The Smartphone of The Future Will Rock The Banking World

The smartphone of the future will have “invisible innovations” including 5G connectivity, AI capabilities, machine-learning chips and processing power far beyond phones today. These devices will increasingly be used to authenticate access to physical and digital environments including homes, stores, information systems and all banking channels.

It may be difficult to fathom, but the role of the smartphone in society in the future is likely to become ever more central than it is today. With extraordinarily power, the smartphone is still a once-in-a-generation innovation whose full potential is far from realized, according to Deloitte.

The smartphone’s trajectory looks strong through 2023. But, should organizations ‘cover their bets’ on other distribution technologies that may replace smartphones in the future? Some organizations have bet on the emergence of new form factors, from smart glasses to virtual reality, but the smartphone still remains dominant.

Members of older generations are rapidly adopting smartphones, and will start to increasingly rely on them to access more financial services, eCommerce sites and payment options, using their smartphones. Bottom line, there needs to be an ongoing commitment to ensuring the experience of mobile banking continues to improve.

Smartphone Growth

Deloitte predicts that the penetration of smartphones among adults in developed countries will surpass 90% by 2023, a five-percentage-point increase over 2018. Smartphone sales will be 1.85 billion per year in 2023, a 19% increase over 2018 and equivalent to over five million units per day.

The main driver of higher adoption rates will be the acceptance and usage among older age groups. Deloitte expects ownership among 55-to-75-year-olds to reach 85% in developed countries by 2023, a 10% increase over 2018.

Deloitte also predicts that owners will interact with their phones on average 65 times per day in 2023, a 20% increase over 2018. “This will reflect the wider range of applications used by the mainstream smartphone owner, such as enterprise applications and in-store payment options, and more intensive use of existing applications such as camera capabilities.”

Despite being the primary access channel for smartphone-centric content, a 2023 smartphone is likely to look, on the outside, very similar to a 2018 model. That said, there will be an introduction of an array of innovations that will provide greater ease of use and improved functionality.

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Smartphone Upgrades

Banking organizations, as well as all industries ,should be developing capabilities that take advantage of smartphone upgrades anticipated in the future. By 2023, 5G networks will be prevalent in most developed markets, providing greater capacity and connection speeds.

Dedicated artificial intelligence (AI) chips will also become standard in most smartphones by 2023. According to Deloitte’s research, about two-thirds of adult smartphone owners in developed countries are already using at least one application that features machine learning. This will increase the range and utilization rate of machine learning applications on phones.

The GPS receiver in smartphones may also be upgraded to enable it to deliver more precise location information – to within 30 centimeters, versus 5 meters in 2017. This will enable improved risk and fraud monitoring as well as new payment capabilities with location awareness.

Over the next five years, it is expected that smartphone map apps will integrate more large indoor locations (such as shopping malls, office blocks and stores) and become more accurate (thanks to additional location data points from Wi-Fi hotspots, beacons and cell towers). This will enable more real-time interaction by banking organizations based on exact location coordinates.

While not appearing to impact the banking industry, wireless battery charging will help users stay connected, charged and engaged 24/7. It is expected the wireless charging will be rolled out in multiple environments, from coffeehouses to office waiting rooms and from bedside tables to cars, alleviating concerns about using more powerful banking apps.

Smartphone Application Innovations

Increasing ‘invisible innovations’ of the smartphone will expand to third-party apps such as mobile banking. The impact will be a continuation of the displacement of the PC as the preferred device for a growing range of digital banking applications.

The smartphone will became the preferred device for video customer service calls across all users, the preferred device for search among 18-to-34-year-olds and the preference among 45-to-54-year-olds for reading content, from news to financial education.

By the end of 2023, the smartphone is likely to have assimilated various additional non-PC functions, serving as credit, debit and other stored-value and loyalty cards. This will lead to smartphones being increasingly used to authenticate access to physical and digital environments, including e-commerce and banking sites. This will, in turn, improve risk and fraud management.

The Smartphone In The Workplace

A further driver of increased smartphone usage and value will be the smartphone’s use in the workplace. According to Deloitte, over the next five years, it is likely that mobile phones will transform the way work gets done in a variety of work settings.

Usage will range from reporting and tracking functionality to accessing a company’s intranet via a phone.”Hundreds of millions of workers around the world do not need to process or analyze information, but they do need to receive contextual information on a timely basis so they can respond to it rapidly based on better information. The smartphone is the ideal device for this,” states Deloitte.

As with much of the digital transformation process in banking, many organizations and processes are operating under old models. This includes employees unnecessarily being tethered to workstations or point-of-sale devices, or disconnected from real-time information.

In most cases mobile should, through better efficiency, make companies more competitive, but in a few cases mobile will enable entire business models to be reinvented and industries to be disrupted fundamentally.

Why Should Banking Care?

The role of the smartphone will remain central to the way people communicate and engage with people and businesses. The number of users depending on mobile devices for everyday chores and advanced capabilities are increasing as the expectations of what a smartphone can do also expands.

The banking industry is in a position to differentiate the consumer experience based on smartphone apps and capabilities. Failing to integrate current mobile functionality (such as integrated address books and the camera) can be significantly detrimental.

The banking industry should evaluate how best to integrate smartphones into their digital strategies for both consumers and employees. The innovation cycle for the smartphone is far from complete and organizations must move forward quickly to optimize the functionality going forward.

Jim MarousJim Marous is co-publisher of The Financial Brand and publisher of the Digital Banking Report, a subscription-based publication that provides deep insights into the digitization of banking, with over 150 reports in the digital archive available to subscribers. You can follow Jim on Twitter and LinkedIn, or visit his professional website.

This article was originally published on March 26, 2018. All content © 2018 by The Financial Brand and may not be reproduced by any means without permission.

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