But what’s next after CX? The answer is scalability and resilience, according to Gareth Jones, senior associate partner at FICO. Digital banks need to deliver a seamless multichannel experience by gathering real-time data to understand the customer and build a proper journey view.

Fintech firms will need to increase the speed at which they innovate to ensure that they are pushing ahead of the rest of the market before it has the chance to catch up, as the recent Finextra and FICO Impact Study on ‘How to Protect and Grow in the FinTech Industry’ explains.

Build vs. buy

Jones highlights that in order to be scalable and resilient, new financial entrants will “either build in-house or go for the cheapest option on the marketplace. They’re budget when they start out. They’re not a Lloyds Banking Group or a Barclays or a Nationwide.”

The build vs. buy question is a difficult one to answer, especially for fintech firms. Historically, fintech companies have favoured building their own solutions which in turn, allows them to maintain control of the underlying technology stack. Therefore, this is a determining factor for a neobank that wants to go from x million customers to 2x million customers.

Jones points out that to solve this scalability problem “there needs to be a paradigm shift to allow an external party to manage the technology platform - the operational monitoring, the application monitoring, networking, patching, upgrades, certainty, downtime etc. Leave the client to focus on all things ‘business innovation’.”

Investment needs to be driven into business innovation - which includes streamlining the customer journey, product offerings, competitive pricing and superlative customer experience - because that is what the customer is touching. Fintech firms can also benefit from the elastic scalability that cloud-based solutions provide, which means that operational concerns such as uptime, availability and peak processing are managed on their behalf.

Breaking down silos

The cloud can also bring data and analytics together in a central place, ensuring that
innovation is accelerated, and an efficient customer service is being delivered, but at a fraction of the cost.

Detailed profiling also allows financial players to better cross and upsell their products and services. If financial players hold fragmented views of their customers through uncoordinated data sources, these disjointed experiences will not meet their customers’ expectations. A platform model enables fintech firms to break organisational silos and use data to make connected decisions.

Jones describes a classic onboarding journey and states that banks “need to be able to demonstrate the strategies that have been used to make decisions.” Returning to the idea of build vs. buy, he continues to say if an in-house solution is being used, this may prove to be difficult as these capabilities may not have been configured.

Both customers and the regulators can question the decision-making process. “If a fintech firm doesn’t have the tools to be able to show how and why a decision has been made, then they risk potential non-compliance a credit risk perspective.

A technology platform that allows transparency and explainability and permits risk appetite flexibility is required. “Whilst there are metrics upon which financial organisations cannot discriminate, firms with a flexible, centralised platform can dynamically adjust their risk appetite in response to market factors”

“But again, that’s not a black box, that’s explainability. That’s extractable from a centralised decisioning platform that’s demonstrable to the auditors or to the customer. You need those controls in place.”

Explainability in the market

Model governance, operationalisation of analytics, scalability and explainability are all brought together within the FICO decision management platform. For the regulator, explainability is key and a centralised decisioning platform allows transparency around compliance and how it is being adhered to.

Tools that predict how customers will behave are the foundation for successful mathematical optimisation of decision strategies. These insights can also be used across the credit lifecycles in areas such as customer management and collections. This is arguably more easily achievable in the fintech space they have been able to avoid the functional silos that legacy systems often impose and hinder the more traditional banks.

Jones also says that there can sometimes be fear around the implementation of new models and strategies because of increased regulatory pressure and as a result, “the need for explainability is becoming more prevalent now than it’s ever been.” This again comes back to having the right tools, but how can a fintech obtain a larger market share?

Jones believes that the answer here is streaming and leveraging this cutting-edge technology to have a combination of event-driven decisioning and analytics.

“Data can be ingested through streaming to target customers at the right time, in the right place and applying contextual profiling and powerful analytics for the optimum result. For example - the use of open banking data (where permitted), spend history and geolocation to determine the propensity for a customer to take up a credit/marketing offer based on their account funds at the precise moment they enter their favourite store. These are the types of event-based decisions customers could, and are making through the use of centralised decisioning platforms with these capabilities.”