BANKS and other financial services companies are undergoing massive change. The model most of us are used to – branches, call centres, face-to-face contact – is being eroded, with a new generation of online solutions taking their place.

It’s now easy to open a current account on an app in 10 minutes, receive instant notification of transactions and even hold different currencies.

The services most of these new Fintech – financial technology – businesses offer are often still quite basic, but they address most people’s day-to-day needs. To establish their competitive edge and boost convenience and efficiency, Fintech firms may well employ chatbots driven by artificial intelligence (AI). These are now becoming so sophisticated that customers may not know they are talking to a machine.

HeraldScotland: Alan Nelson, partner in the Technology Team in the Glasgow office of the international legal firm CMSAlan Nelson, partner in the Technology Team in the Glasgow office of the international legal firm CMS

We had better get used to AI: we are likely to encounter an awful lot more of it in our lives in the years to come.

“People are talking about it having the same potential to disrupt and drive innovation as the steam engine did,” says Alan Nelson, partner in the Technology Team in the Glasgow office of the international legal firm CMS, which has 75 offices in 43 countries and employs more than 250 lawyers in Scotland alone.

“It really is as significant as that – it will change every aspect of our lives. In financial services, companies are only just starting to scratch the surface of how it can be used.” He adds: “Large organisations will start using AI, while Fintechs will develop it to create novel business propositions and create models that simply haven’t existed before.”

The holy grail is data. “AI thrives on this, and the established institutions have vast pools of it. If they can partner with some of the Fintech companies or buy in some of the solutions, then they will be able to do something quite different – create value and new products for their customers.”

As technology-driven banking moves forward, trust in online alternatives to traditional accounts is likely to grow and new offerings emerge. At present, many people use Fintechs as an efficient, cost-effective solution for daily transactions, but may well keep their traditional account as well. As trust in new banking builds, that might change.

Potentially, Alan Nelson says, there is a win-win relationship the large traditional banks and the Fintechs can build with each other. “With a partnership between the two, Fintechs can build a platform in their own name but also sell it into one of the traditional providers.

“That means the bigger, established financial services providers don’t have to invent a technology solution themselves. And it gives the Fintech access to commissions, sales and potentially more customers. I think that sort of collaboration will be key and it’s a model that can work well.”

What direction will AI-driven banking take in the future? At present, people’s personal finances tend to be disconnected, with bank accounts, mortgages, pensions, investments and other assets all separate from each other. “By the time you get to your 40s or 50s, you could have lots of different products and lots of different apps. But you won’t have a financial dashboard to tell you how it all works to analyse your data on all your finances. That would be a massive win.”

HeraldScotland: Aidan Campbell is a partner in the Financial Services and Products Group and specialises in investment funds.Aidan Campbell is a partner in the Financial Services and Products Group and specialises in investment funds.

Another area of change within financial service is the development of cryptocurrencies – internet- based mediums of secured exchange that can be used as money and traded.

A question remains about whether these digital currencies, the most famous of which at present is Bitcoin, will ever move into the mainstream market. But they are attracting more attention from European regulators, especially since the announcement of Libra, the proposed new crypto asset from Facebook.

Aidan Campbell, a Partner in CMS’s Financial Services Regulation Team, says there has been a sea change in attitude. “Cryptos are now coming more into the mainstream, especially with Libra, which is to be backed by Facebook and has the potential to really take off.”

Will that actually happen? No one yet knows. But with the muscle of the global technology giants behind crypto assets – and particularly if they combine strengths – they may be able to move beyond the niche, rather geeky market position they currently hold. “At the moment, there are just so many people working on this in isolation,” Aidan adds. “It’s a bit of a struggle to see it taking off. You almost need a killer application, rather than just an interest in technology.”


While there has been a lot of excitement about cryptocurrencies over the past three or four years, Aidan adds, this is not really converted into practical action. “There’s a lot more excitement around crypto in other parts of the UK outside Scotland, and particularly in London. But the jury is out on whether or not it will really take off.”

CMS, which is Europe’s largest legal firm, is working with its clients on the implementation of these and other new technology solutions. “We’re giving advice on the contracts and the regulatory issues,” says Alan Nelson. “That helps our clients in terms of risk management and ensuring they can adopt a technology in the most appropriate way.”

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