Dissecting Techwashing
No more dumbing down, wild claims and bandwagons
Tech is the latest industry to fall into the trap of spouting misleading claims and exaggerated capabilities in a bid to boost investment and profits. Here, we explore what this means for the digital transformation of the FS industry.
When objective facts are less influential in shaping public opinion than appeals to emotion and personal belief, we find ourselves in what has come to be known as a ‘post-truth’ age. From politics to current affairs, it is becoming increasingly difficult to discern fact from fiction.
As some of the biggest players in the exaggerated claims business, the advertising industry and the stock market have always danced openly in the grey area between truth and hype. But with an inexorable desire to stay at the forefront of change, has the technology industry joined the show?
While the current prevalence of greenwashing is shining a light on the misleading sustainability claims of big business, we explore a newly understood phenomenon: ‘techwashing’. What is it? Why does it happen? And, what impact is it having on the FS industry?
“Slapping on a trendy label”
A term used recently by Chris Clark, CEO, Prosperity 24/7, techwashing describes hyperbolic (or simply untrue) claims about technological capabilities. This includes everything from exaggerated digital transformations to the adoption of misleading marketing language in an attempt to profit from a new trend.
According to Forbes, techwashing can be understood as: “The practice of slapping a trendy new label on legacy solutions. Businesses in adjacent spaces often follow incumbents’ lead. Wanting to cash in on the new trend, they too adopt the flashy term. In the process, they obscure the key advantages of the new technology, and end-users are forced to struggle to find clarity.”
Common examples include misrepresenting automation or ML technology as AI - or promoting a future within the metaverse without the infrastructure or expertise to support the claims.
In the FS sector, overhyped technologies are a challenge – and according to Forrester’s podcast episode, ‘Emerging Tech in banking: what’s hot and what’s hype?’, the issue is widespread.
“It is difficult for banks to identify suitable tech that fits with their starting point. And certainly, there are a number of overhyped technologies these days, that I describe as technology looking for a solution,” says Jost Hoppermann, Principal Analyst, Forrester. So, what drives techwashing?
Why does the practice exist?
The value of the technology sector is a key motivator. Based upon their market cap, both Apple and Microsoft are ranked in the top three most valuable companies in the world. Since 2015, the Big Tech companies have contributed $4tn of the $6tn increase in the global market cap, and despite a decline in market value, the world’s Big Tech companies also reported recordbreaking revenue figures over the last 12 months.
Technology companies typically fall into two categories:enablers and adopters. The former develops tech to support the growth of others, while the latter uses technology to gain a competitive edge in their own markets. Some argue that what falls under the tech umbrella is too broad, and has played a role in the prevalence of techwashing in general.
For businesses seeking investment, it is clear that trying to exaggerate their way into the tech space could prove rewarding.
And it’s not just the proven success of Big Tech so far. According to Business Life Global, “As digital transformation increasingly takes hold of the FS sector, firms are racing to demonstrate that their systems are fast and more automated than their competitors.”
The result? Banks are investing heavily into tech that fails to return commercially, or the benefits of which will not be felt for a long while yet. “A good example can be found in advanced gamification, which applies game mechanics to user interfaces [in the banking industry],” says Hoppermann, speaking on Forrester’s podcast. “Those who invested in the concept found it took lots of effort to implement capabilities, and required a large investment – but until now, commercial success remains comparatively limited.”
“I see a lot of investment proposals coming from across the table where companies have made wild claims akin to the greenwashing scenario.” Chris Clark,CEO, Prosperity 24/7
Another explanation for the prevalence of overhyped technology within the FS industry may be down to its complex nature.
Gemma Milne is a PhD Researcher at the University of Edinburgh, researching the political economy of corporate futurism, and the author of Smoke & Mirrors: How Hype Obscures the Future and How to See Past It.
“We live in a world, particularly in tech and science, that can be very difficult to describe – particularly when it comes to deep tech. You need to be able to get people on board that aren’t experts: politicians, funders, the general public,” says Milne.
“Where the trouble begins is, of course, a lack of understanding of the reality of deep tech. Investors want their payout, but the technology hasn’t been invented yet – and so these overclaims start to become a problem. What do we think is all right to say in terms of exaggeration, considering the fact that we work in this complex system? It’s about learning how to communicate better.”
“Investment is all about hype. From a critical perspective, arguably investors don’t need to pay attention to the reality of whether the hype is true. In my mind, that is a bad thing.” Gemma Milne, Author of Smoke & Mirrors: How Hype Obscures the Future and How to See Past It.
Due diligence concerns
While the motivation is clear, how prevalent is the issue of techwashing today? From an investment perspective, Clark has noticed a significant number of companies misrepresenting themselves in the digital space.
“I see a lot of investment proposals coming from across the table where companies have made wild claims akin to the greenwashing scenario,” says Clark.
“When it comes to tech, you see people jumping on the bandwagon all the time. At the end of the day, if an organisation is doing it properly, then it is a massive enabler. It should drive efficiency, and drive performance. But COVID has accelerated misclaims around digital transformation and tech capabilities.”
This could begin to have a growing impact on the investment space and may be something financial service organisations keep a close eye on. The cost of heightened due diligence and the risk of failed investments could have a greater effect on the industry, if the issue continues.
Untangling help from hype
There are some areas of the technology industry which tend to be more ‘overhyped’ than others, particularly when it comes to the potential benefits for the banking sector.
These include the metaverse, blockchain, cloud-based solutions and AI. In each case, it can be argued the technology has failed on its promises so far, or is unlikely to live up to its promised future capabilities. In the case of AI, the term is said to be “severely overused as a way to market applications and technologies in order to exaggerate their capabilities,” according to Josh Hamit, CIO of Altra Federal Credit Union, in a 2020 CIO article.
While AI chatbots have become commonplace in banking, they are still at a comparatively simple stage – failing to handle any complex customer query that requires an understanding of context. When you compare this reality to the grandiose claims around the revolutionary power of AI, we begin to see the types of discrepancies facing many FS firms, as they attempt to select and implement appropriate tech.
Furthermore, “more sophisticated AI applications, such as deep learning, natural language generation, and AI-powered robotic process automation…the technology is still evolving, as is the regulatory environment to allow specific applications. More than a third of the banks surveyed also identified lack of technology skills and experience inhouse as a challenge to greater adoption,” according to Joy McKnight, editor of The Banker.
Other examples of overhyped tech most affecting the FS industry include edge computing, the Internet of Things and gamification.
“These all fall into the ‘hype’ bucket. They’re emerging technologies that aren’t yet mature enough for ‘banking prime time’,” says Martha Bennett, Principal Analyst, Forrester.
While these technologies have the potential to become transformational, there is a widespread and problematic presentation of their benefits, as a result of collective marketing efforts.
The regulation game
So, what protection from techwashing can banks, FS firms, and investors expect? Is it realistic to expect regulation?
“We have organisations such as the Advertising Standards Authority, but there’s a lack of understanding of both technology and science – and it moves very quickly,” explains Milne. “You only have to look at examples such as quantum computing: the claims that are being made are very difficult to unpick.”
Clark agrees: “Maybe it is a technical capability piece. In a resource-poor landscape that we have in the tech sector across the UK, Europe and the US, due diligence teams are often not technology-led.
“You would hope that at some point in the very near future, certain levels of certification will be mandated and are required.” But, there is a fine line to be struck when it comes to regulation; particularly for smaller, digital-only banks keen to innovate.
“We’ve got to make sure we don’t stifle innovation. Regulation is a balancing act,” says Clark.
Milne adds: “Is the narrative so gripping that it becomes a self-fulfilling prophecy? Is it worth investing in because later on, that fact that they will get their investment, means they’ll be able to actually create the promise?”
But change is definitely afoot, says Clark. “Due diligence is starting to catch up. There is a huge amount of diligence going into the claims regarding digital transformation, or the underlying tech of key platforms. Whereas even two years ago, many of these claims were not being investigated.”
When it comes to regulation, it seems the focus of the conversation must return to the concept of truth. There is a fine line between puff advertising and full-blown fraud, according to Business Life Global. “Using trendy labels is techwashing. Making entirely false claims is more sinister fraud. What drives techwashing is the competitive and unregulated environment.”
This blurred line seems to be a real obstacle for regulatory bodies, and for the FS firms trying to untangle the murky world of FinTech claims.
Uncovering whether claims are made deliberately or ignorantly is a challenge – although it could be argued that both should be made illegal. But, does any attempt to differentiate become problematic for the FS industry, when considering the nature of the stock market overall?
“Investment is all about hype,” continues Milne. “From a critical perspective, arguably investors don’t need to pay attention to the reality of whether the hype is true. In my mind, that is a bad thing. But understanding how the mechanics of hype captures society is arguably a very clever way of investing. Venture capital, for example, disregards the reality of a company – whether or not they do the thing they say they do – and instead is concerned on whether the company delivers on excitement for bigger investors at the IPO [initial public offering] or exit point.”
Can regulation prevent techwashing and assist the finance industry’s digital transformation - without stepping on the toes of the very nature of the investment space?
Getting to the reality
When it comes to B2B or B2C marketing campaigns, perhaps some adoption of trendy tech terms and bloated claims could be argued to be fair game. After all, the practice is common across many industries – and arguably the media must also take some responsibility for the issue.
“In the world of tech and science, in some cases you do need to simplify. You do need to paint a vision and showcase what the future looks like,” says Milne. “But – from a media perspective, and from a business perspective – we are all too quick to think that we need to make things simple for people. Arguably, everyone needs to stop using terms fed to them by PR agents from these companies, and start asking real questions.
“It’s not about dumbing down. It’s about getting to the facts – about getting to the reality.”
So, can the issue of techwashing be controlled? Is it fair to suggest that banks are overwhelmed by emerging and overhyped tech? Perhaps only time will truly tell. But what is clear, is that the world of hype and exaggeration is big business – particularly in a complex and fast-moving industry such as the tech sector.