Podcast: Emerging tech key to long-term success for FIs

Whitney McDonald 0:02
This episode of The buzz is brought to you by bank automation summit us 2024. This annual event is tailored to resonate with financial services professionals focused on business optimization through technology and automation. Learn how to overcome implementation challenges by hearing firsthand from C level executives from institutions such as Bank of America, Wells Fargo city and more. There is no better place to get a read on the competition than at Bank automation summit us 2024 Early Bird registration ends February 2 Save $200 By registering at Bank automation summit.com My name is Whitney McDonald and I’m the editor of bank automation News. Today is January 25 2024. Joining me is chief executive and co founder of Episode Six John Mitchell. John is here to discuss how financial institutions can approach 2024 regulation in innovation, while keeping emerging technologies like aI embedded finance and payments at the forefront of their strategies. Join me in welcoming John. Thanks, Whitney.

John Mitchell 1:01
It’s a pleasure to be here. I’m John Mitchell, CEO, co founder of Episode Six, I have a lengthy, lengthy background in payments. I’ve been in payments since 1999. When myself and one of my co partners worked with a group of folks putting together a large prepaid payments platform and program manager and expanded beyond that in the late 2000s into building payment platforms in different parts of the world. Some of that revolved around FX and multi wallet propositions. And then in 2015, myself and my two co founders came together and we started episode six. So episode six offers a payments platform via API to banks and brands and other technology companies on four continents. And the platform is info provides infrastructure for payment products and services such as debit, credit and prepaid on the on the card scheme side and account to account services. On the ledger side. We started off with a little POC in the South Pacific and Tahiti, actually. And from there, we Springboard it into working with one of the world’s largest banks, HSBC in Hong Kong and Japan Airlines and the largest digital bank in Japan. And then from there moved to Singapore and London. And now we’re active across 50 b2b clients on four continents. Great.

Whitney McDonald 2:38
Well, thank you so much for the background. And again, for joining us on The Buzz today, we’re going to be talking through what we’ve experienced in 2023. In the industry, lots of changes, which is not a surprise. So maybe before we get into the forward looks of what we’re prepping for, for 2024. Let’s kind of take a step back talk through 2023. I’d love if you could share some of the trends, innovations, anything that really stood out for the year that have changed the banking industry?

John Mitchell 3:07
No, I think that there was there was a continuation of what we’ve seen for the last several years. And then that that trend was was accelerated with the advancements that we’ve seen around AI. The pandemic really highlighted the need for on demand, convenience, contactless a lot of the infrastructure and much of the technology that banks use today, and we’re using at the time simply wasn’t adequate for some of these new products and services. So we saw the beginnings of more of a large scale transformation and modernization projects. So that new technologies around AI, machine learning, etc, can provide the provide the services that customers and financial institutions are demanding. We saw more around open banking. And we saw more around regulation. I think Dora in the UK is quite an interesting, interesting example of that. But really a continuation of what what started in the late 2010s. And that’s a realization that modernization is required in order to keep up.

Whitney McDonald 4:22
Regulation this year is definitely something that we’ve been monitoring closely. There’s been proposals and changes around open banking, like you mentioned around AI as well. Looking back on 2023 and these proposals, I kind of want to get your insight here on how financial institutions can can monitor the regulatory landscape as we head into 2024. What they should be watching for as regulation comes down the pipeline, and we we can kind of start with open banking but then get into AI as well.

John Mitchell 4:53
Why I think AI is going to open up in frankly, we don’t know what we don’t know but right you motion around AI is nascent. But it’s going to expand particularly as the use cases around AI start to take over. And we see behind the scenes, how every, every point of friction can now be, can be analyzed and can be, can be altered. And the way that all that happens will be under the scrutiny of regulators over time. So banks and who are quite familiar with the regulatory landscape and regulatory environments will be will just have more to more to operate with open banking, different parts of the world see different, different requirements. And we’ve seen multiple requirement changes. And some in some cases, particularly in the UK, and in Europe, and the US, it’s it’s coming, I don’t think the final form is, is quite, quite known. But access to data is key for many of the components in the ecosystem around banking and financial services. So that’s happening, more regulation, around crypto around CBDCs. Is that sort of sort of ongoing, but where does it sit? Who, who is in charge? I think those questions are still still being wrestled with, particularly in the US. So we’ll just see a lot more of that. And so as we shift towards towards new technologies, regulations will, will or follow closely behind.

Whitney McDonald 6:30
Yes, absolutely. And I know that some of those proposals were coming up at the end of the year of that some of those deadlines for comments and getting all your your last minute comments in and where those stand with regulation coming down the pipeline coming spring, summer. So we’ll definitely be following along for that.

John Mitchell 6:47
Summer. Yeah, it’s gonna it will be interesting. That’s for sure.

Whitney McDonald 6:51
Yes, I think I think so. Now, I know that we talked about the trends for 2023. We we talked through a little bit of the regulation, but maybe kind of this forward look of 2024, as we get started in the new year, what what kind of innovations do you really have your mind? And I know there’s a lot of talk with AI, embedded finance, changes in payments, what are you what are you really monitoring for and watching for as you kick off the year, you know,

John Mitchell 7:18
all everything, everything you mentioned, requires requires access to data. And you know, since we’re an infrastructure play, we what we see is this acceleration around these modernization projects that I mentioned earlier, so that so that these AI tools actually can consume and have access in a digestible fashion all of the data they need, so that they can handle the decisioning that will provide all the benefits and in in 24, so I see as as as infrastructure is upgraded, hyper personalization around some of these products so that consumers and merchants can offer, what is becoming increasingly more demanded by their customers is, is only going to accelerate. So I think the evolution towards hyper personalization. And on the on the back end, and the back office streamlining and driving efficiencies, and risk management, being able to survey vast amounts of data in almost real time, all will have tremendous implications. And we’re just seeing a lot more of that. And it’s becoming

Whitney McDonald 8:33
table stakes. Yes, I’m expecting that efficiency will continue to be one of those buzzwords throughout the year, as it has been in 2023, as well. So everything that you’re mentioning about about data and being in real time, that’s all definitely going to move us along.

John Mitchell 8:51
Yeah, it just having the having the having the ability to leverage emerging technologies, I think is the starting point. And not every Fy is equal in terms of their ability to leverage these emerging technologies. But over the coming, it’s not going to happen overnight. But over the coming years there, there’ll be an evening out of in terms of what what, what F eyes are able to offer. And what we’re seeing more and more today is that these smaller F eyes have access to these newer technologies. And these newer platforms were traditionally they had to rely on sort of more meat you legacy types of offerings. And so the ability for somebody in Florida to hyper personalized towards their client base and not be reliant upon what somebody somewhere else in the world or some in some other state is offering their clients, I think is a big we’ll see big shifts around that.

Whitney McDonald 9:55
Yes, there there’s definitely depending on your capital depending on your resource Just kind of where you sit on how that investment goes. But it does seem that across the board, everyone has their seat at the Digital table, it just kind of depends on on your resources.

John Mitchell 10:08
Yeah, FYI. So what we’re seeing in terms of these modernization projects are infrastructure systems that are decades old, are being either enhanced, or swapped out entirely. Some of the challenges that we see that FIS go through are related to taking on these massive projects that are hard to see through to an end, they’re just too big, they take too many resources prioritizations change the market changes, they just take a lot of a lot of time, what we’re seeing success is with the FIA is that are going through more of a progressive modernization strategy. And so that is to start with smaller, more palatable size projects that can fit within budgets can fit within time periods, where you can actually see tremendous results, and then to layer on that over time. And so all of these banks should start with the appropriate baseline with the appropriate infrastructure, so hard coding on new types of, of capabilities, or reworking infrastructure that was designed in the 70s and 80s, for requirements that are no longer relevant, probably not the probably not the best long term strategy. And so I guess, looking towards the future and understanding that doing things correctly in the beginning, so that you can have a longer term view is quite important. But really everything from our point of view, it starts with the fuel from the ground up and to, to leverage technologies that are more adaptable, that can actually be modified and change as the market changes, and the rate of change within the payment space is accelerating as well. So starting something today finishing it in 2026, or 2027, based on requirements for 2018 doesn’t necessarily make sense.

Whitney McDonald 12:18
Yeah, I like what you’re saying about kind of that little by little approach, things that you can build upon. You don’t necessarily need to do a full overhaul today. But taking those different pieces of the puzzle or the digital puzzle and, and stacking on as you go.

John Mitchell 12:31
Yeah, if we don’t lose, share, meet existing budgets, and test things out, have an opportunity to see that you’re heading in the right direction, progressive modernization. Great.

Whitney McDonald 12:45
Now I know we’ve talked through some things that we’re excited about that we know are going to be we know are going to be top of mind for the year. But I’d like to kind of push you a little bit to talk through what sort of technology or what digital evolution that you might be excited for in 2024. What do you think’s coming? What do you want to see from the tech side within the industry, where

John Mitchell 13:09
we’re excited about watching where AI takes the industry? You know, it’s it’s really early days. And I think when Chad GPT, four came out, folks thought within six months, everything would be altered and changed. And obviously, things aren’t happening that quickly. But the tool sets that we’re seeing based on AI are just more and more powerful. And we’re excited about that from an episode six perspective, because those require technologies like ours to really to really see Max benefit, you know, in terms of just product sets, microlending platforms, and even there seems to be a bounce back around blockchain somewhat, although it’s not necessarily always perfectly interconnected into mainstream systems. I think we’ll see kind of the slow evolution of integration of blockchain for cross border. And I’m particularly excited about some of the interoperability that we’re seeing between various faster payment systems, real time payment systems, I’m excited about what we see here in the US with with fed now and how that that pops up or or clearing houses, real time payments. All of that is going to just make driving efficiency but just the the use cases for for for commercial and consumer just going to be quite quite a bit more exciting.

Whitney McDonald 14:44
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Transcribed by https://otter.ai