The financial services industry is at a pivotal point — and institutions of all sizes are navigating the demand for digital products and services that will have the most impact on consumers’ financial journeys. The highest performers and most digitally mature banks and credit unions are differentiating themselves using modern data solutions and consider technology a major advantage.
This tech-forward industry highlights the innovation and necessity of a niche business category: the TechFin. TechFins are companies with a platform and strong technology expertise that offer product capabilities and features to support financial institutions through curating a wide array of solutions and applications to transform and modernize their digital platforms and operations. The differentiation and value of TechFins focuses on the critical capabilities of technology financial institutions should invest in to maximize their growth.
There are four critical platform capabilities that financial institutions need within their digital banking platforms to stay relevant and innovative:
1. A platform that “auto-scales” based on a financial institutions’ growth and engagement strategies will accommodate banks and credit unions’ growing user bases, ensuring all users get reliable, high-quality experiences.
2. An “always-on” digital banking platform allows retail and commercial account holders to be supported whenever and wherever they are.
3. Actionable “data and insights,” can provide financial institutions the intel to deliver personalized experiences and offers at scale.
4. “Flexibility” empowers financial institutions to self-serve, while “extensibility” allows them to embrace and extend their digital banking platform to create unique and differentiated experiences – both aligning with speed.
Financial institutions that invest in these pillars and the data platform capabilities can transform into the “data-informed digital banker” for end-users, providing a sophisticated and exceptional account holder experience through the digital banking sales and service channel.
TechFins Provide Many Points of Value
TechFins have provided many points of value in recent years, but particularly in 2024 and in the near future, they will highly benefit financial institutions in the areas of:
- Leveraging the power of transaction data cleansing and analysis
- Artificial intelligence (AI)
- Fraud prevention and cost mitigation
- Extending the personalized user experience and reliability of the digital banking application
- Transforming digital banking platforms into a digital sales and service platform
- Increasing revenues and lowering costs for financial institutions
With financial institutions amassing high volumes of transaction data within their ecosystems, processing and analyzing that data is becoming a greater priority. According to the Pragmatic Institute, data practitioners spend 80% of their valuable time finding, cleaning, and organizing the data. This leaves only 20% of their time to actually perform analysis on it. This is the 80/20 rule, also known as the Pareto principle.
TechFins can provide vital support to financial institutions’ data teams through transaction cleansing, leaving them more time to build campaigns and take action on the data. From uncovering trends in spend behavior, account holder preferences and competitive engagements, data analytics catalyze personalized banking and marketing segmentation, allowing data-informed digital bankers to build and strengthen both marketing and operations strategies while increasing efficiencies.
Data modernization also plays an instrumental role in ongoing digital transformation and determining high performers in digital maturity — TechFins can be partners to financial institutions by supporting their vision for innovation.
The AI Conversation
While AI has been around for nearly 70 years, it is a fairly new tool for financial institutions as they are adopting it with caution and curiosity, and TechFins can help financial institutions tap into the capabilities of AI. According to commissioned research conducted by my company, 96% of regional and community financial institutions believe that, in five years, most banks and credit unions will use AI in some capacity, with more than eight in ten agreeing that AI will have dramatically changed the way their institutions do business.
Outside of the financial industry, for instance, Microsoft’s Copilot product can integrate with Excel and help users more effectively use and understand spreadsheet data. Tools like Oracle’s Select AI have solutions that allow users to “converse” with data and ask direct questions to clarify or uncover useful information.
New developments in explainable AI (XAI) and machine learning solutions will play an important role in the way financial institutions approach data in the risk and fraud space. Explainable AI provides human users with an understanding of the algorithms used and results generated by an AI model. This helps users understand the accuracy and transparency of the model, as well as its potential biases, so they can take those elements into account when evaluating its output. XAI solutions can help banks and credit unions ensure that their AI tools are delivering desired outcomes, as well as complying with regulatory standards.
What is Explainable AI?
Explainable AI (XAI) refers to artificial intelligence systems and methods that are designed to be interpretable and understandable by humans. The goal of explainable AI is to make the decision-making processes and outputs of AI models more transparent, allowing users to comprehend how and why a particular result was reached.
AI also plays a role in individualizing the consumer experience when it comes to interactions on digital channels. Specifically for online and mobile banking, financial institution leaders can use artificial intelligence combined with transaction data to provide the right products and services best suited for each account holder.
The Impact of Fraud and Mitigating Risk
According to research from PYMNTS, the average fintech loses $51 million to fraud every year. Many financial institutions rely on insurance to mitigate losses from fraud. The TechFin concept can provide the most advanced technology for financial institutions to mitigate the impact of fraud losses on their mid- and back-offices.
The TechFin philosophy is built on a developer mindset — making integrations simpler, faster and more collaborative, enabling financial institutions to offer the next generation of products to consumers. The most digitally mature financial institutions will work with their TechFin partner to deploy more passwordless authentication across all digital banking channels, including mobile banking offerings, to increase security and simplify the user experience.
TechFins Continue to Innovate
The TechFin concept illustrated. With a developer mindset, TechFins curate internal platform functionality with niche fintech solutions to deliver a highly performant collection of scalable and secure solutions for their financial institution account holders.
Leading the digital transformation journey is the foundation of a TechFin company. TechFins enable faster innovation to help financial institutions compete with mega banks and stay relevant to serve their account holders in this fast-paced consumer-driven economy. The transition from a fintech to a TechFin, exemplifies the commitment to providing the premier technology platform in the market, supporting banks and credit unions as experts in financial services.
TechFins offer vital support to financial institutions navigating the fluid environment of how consumers consume and engage with their digital channels. From generating valuable data insights, to strategically leveraging AI, to mitigating risk and delivering an exceptional user experience, companies that combine technical prowess with financial expertise are accelerating their role in the advancements of financial services.
See how the TechFin company Alkami delivers outstanding digital banking solutions.