Demystifying Investing: The Power of Digital and Generative AI

With an audience of fintech enthusiasts, I am probably preaching to the choir, but investing your excess savings remains critical to preserving and hopefully increasing the buying power of your hard-earned money. Unfortunately in practice, this is easier said than done.

After years of great enthusiasm, investments in robo-advisors seem to be returning, despite the hype of AI and its clear link with this technology. At the same time specialized digital trading platforms like Robinhood, Webull, E-Trade or eToro offer an excellent user experience, but often remain a bridge too far for the average investor, who occasionally invests relatively small amounts via their regular bank. And good advisory services still target mainly the happy few, as the costs are too high to offer to the masses.
As a result, the occasional, amateur investor, who doesn’t want to spend too much time on his investments, often ends up buying the "Fund of the Month" offered by their bank or invests a large amount in a single stock they believe will perform well.

This is clearly not an ideal situation for a substantial group of customers, probably even the majority of investors. The solution, in my opinion, lies in self-directed investing supported by digital advice. Contrary to robo-advice, where there is a strong push towards specific investments, the initiative here lies with the customer, but they are digitally guided and supported with their investments in a very intuitive way. This can be achieved in three ways:

Intuitive and Graphical Representation of current portfolio: Providing a clear visualization of the customer’s current portfolio and the issues associated with it, such as incompatibilities with the customer’s risk profile and investment objectives, issues with knowledge and appropriateness of certain investments, or specific market risk issues like overexposure to a particular country, sector, currency, or issuer.
Support in Security Selection: Summarizing and graphically representing the characteristics of securities and the financial results of the underlying companies. This includes easy comparison between different securities, highlighting key aspects, and summarizing the underlying company in a personalized way, focusing on elements that matter most to each specific customer.
Impact Visualization of Investment Decisions: Showing the impact of specific investment decisions on the portfolio, such as the effect on diversification, the impact on Value at Risk (VaR) by graphically showing the correlation of the investment with existing positions, or a graphical representation of the possible variation in future value (maximum loss and gain) based on historical data.

Many of these representations can be based on precise algorithms (e.g. calculating correlations or VaR), but a significant part requires interpretation of unstructured data and needs to consider the personal preferences of the investors, ideally derived from the user’s past behavior. Additionally, to visualize these insights intuitively and engagingly, it’s important to make use of multimedia, such as pictures, animations, videos, and audio. These media are easier for end customers to consume, but in the past, their generation was very time-consuming and expensive. This limited their use, often resulting only in generic, one-size-fits-all content, which was not very relevant to the specific investment situation of each customer.

The rise of generative AI can significantly help here. Generative AI is becoming increasingly multi-modal, and the results improve daily. Today, it is already possible to generate high-quality pictures (e.g. DALL-E, Midjourney…) or videos (e.g. Sora AI, Synthesia, InVideo…) with a simple prompt. As the media generated for different customers can follow predefined templates, even better results can be obtained by limiting the degree of free generation with templates and constraints. A very interesting example of such AI-generated investment advice content is Zeed (https://zeed.ai), which offers a B2C investing platform, but recently saw a surge in interest to license their AI software solution to banks and Fintechs. In a world where AI seems to be used for everything, even when the added value is limited, this story is refreshing as the use of AI can truly elevate investment advice to the next level.

Comments

Transforming the insurance sector to an Open API Ecosystem

1. Introduction "Open" has recently become a new buzzword in the financial services industry, i.e. open data, open APIs, Open Banking, Open Insurance …, but what does this new buzzword really mean? "Open" refers to the capability of companies to expose their services to the outside world, so that external partners or even competitors can use these services to bring added value to their customers. This trend is made possible by the technological evolution of open APIs (Application Programming Interfaces), which are the digital ports making this communication possible. Together companies, interconnected through open APIs, form a true API ecosystem , offering best-of-breed customer experience, by combining the digital services offered by multiple companies. In the technology sector this evolution has been ongoing for multiple years (think about the travelling sector, allowing you to book any hotel online). An excelle...

IoT - Revolution or Evolution in the Financial Services Industry

1. The IoT hype We have all heard about the "Internet of Things" (IoT) as this revolutionary new technology, which will radically change our lives. But is it really such a revolution and will it really have an impact on the Financial Services Industry? To refresh our memory, the Internet of Things (IoT) refers to any object , which is able to collect data and communicate and share this information (like condition, geolocation…) over the internet . This communication will often occur between 2 objects (i.e. not involving any human), which is often referred to as Machine-to-Machine (M2M) communication. Well known examples are home thermostats, home security systems, fitness and health monitors, wearables… This all seems futuristic, but smartphones, tablets and smartwatches can also be considered as IoT devices. More importantly, beside these futuristic visions of IoT, the smartphone will most likely continue to be the cent...

RPA - The miracle solution for incumbent banks to bridge the automation gap with neo-banks?

Hypes and marketing buzz words are strongly present in the IT landscape. Often these are existing concepts, which have evolved technologically and are then renamed to a new term, as if it were a brand new technology or concept. If you want to understand and assess these new trends, it is important to reduce the concepts to their essence and compare them with existing technologies , e.g. Integration (middleware) software ensures that 2 separate applications or components can be integrated in an easy way. Of course, there is a huge evolution in the protocols, volumes of exchanged data, scalability, performance…, but in essence the problem remains the same. Nonetheless, there have been multiple terms for integration software such as ETL, ESB, EAI, SOA, Service Mesh… Data storage software ensures that data is stored in such a way that data is not lost and that there is some kind guaranteed consistency, maximum availability and scalability, easy retrieval...

AI in Financial Services - A buzzword that is here to stay!

In a few of my most recent blogs I tried to demystify some of the buzzwords (like blockchain, Low- and No-Code platforms, RPA…), which are commonly used in the financial services industry. These buzzwords often entail interesting innovations, but contrary to their promise, they are not silver bullets solving any problem. Another such buzzword is AI (or also referred to as Machine Learning, Deep Learning, Enforced Learning… - the difference between those terms put aside). Again this term is also seriously hyped, creating unrealistic expectations, but contrary to many other buzzwords, this is something I truly believe will have a much larger impact on the financial services industry than many other buzzwords. This opinion is backed by a study of McKinsey and PWC indicating that 72% of company leaders consider that AI will be the most competitive advantage of the future and that this technology will be the most disruptive force in the decades to come. Deep Lea...

An overview of 1-year blogging

Last week I published my 60th post on my blog called Bankloch (a reference to "Banking" and my family name). The past year, I have published a blog on a weekly basis, providing my humble personal vision on the topics of Fintech, IT software delivery and mobility. This blogging has mainly been a personal enrichment , as it forced me to dive deep into a number of different topics, not only in researching for content, but also in trying to identify trends, innovations and patterns into these topics. Furthermore it allowed me to have several very interesting conversations and discussions with passionate colleagues in the financial industry and to get more insights into the wonderful world of blogging and more general of digital marketing, exploring subjects and tools like: Search Engine Optimization (SEO) LinkedIn post optimization Google Search Console Google AdWorks Google Blogger Thinker360 Finextra … Clearly it is not easy to get the necessary ...

Low- and No-code platforms - Will IT developers soon be out of a job?

“ The future of coding is no coding at all ” - Chris Wanstrath (CEO at GitHub). Mid May I posted a blog on RPA (Robotic Process Automation - https://bankloch.blogspot.com/2020/05/rpa-miracle-solution-for-incumbent.html ) on how this technology, promises the world to companies. A very similar story is found with low- and no-code platforms, which also promise that business people, with limited to no knowledge of IT, can create complex business applications. These platforms originate , just as RPA tools, from the growing demand for IT developments , while IT cannot keep up with the available capacity. As a result, an enormous gap between IT teams and business demands is created, which is often filled by shadow-IT departments, which extend the IT workforce and create business tools in Excel, Access, WordPress… Unfortunately these tools built in shadow-IT departments arrive very soon at their limits, as they don’t support the required non-functional requirements (like h...

The UPI Phenomenon: From Zero to 10 Billion

If there is one Indian innovation that has grabbed global headlines , it is undoubtedly the instant payment system UPI (Unified Payments Interface) . In August 2023, monthly UPI transactions exceeded an astounding 10 billion, marking a remarkable milestone for India’s payments ecosystem. No wonder that UPI has not only revolutionized transactions in India but has also gained international recognition for its remarkable growth. Launched in 2016 by the National Payments Corporation of India (NPCI) in collaboration with 21 member banks, UPI quickly became popular among consumers and businesses. In just a few years, it achieved remarkable milestones : By August 2023, UPI recorded an unprecedented 10.58 billion transactions , with an impressive 50% year-on-year growth. This volume represented approximately 190 billion euros . In July 2023, the UPI network connected 473 different banks . UPI is projected to achieve a staggering 1 ...

A bank account - A concept of the past

Almost every recent article written about banking starts with the statement that the banking industry is being disrupted by new competitors, new innovations and new technologies. Although this statement is definitely true, the extend of the disruption can still be debated. Even the most innovative neo-banks still work with bank (current, saving, term and investment) accounts, cards (credit and debit), traditional credits, existing payment infrastructure… The user experience surrounding the origination and servicing of these products has dramatically improved (and will continue to evolve), but the underlying banking products are not really disrupted. You could argue that banking products are so intertwined with society and our way of thinking about finance, that they can’t be disrupted, but looking at those products you cannot ignore that they are far from an optimal solution in our current digital world. Let’s consider cards for example. Isn’t ...

The Freemium Model in SaaS: A Smart Acquisition Play or a Costly Gamble?

In the world of SaaS, the freemium model has become a widespread customer acquisition strategy. The premise is simple: offer a free version of your software to attract users and then convert a portion of them into paying customers. The classic tagline — "Start for free, upgrade as you grow" — perfectly encapsulates this approach. But while the model sounds straightforward, the reality is more complex. Freemium is not just a pricing strategy; it is a calculated bet with significant costs. Companies must carefully balance acquisition, conversion, and infrastructure expenses to make freemium a sustainable growth engine rather than a financial sinkhole. Freemium offerings come in different flavors, each designed to balance value for the user with a strong incentive to upgrade: Unlimited free usage with restricted features The core product is free, but premium features (often essential for corporate users) require payment. This flavor is common in open-source solutions, where ente...

From app to super-app to personal assistant

In July of this year, KBC bank (the 2nd largest bank in Belgium) surprised many people, including many of us working in the banking industry, with their announcement that they bought the rights to broadcast the highlights of soccer matches in Belgium via their mobile app (a service called "Goal alert"). The days following this announcement the news was filled with experts, some of them categorizing it as a brilliant move, others claiming that KBC should better focus on its core mission. Independent of whether it is a good or bad strategic decision (the future will tell), it is clearly part of a much larger strategy of KBC to convert their banking app into a super-app (all-in-one app) . Today you can already buy mobility tickets and cinema tickets and use other third-party services (like Monizze, eBox, PayPal…) within the KBC app. Furthermore, end of last year, KBC announced opening up their app also to non-customers allowing them to also use these thi...

Bankloch

Search This Blog