When banktech gets personal
Brett King, co-founder and executive chairman of Moven, explores how artificial intelligence (AI), embedded tech and experience design are reframing banking.
As technology has dominated our lives over the last decade, banking has transformed what customers expect in an everyday banking experience. Today, a digital presence is simply table stakes – it has become imperative in how banks engage and more importantly, retain their customers. Despite this progress, less than 5% of banks in markets like the US and UK allow a customer to open an account through a mobile phone. A shockingly low statistic.
So where are banks today, and what do they need to do to compete with the challenger banks whose offerings are 100% digital?
There is a paradigm shift especially in retail banking (increasingly across wealth management and wholesale banking), where many products and services that have been built on the premise of the signature, paper-based process and just physical presence, are no longer valid or viable for the way people live their lives today.
Banking, like all other industries, is subject to rapidly changing consumer behaviour and technological capability. In the field of music, movies and TV, retail consumer goods, clothing, groceries and even restaurants, digital distribution is increasingly a fact of life. But technology has not just attacked distribution, it’s also attacked friction – driven by shorter attention spans, technology adoption diffusion and improvements in experience design. In a world where you can order groceries from Amazon and have them delivered within hours, having to physically sign a piece of paper to access banking services seems an anachronism.
What is yet not recognised by most financial institutions is that this directionality will inevitably, completely transform acquisition economics for financial services. The future expectation will be that banks should be able to anticipate their customer’s daily experience and proactively meet their needs – in real-time. To effectively do this, the bank will need to intuitively understand and link all of its customer’s financial activity and relevant behavioural data to ensure that the customer will have access to the right banking payments or credit capability when and where it is needed. The future banking experience doesn’t necessitate a credit card or signature to make a payment or the need to ensure that a checking (current) account has cash – the idea is that your customer’s mobile device will have this capability embedded. always on, anticipating their needs.
It is with this mindset that the challenger banks and the banks of the future are aiming to circumvent the traditional banking product and departments by taking its core utility (i.e. the ability to store money safely, move money quickly or to access credit) and embedding into the technology layer. Next will come consumer awareness of the fact that they don’t need to apply for a plastic credit card in advance, that credit will be available on demand, as required.
Turning the ship – how banks are reacting to these forces
The impact to traditional banks is that each one of these traditional product departments will be under threat because these products will largely cease to exist – replaced by a technology experience delivering the same or better core banking utility.
This changes distribution dynamics considerably. For example, the selection criteria many customers used historically of who they banked with, tended to be focused on the location and convenience of the local branches. Now the focus is how you will differentiate your bank in real-time, and how quickly and smartly that bank can respond to an individual customer’s needs.
As a result, many leading banks have taken to building apps to compete with the up and coming challenger banks; like HSBC working on its own digital bank under the codename “Project Iceberg”, JP Morgan Chase’s Finn, Wells Fargo’s Greenhouse and more. The issue that a lot of these traditional banks face is that because they are so complex with so much legacy, the best they can really do on providing “banking as an experience” is to just ensure that they are doing what the challenger banks have already done.
If you look at the range of leading innovations in banking over the last decade, evidence suggests that fintechs and technology players like Ant Financial, remain three to seven years ahead of mainstream banks on the innovation stakes. Banks seem to be spending most of their time catching up and arguing why they can be fast followers of the challengers. This lack of core digital strategy across the board will make it almost impossible for these traditional banks to transform at the same pace that challenger banks have been able to do consistently. Thus, many banks are also partnering with fintech firms that can get them into market faster or cheaper than they can on their own.
The embedded technology experience
The idea of the embedded technology experiences, with the use of new age technology like AI, is a current reality that is only getting more sophisticated. In our homes, we have the likes of Siri and Alexa that have infiltrated our day-to-day from finding the right restaurants with your preferences or how you book your next flight – in essence, acting as intelligent agents on your behalf.
The important point here is that the technology infrastructure is the primary interface by which people are benefitting, and as a result, technology owners and first-movers have a distinct advantage.
As social media networks have the advantage of the network effect, and companies like Amazon have the advantage of voice; banks ultimately need to partner with innovative technology providers to be integrated into their customers daily lives in the same way that Amazon and social networks are today. If they don’t, banks will quickly lose their customers and market share to those banks who are on the forefront of this paradigm shift.
This article is also featured in the October 2018 edition of the Banking Technology magazine.
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