Galileo’s chief product officer, David Feuer, said AI and improving infrastructure allow financial services innovators to create more responsive products, including in BNPL. And the innovation is just beginning.
Feuer said payments evolved before the Internet economy because they behaved in an Internet-like fashion. Trusted companies brought structure when joining networks.
A quarter-century into the Internet era, cloud technology lets fiservs ditch the monolithic stacks for API integrations. Telcos leveraged 5G to deliver more software-based solutions.
That innovation has crossed into financial services, as leading firms eschew large, internally-based structures for more customer-focused solutions where iteration at speed to keep up with market demand is prioritized.
“Finally, cloud computing and where we are in the arc of technology is enabling them to do those interesting things,” Feuer said.
Tech is eroding barriers between B2B, consumer offerings
The traditional framing of banking and payments is fast eroding. The definition of who a financial services firm is will loosen. Those who solve specific use cases will build off that foundation to better meet customer needs. It could be a bank but also an airline or automobile manufacturer. Many already offer credit cards. Soon, they’ll also offer accounts.
As the technology decomposes, it fosters smaller units of value that are expensive but need less scale. Feuer said that allows creators to focus on new composition journeys that provide unique value to new groups. The ideas that work in TradFi can be leveraged for SMBs or B2B.
“What we’re allowing is a new kind of focus on the business and the customer because the IT piece has gotten a lot easier,” Feuer said. “It’s not just cloud. It’s not having to host, manage or operate your software.”
As integrations and partnerships increase and AI proliferates, companies pay more attention to their partners’ security practices. Feuer said Galileo developed a next-generation payments risk platform focused on transaction fraud. It uses AI across Galileo’s networks to discern patterns while empowering customers to act.
Leveraging natural language understanding
Natural language understanding is another valuable financial services tool. Feuer said it lets firms create intelligent digital systems that answer common questions like the location of their money.
“It’s something that we’re squarely focused on, Feuer said. “The idea is, can we not just alleviate cost, but can we also create a better service for customers so that our clients see customer satisfaction increase, see cost containment increased because they don’t have to talk to a human, they’re able to get their problem solved very quickly?
“There’s also a next generation of customers that don’t want to speak to a human. Can we create a digital assistant that understands emojis and acronyms much better? The answer is yes, we can, and we did. We’ve created something that uses AI to have better natural language understanding to have a more expressive brand experience so it can respond in a way that reflects your brand.”
Customization through enhanced BNPL
Feuer said the foremost experience innovators need to capture for a proper BNPL experience is combining layaway components with aspects of a traditional loan. That eliminates a pure revolving credit play, replacing it with hyper-specific offers. It’s a perfect example of looking beyond the one-size-fits-all mentality and providing an alternative to a credit card.
“Can we create a similar type of product with similar ease of use but a different form factor and perhaps doesn’t have the same interest rate? That’s how BNPL was born.”
Companies are beginning to apply that level of innovation to B2B. Increasingly arduous payment terms create short-term liquidity problems that new companies are addressing. Feuer said the problem solvers borrow from the consumer and enterprise sectors to produce more responsible solutions than personal loans and credit card debt. He sees strong demand for such products.
Using AI to drive financial inclusion
AI has companies asking how to use consumers’ data to help them and not disqualify them. Solutions include a range of BNPL offerings.
Feuer believes some unfairly categorize BNPL as predatory. Offered at checkout, it risks increasing impulse buying. But if it’s offered proactively by the bank, BNPL can be much more responsibly leveraged. With tech-enabled customization, companies can deliver personalized offers based on cash flow. Feuer sees at least 20 new BNPL types as possibilities.
A related option is save now, pay later (SNPL), where tech providers help consumers save for larger purchases. It helps deliver financial inclusion and can foster brand loyalty. Feuer sees a range of SNPL types on their way that cater to younger generations.
Learning from Latin America
Galileo has a growing presence in Latin America. Feuer said the experience has been instructive, as both North and Latin America have unique financial preferences that can be leveraged to improve service in the other. Some Latin American credit cards come with interest-free components, which are unavailable in North America.
Latin America has a mobile-first ethos, while the USA has a greater branch focus. The former prioritizes embedding value into apps and digital experiences.
“The next generation is teaching us that that’s not what they want,” Feuer said of a branch experience. “They really want that mobile-first, digital-first financial services experience. We see that with the large number of checking accounts that were opened in the last year. More of them are opened in neobanks and fintechs than traditional financial institutions.”
Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.