Contextual banking will change the way traditional financial institutions (FIs) interact with their business clients.
In an interview with PYMNTS, Lisa Shields, founder and CEO of FISPAN said advanced technologies can help capture new types of data — and leverage that data to offer more relevant products and services.
Side effect information, she said, is more broadly defined as information that is not intentionally shared but available to third parties through “the data crumbs that we leave behind as we go about our daily lives.”
This type of information, she said, feeds artificial intelligence (AI) models and answers questions such as “what’s the probability that a company with 70 employees will be engaging a real estate broker in the next six months?” Shields said.
This side effect data can actually lead to useful insights when used in tandem with intentionally, or explicitly shared information, such as information shared on LinkedIn, that isn’t accessible today in the bank-customer interaction, but that could conceivably greatly enrich the ability for that bank-customer relationship to be deepened.
Shields offered an example of intentional information: invoice data. Today, a bank simply receives a payment instruction from its customer. What the bank isn’t privy to is contextual information such as “who is this vendor, and what’s the nature of the relationship between the customer and the entity that they’re paying?”
Having this type of tangible information to act upon enables the bank to be proactive with developing and making beneficial offers to its customers.
“If a bank has visibility because the customer has explicitly said, ‘Yes, I will share the invoice history between myself and this vendor with the bank (or between myself and this customer) with the bank,’ the opportunities for dynamic and optimally priced trade finance, for example, become not only possible but obvious to be interjected and will be beneficial for both parties,” she told PYMNTS.
Of course, any data sharing involves trust between parties.
“This is the least mature area of the industry right now,” said Shields of data sharing in general.
It is a massive opportunity for banks because they already have that implicit trust — they are already bound by regulatory obligations to safeguard that data.
With a nod toward open banking, Shields said the initiative helps to focus on open data exchange, including metadata, which can help banks tailor their offerings.
Building The Infrastructure
“Where I think the bank has an opportunity to really set its marker and what the bank should be building on is where we started: building the infrastructure and control mechanisms around the data exchange for its customers and on behalf of its customers,” she said.
In terms of mechanics, application programming interfaces (APIs) are part of the technology that, once permission is granted, facilitates the raw exchange of data. Banks, then, should double down on making sure authentication solutions for their customers are distributable and embeddable in different applications, said Shields.
This lets the bank have its brand and services front and center, even when it comes to embedded banking.
The bank is a custodian of the customer’s data, and this is a massive opportunity for the bank. Banks shouldn’t try to be the player in every application endpoint, Shields told PYMNTS, saying that’s a role best left to third parties.
Partnerships, she said — such as FISPAN’s own efforts with traditional financial services firms — help treasury banks to build embedded banking solutions inside enterprise resource planning (ERP) and accounting systems.
She pointed to her firm’s position as a third-party developer company coming in and building a new application endpoint on top of a bank’s existing products and services.
As to what products and services treasurers and chief financial officers want, she said, “up and down and across the financial services ecosystem, from the smallest businesses to large corporates, the key focus is on cash visibility.”
“This is the No. 1 ask that we see from treasurers, controllers and CFOs across organizations of all sizes,” she said. “They want to know what their cash position is in real time in the applications that they already use to manage and predict their cash.”
Reconciliation should be an intuitive process, she added.
Professionals want to manage their cash, stay current with their vendors, and have really good internal controls. They want products and services to be simple, and they want them to be able to empower their remote workforce to not need to know about what an ISO 20022 message is, or what the difference between ACH and SWIFT is.
And in terms of streamlined workflows, she said, back offices should be able to receive invoices electronically, have those invoices approved by the correct business line users and have the invoices sent to the finance department — with payment optimally timed. And, ideally, all of it should be simple, seamless and embedded in their current workflows.
As she told PYMNTS of the corporate treasurers’ mindset: “I value my bank the most when it’s not front-and-center in my face on a day-to-day basis.”