What Bankers Can Learn From AI Assistants
As PSD2 is set to open data sharing between banks and third parties, banking and fintech professionals should heed this warning: Don’t confuse digitization with digital strategy. You need to build mobile apps and digital experiences for your customers. They expect it, so you should deliver. But a series of mobile experience projects doesn’t constitute a digital strategy.
To appreciate the difference, we’ll look at a topic outside of banking and fintech—AI (artificial intelligence) assistants.
It’s easy to assume that most of us have experience with a major AI assistant, such as Siri, Alexa, or Google Assistant. It’s increasingly difficult to guess which devices any of us use to interact with these assistants, however, given that they’ve spread from smartphones, tablets, and computers to a growing array of traditionally “dumb,” unconnected devices, such as speakers and televisions.
The variety doesn’t stop there. Even within a single device, many assistants integrate with a wide range of both first and third-party apps, causing the assistants to function less as one-off resources than as guides in a cohesive ecosystem. For bankers, this diversity and extensibility of apps and devices is a salient point.
The virtuous platform cycle
Putting an AI assistant into just a speaker or any single product is analogous to a single great banking app: it’s valuable, but may not be a digital strategy in and of itself. Rather, the digital strategy is baked into the service and its overall business model, which is then distributed by the ecosystems built around these assistants—ecosystems that leverage APIs to expand assistants’ capabilities and integrate them into new products and services.
And these assistants are just the newest iteration of this virtuous platform cycle. Decades ago, Microsoft Windows enabled developers to build applications that made computers more useful. This triggered a virtuous cycle in which more computers ran Windows, more developers built applications for the Windows installed base, better and cheaper computers hit the market as the installed base grew, economies of scale improved, and so on.
Apple’s iOS and Google’s Android represent similar virtuous cycles between developers and platforms. Ditto for Facebook, which brokers users’ interests and attention with advertisers. Or Google Maps, which enables thousands of mapping applications, or Uber, which creates a new ecosystem around delivery and logistics, or Nike+ for fitness tracking. The examples go on.
What do all of these virtuous platform cycles have in common beyond their shared platform mentality? They’ve executed their platforms in part by by opening their systems via APIs and enabling developers to build new and interesting experiences that rapidly expand the user base into many niches they might otherwise not have acquired.
They’ve set up a business for third parties, giving them ways to differentiate or monetize. They’ve used those third-party applications to make the platform more valuable by reinvesting data from user interactions or simply expanding the depth of functionality attached to their services.
For bankers who follow this model, it may well be the difference between providing decent online experiences that customers intermittently use and building an omnipresent model that not only integrates into customers’ daily routines, but does so intelligently with real-time data analysis.
The banking platform model
So the big question is, what is the digital banking platform model? Which bank or fintech can successfully execute a platform strategy? Will an established aggregator evolve its model to fully become the BankOS for retail customers? Or will a “new challenger bank” revolutionize the experience and data access?
These questions should be intensely important to bank executives, as platforms that achieve the virtuous cycle can end up being “nuclear weapons” for competitors in their markets, with all but two or three competitors squeezed out over time.
I don’t know all the answers but history and intuition tell me the companies who find the right recipe will likely follow these steps:
- Build digital experiences with APIs. Development teams should expose their data and functionality through APIs. Make those APIs externalizable and self-service from the start, even if you don’t think you’ll ever expose them to third parties.
- Identify your most valuable systems. Identify the systems that define you as a company (and likely define your industry). Prioritize building APIs for these systems and start shopping them to partners. The APIs can be invitation-only but the process of productizing those APIs and taking them to market with partners can be hugely educational for your company. There is no way to learn to swim by standing on the shore. You have to get wet.
- Understand that business leaders should be involved in the productization of APIs from the beginning. This is not an IT-only effort. You may need to reorganize some teams, and you’ll likely need a different funding model for this than the other twenty IT projects you are currently running.
Don’t become a cautionary tale
It wasn’t too long ago that Netflix, Amazon, Uber, AirBnb, and many others were seen as too small to challenge industry incumbents. Modern AI assistants hit the scene only a few years ago, and they are already in a virtuous cycle as voice controls for not only mobile devices but also, increasingly, the connected home.
This could very well become the story for tiny fintechs and upstart banks that might look too small to compete right now. Its quite easy for a bank executive to dismiss all the “noise” about platforms and APIs because there have traditionally been very wide moats around banks. That mentality could be a mistake.
Image: Flickr Creative Commons/Ofer Deshe