex. “People are said to have 30,000 thoughts a day, but not many of them are about banking.”

Bank of America President of Retail Banking Thong Nguyen notes that BoA is acting on the same principles. While it is aggressively closing local branches to save on personnel costs and recognize a shift to electronic banking and services, it is also rolling out “Erica,” an artificial intelligence driven avatar to help consumers compete simple tasks.

BoA’s goal? To use AI to integrate and enhance the technology that people use as part of their banking activities. In 2016-17, BoA is defining the AI-driven platforms as including text (including email and chat) , social (Facebook and Twitter) and Voice (Alexa, Siri, Eirca, Google Home). “AI is the underpinning of all of it,” says Nguyen. “The motto in technology is to ‘follow the customer.”

Whether the banks and other incumbents get a chance to do that for customers really depends on how they execute. Many players in the space clearly got distracted this year by electronic security problems and the rollout of EMV credit cards. They’ll need to stay focused, however, to stay ahead.

As EY Head of Payments for the Americas Margaret Weichert notes, “players redefining customer experiences” — via such features as loyalty integration, omni-channel flexibility, mass customization and integrated payments — “are those closest to the customer.”