#SGFinTechFestival 2018

Reimagining Banking Ecosystem – Breaking the Barriers

Below is the transcript (slightly edited) of my participation in the Singapore Fintech Festival 2018. The panel was integrated by Andres Portilla (Moderator), Managing Director at the Institute of International Finance; Peter Swartz, SVP of Strategic Planning at Salesforce; Roman Regelman, EVP and Head of Digital at BNY Mellon; and myself.

I would like to thank Sopnendu Mohanty, Chief Fintech Officer at MAS, Government of Singapore, for the invitation.

Topic 1: Meeting new customer expectations

Andres Portilla: Mat – Your venture is finding signals in new data sources and you maintain a lab to help create the cutting edge of data science. What new techniques do you see delivering results today and with the greatest promise for tomorrow?

I look at customer expectations in the context of the blurring of the online and offline or digital and physical worlds. These boundaries are increasingly being rendering artificial, since these days pretty much everything is being digitized. Perhaps, the last remaining critical difference between physical and digital is the difference between human and. machine.

In that context, I expect three areas of radical change that will greatly impact customer expectations over the next few years.

The first is data. From my perspective 2018 was a critical year as we progressed from a period where the focus was on Big Data to an era where we will be focusing on Data Ownership. During the Big Data era, we worked to build technology that could deal with the scale and speed of data. It’s fair to say we’ve addressed many of those issues. The challenge ahead is more qualitative than quantitative. I am talking about Data Ownership. Customers will expect to be in control of their data and profit from the benefit and value their data creates.

Second is AI. Similar to what we’ve seen with mobile, there is no doubt in my mind we are transitioning to a world where every product will be an AI-first product. By AI-first product, I mean products that no longer make sense without AI. The reason is that AI will deliver so much user value that ignoring an AI-first strategy will quickly be considered ridiculous. Imagine a chat-bot for customer service. Would you build it by defining a set of expert rules or with AI that starts simple and learns fast and ultimately is much more sophisticated and better at interacting with customers?

The final area is trust. Money is based on trust. People trust banks with their money. Banks have built their businesses for hundreds of years on relationships and trust. Now, there is this new technology called blockchain, which recently turned 10 years old. With blockchain-based systems, trust emerges from the system’s mathematical and cryptographic properties. In that regard, Blockchain has the potential to radically change financial systems by redefining the concept of trust. What is there for banks? Can Trust be separated from banks? Can a customer expect not to trust its bank and still find value in its services? We will figure that out over the next few years.

Topic 2: Unlocking the power of banking data for new insight, products, and services.

AP: Mat – What do banks need to do to unlock the power of the data they hold? What systems and capabilities are essential to have in place?

Digital transformation nowadays is a must. If you are not digital, you cannot compete. But, is being digital enough?

Financial data probably has the biggest potential for banks. Nevertheless, financial data is largely still untapped and fairly protected. There is a window of opportunity, but it won’t last long, and banks will need to move fast…

The practical question is what is the opportunity for banks to leverage their financial data?

Typically, a bank would take the data they have, use it to train an AI system, and deliver that value via an interface. Take my earlier customer service example: Banks around the world are building AI-based chat-bots to improve the efficiency of their services. Basically, banks think of machines to process personal data with AI to answer questions from human customers more efficiently.

I think what’s more important and a huge opportunity for banks is to jump to the other side of the fence and provide AI for the human customer’s benefit. Banks need to take a customer-centric view of technology instead of an organization or process optimization view of their business. Instead of a chat-bot that handles the customer service for the bank with its multiple customers, banks should be creating chat-bots that assist a human with multiple customer service interactions and predict their needs with high accuracy and personalization and the desire to make their lives easier and better. A human that is empowered by AI using personal data to deal with machines can be a powerful thing, and the bank that provides those capabilities will provide great value to its customers. If you remember what I said earlier, these systems will be successful when the humans or customers benefit from their data, understand how their data is being used, and trust the relationship with the provider. Humans represented by machines, dealing with machines. This is what I call: the alter-ego AI.

The other thing that is really interesting for me about banks is that they manage money for people. They are in charge of something important for everyone. And Money is very similar to Data. So, I believe that banks are uniquely positioned to play a leading role in a world where data becomes a key asset in the AI-driven economy.

Topic 3: Keeping Pace - Highly regulated financial service firms face some specific challenges breaking open the value of the data they hold.

AP: Mat — I would like to hear your point of view.

In the last few years, we have seen a lot of new regulation around data and privacy.

• Personal Data Protection Act (PDPA) of Singapore
• General Data Protection Regulation and PSD2 in EU
• Data Protection Regulations (CDPR)
• California Consumer Privacy Act, live Jan 1, 2020

The same is happening throughout the world. We are heading towards a world where the ownership of personal data will be recognized as a fundamental human right.

And that’s why I am super bullish about projects like Wibson that provide consumers ownership and benefit from their personal data and catalyze societal progress in how we think about personal data.

It’s very important to highlight that government regulation, if applied intelligently, can actually benefit society as a whole. The reason is the following:

Data is non-rival, meaning your location history or credit card transactions can be used by any number of companies simultaneously without being depleted.

Companies fear being disrupted, and therefore they choose to hoard the data they think own and protect it dearly, leading to the inefficient use of non-rival data.

Instead, by giving data property rights to consumers, their rightful owners, we can create systems that optimize the allocation of data. When consumers understand that they truly own their data and can benefit from the value it creates, they can more appropriately balance their privacy concerns against the potential economic gains from selling data to interested parties in a transparent way.

In my view, digital property rights will serve as the foundation for a true market-based economy for digital assets. A digital economy where consumers and the average person participate equally and fairly in transparent transaction on a level playing field, a role, to this point, they haven’t enjoyed.