Artificial Intelligence, Payment Innovation and Regulation — Highlights from EBAday 2018

On June 12, the Euro Banking Association hosted its annual EBAday in collaboration with Finextra. Fittingly set in a major hub for technology, finance and innovation — the transaction banking event played host to 1500 delegates and featured more than 80 speakers at the International Congress Center in Munich.

Over the two-day conference, delegates had the opportunity to sit in on stimulating panel discussions, insightful speaker sessions and engaging roundtable lunches. The programme focused on two main streams: first-hand insights into payment trends as well as exploring upcoming alternative payments and technology. Speakers from notable companies such as Unicredit Bank AG, HSBC, Saffron AI, JP Morgan and Deutsche Bank shared their expertise on a wide range of key topics, including the AI invasion and adapting to complex regulatory changes.

EBAday kicked off the first morning with a welcome from EBA chairman Wolfgang Ehrmann and special message from surprise guest Sophia the AI robot.

Hard to compete with an opening speech from the human-like #AI @RealSophiaRobot. Already a glimpse of the innovation that is happening at #EBAday! pic.twitter.com/SpvKCRgGG0

— Trulioo (@trulioo) June 12, 2018

Keynote

Jan Kupfer from UniCredit delivered a riveting keynote, leaving us with a quote from Rupert Murdoch at 21st Century Fox. During his speech, it was revealed that the biggest challenge in the payments area for banks was cybersecurity according to the live polls. When asked: “Where do you invest significantly more compared to previous years?” IT infrastructure and compliance were among the top answers — at which Kupfer noted that [tweet_dis excerpt=”“While many people see compliance as a burden, we should really see it as a guardian angel that protects our business.” — Jan Kupfer, @UniCreditBankAG #EBAday”]“while many people see compliance as a burden, we should really see it as a guardian angel that protects our business.”[/tweet_dis]

Insights from #EBAday: Size does not matter. It is about being agile. pic.twitter.com/G995RTGLSQ

— Trulioo (@trulioo) June 12, 2018

AI is Back

This year’s challenge speech was given by Kyle Thomas, Head of Global Business Development at Saffron AI Group on the rise of AI. Thomas, who used to be a banker himself — talks about how much AI was going to change the industry. Learning that US Citibank could reduce their tech and ops staff by half in the next five years, the inevitable reality that many people were going to be replaced by artificial intelligence dawned on the audience. The silver lining is that in one of his slides, Thomas states that AI is back but pointed out that it stood for Augmented Intelligence — a complement rather than a replacement to human intelligence. While AI will not replace managers, managers who use AI will replace those who don’t.

Insights from #EBAday with Kyle Thomas, @saffrontech: #AI is back, but it’s not artificial intelligence necessarily… pic.twitter.com/9YGW3rWEXz

— Trulioo (@trulioo) June 12, 2018

Kyle Thomas wraps up with a piece of advice encouraging the audience that while it doesn’t mean everyone should integrate AI, they should at least be aware of it.

[tweet_box design=”default” float=”none”]“Enthusiastically ride the AI wave. It’s moving, it’s big and powerful. It is better to ride on top of a wave, than be hit by one.” — Kyle Thomas[/tweet_box]

Traditional Banks Vs Challenger Banks

Experts from Barclays, Temenos, German Savings Banks Association and Bankifi shared their top strategies that incumbents could glean from challengers. Challenger banks often start with lean products with few functions and do it fast and do it well. They have the ability to be narrower — focusing on specific niches or opportunities as opposed to the universal breadth of services that traditional banks offer. Most agreed that banks have to be more agile, moving quick and nimble to focus on the customer.

Insights from #EBAday: “Traditional banks can be like the Titanic, they think they’re too big to sink. But the iceberg is there and they will need to start changing.” — Darryl Proctor, @Temenos #innovation

— Trulioo (@trulioo) June 12, 2018

While these are things that “would be nice,” it is certainly easier said than done. One panelist pointed out, “you cannot ‘fail fast’ at a traditional bank.” Due to the nature of bigger established banks, risk and failure come at greater prices at the expense of customers whose money may be on the line.

When asked if challenger banks will replace traditional banks in the long run, the consensus was that traditional banks aren’t going anywhere and will adapt. Challenger banks will become the traditional banks of tomorrow but not in the way that they will replace them but more so be acquired and absorbed into them.

Adapting to Complex Regulatory Change

With the recent changes in European legislation, namely GDPR and the PSD2, how are banks and financial institutions going on the offensive and defensive? Thomas Egner from EBA, Frederik Mennes at OneSpan, Oded Shoshany at CeleritiFinTech, Adolfo Tunon at HSBC and Krzysztof Zurek of the European Commission discusses lessons learned thus far and how technology can help achieve easier compliance.

It is a common conception that regulations prevent innovation. But one panelist believed otherwise, pointing out an interesting example — the Scotch whisky industry. Though it is one of the toughest regulated industries in the world, it continues to be one of the most innovative at the same time.

So how should banks respond to regulatory changes? It should depend on the type of regulations, as broken down by Mennes.

Regulation requiring banks to comply
• Banks should differentiate by going beyond compliance
• Banks should consider other factors like convenience to drive customer acquisition and retention

Regulations enabling new banking services
• May allow cost reduction (e.g. fewer branch offices)
• Banks should leverage regulation to address new generations (Gen x, millennials) who prefer digital channels

Regulations enabling new business models
• Exposes banks to new competitors
• Allow banks to create new revenue streams, gain market share

Networking Exhibition

In between the sessions, networking was available in the exhibition hall where 74 companies showcased their latest innovations. The exhibition demonstrates the complete spectrum of payment processing services, identity verification and authentication technology solutions and consultancies.

Trulioo demonstrated our global identity and business verification solution, GlobalGateway. Providing instant verification for over 4.5 billion people and 250 million companies, we assist financial institutions in satisfying KYC/AML compliance needs in over 100 countries.

About EBAday

EBAday 2018 is a conference by the Euro Bank Association organized in collaboration with Finextra. The Euro Banking Association (EBA) is the pan-European network for payments practitioners with over 180 members and associate members from across Europe and beyond. The EBA supports its members by delivering value in four strategic areas — thought leadership, knowledge and research, industry dialogue and educational services — each designed to deliver benefits to their wholesale and retail payment divisions.

Finextra Research provides an independent online resource to serve the information needs of the worldwide financial technology community. It covers finance-specific innovations, services, solutions, applications and technologies.