Fintech Insider Podcast by 11:FS
00:00:40 · Ross Gallagher
[00:00:40] S1: Hello, and welcome to Fintech Insider Insights from 11:FS. I'm Ross Gallagher, and today, we're asking a question that could fundamentally change how we think about banking. Happens when our money starts managing itself? Banks make money when we borrow, when we go overdrawn, and sometimes when we miss payments. They also benefit when customers leave deposits sitting in low interest accounts or simply don't bother switching to a better deal. But what happens when AI agents start eliminating some of that behavior? What happens when customers no longer leave money sitting in the wrong accounts? Borrowing is constantly optimized, and financial decisions are made automatically. For decades, banking has benefited from relatively sticky deposits, customer inertia, and owning the customer relationship. But AI agents could change all of these things. So today we're asking, does fully automated money break the economics of banking? And if it does, what replaces the traditional business model? Now joining me to unpack all of this is our wonderful panel, Conrad Ford, the chief product and strategy officer at Allica Bank. Merusha Naidu, the global head of partnerships at Paymentology, and Aurélien Bonnel, the CTO of N3xt. Right. So let's dive in. Let's start by imagining what fully automated money could actually look like. Conrad, maybe I'll come to you first if you don't mind. As we sort of teed up in the intro, has sort of historically benefited from those sticky deposits that customer inertia and people maybe not always being on top of every little financial decision. How do you think, you know, this sort of this move now towards AI agent starts to, I suppose, eliminate some of those behaviors and then what does it mean for, some of the banks?
00:02:36 · Conrad Ford
[00:02:36] S2: Yeah. So certainly in certain segments, incumbent banks have been too reliant on, I think, two things. Firstly, customer ignorance and secondly, customer apathy. And I think agents is kind of the perfect super weapon for both, isn't it? Because Yeah. In terms of apathy, it does it for you. That's why they're called agents. But also they are intelligent, they're AI agents. In other words, you don't have to be a financial services expert because they probably know more about financial services than I do, and I've spent most of my life in financial services. So so that's kind of the high high level problem statement. I think the... It's pretty much inevitable this is gonna happen. I think the real question is how quickly and and where it happens first. So let me try and approach that first question. I think the kind of perfect sweet spot where this happens really quickly is an alignment of two things. It's where customers are very AI native. In other words, customers are pushing themselves towards AI and agents. So that's kind of part number one. And then also where the incumbents have sort of gone too far in terms of taking advantage of customers. So so let me talk about our segment. Our segment is quite traditional large SMEs. On one dimension, they are very much taken advantage of. So although their deposits are actually more attractive to a bank, they get they get a penalty of a couple of percentage, 200 basis points or thereabouts, less than a corporate despite the fact that in capital and regulatory terms, it's more attractive deposits. So certainly, in the taking, being taken advantage of is very much there. But our customer base, generally speaking, isn't, you know, at the front of the adoption curve when new technologies come along. So for example, our customers would typically still be using desktop accounting software, which kind of, you know, is paradigm that dates from the nineties, you know, large chunks of them have adopted the cloud, but actually that's still a minority. So I think the interesting question is what's that going on that forward squid, did you have management consultants, down to take advantage and digital native, AI native, I think we've got a pretty good guess about where that's going to be. It's almost always the younger generation, right?
00:04:50 · Conrad Ford, Ross Gallagher
And just as Monzo run the millennials, Gen A, I think it is, is the generation that's come of age in the the agentic age. No doubt they will be the ones using these tools, not thinking hard about these tools, not worrying about these tools, they will just be natural for them. And I think that will be the interesting dimension. Although I have to say the downside of course is that that generation is not going have much money. So I think it'll be some time until the really sticky large deposit basis, which is larger SMEs, our segments, but also the mass affluence of semi retired segments. I think it's unlikely they'll be jumping into a agentic AI as as early adopters, but we shall see. I may be surprised. [00:05:33] S1: It it does. I mean, Merusha, I think it, you know, it it sort of puts a spotlight, I suppose, on, I suppose, a kind of uncomfortable truth, right, for the banking industry, which is banks do often benefit when consumers behave in a way that doesn't necessarily get them to the best the best outcome.
00:05:54 · Merusha Naidu
[00:05:54] S3: Yeah. Absolutely. I think traditionally, banks have benefited from customer inertia. Right? You know, banks set their rate, and they just... Customers have to accept it. And I think it's it's two... Twofold. The first one is the banks don't give customers enough options so that they can actually pick and choose. They're quite prescriptive. Well, you know, traditionally. Right? And I think... But I also think at the same time, we can't just say, look. It's, you know, customers making poor financial decisions. I think it really comes down to what are the needs of the customer and how big of a pain point is for a customer to actually think about, you know, moving. Right? And in the past, even looking for other providers, that was typically very, very difficult. That's where AI agents come in because, you know, even if I look at, you know, some of our customers, they kinda say, okay. Well, I'll take this price because I understand it. It's easy, and it kind of makes sense. They don't have the tools to look for competing products, competing banking services, competing rates. With AI agents, this now makes it a lot easier. So do I think that the traditional banking rails are gonna still be able to rely on, you know, passive customers? Definitely not. The banks are now going to need to really compete for the first time with these newer digital players that are coming in. They're gonna need to make sure that they are, you know, relooking at their commercial models to retain their customers. So I think that's one of the biggest shifts that we're gonna see. And I think, ultimately, a bank's loyalty or their customer loyalty is going to need to be continuous. They're gonna continuously need to show customers their value.
00:07:36 · Ross Gallagher
[00:07:36] S1: And, Merusha, it's a... Because it's a really interesting point. Right? I I agree with you. I mean, there's no world where this doesn't force banks to become more competitive. But it's interesting, isn't it, when you start to think about sort of the... Some of the decisioning when it comes to those agents. Is there also a risk that actually banks become a little bit more commoditized and actually it does just become about who's offering the best rate?
00:08:00 · Merusha Naidu
[00:08:00] S3: So in in certain products, I would say. So if it is very easy transaction banking, then customers... It's very easy for customers to look for the best rate, the best solution. What we're seeing happen now is when you have the likes of a Revolut entering the market. Right? And we're seeing this happen across all of our regions. Right? When you see the likes of a Revolut entering or when you see a large digital bank coming in where they also have, you know, AI capabilities or AI agents to help with the the, you know, optimization of of the way these banks operate. I think one of the things that we are seeing is banks are now saying, look. They need to... Even from from processes like us, they really need to look at their commercials because they... Their bottom line is really being put under pressure. And so we are seeing that that is is a continuous problem when it comes to some of the more traditional banks. We're seeing very large banks across Africa, across LAC, even across The Middle East who are now saying to us, okay. We used to do this before. We've had relationships of over twenty years. We now need to relook at our commercials at a product level for every single service that we're offering because, you know, they they need to just be more competitive. They need to offer better services to customers even when it comes to, you know, sharing interchange, giving better interest rates, all of those different things where it would typically just be a revenue driver for the bank than now having to share in that revenue. So it's becoming quite quite challenging for banks who are not, you know, making the change and who are not evolving.