There has never been a more exciting time in the banking industry. As technology’s onward rush continues nonstop it provides institutions with opportunities that expand well beyond traditional financial services. More than expanding the services offered, financial institutions will be able to process data and engage with consumers faster than ever, as the rollout of 5G networks becomes a reality.
These superfast networks will provide the opportunity to instantaneously and intelligently meet any consumer need, at any time, on any channel. Achieving this will require new computing and storage strategies, advanced analytics, enhanced cybersecurity capabilities and a brand new perspective on how banking services can be delivered.
What are the technologies which hold the greatest 4th industrial revolution potential? Nothing is for certain, but the technological trends below certainly should be watched closely. These are in no particular order, since each organization will be different as to the prioritization and investment allocation. That said, the opportunities are greater than ever … but so is the risk of inaction.
The Need for Speed: Expansion of 5G Wireless
The 5th generation of mobile connectivity will provide superfast download and upload speeds as well as more stable connections. The impact comes from the startling improvement of 10X the speed of 4G connections.
While 5G mobile data networks started to be deployed in 2019, they will expand significantly in availability and use in 2020. Not only will more geographic areas be covered, but new devices and more affordable data plans will be made available. In other words, 5G will achieve scale in 2020 and even more in 2021.
Financial institutions, as well as all industries, will need to understand the business implications of having super-fast and stable internet access everywhere. The greatest initial impact will be that all components in the Internet of Things (IoT) universe will be able to connect with each other seamlessly, collecting and transferring more data than ever. 5G will be also be available over wired connections, leading to the convergence of fixed and mobile technologies.
The higher speeds will have the potential to improve both the customer experience and bank infrastructure. For example, virtual assistants, enabled by increased data processing speeds, will be able to provide more contextual recommendations in real time. It will also be possible to increase the security of communications with improved biometrics.
In addition to the expansion of 5G, WiFi 6 will provide the next generation of WiFi connectivity. Similar to the impact of 5G wireless, WiFi 6 will provide faster connectivity and processing in buildings where WiFi is available (workplace, home, coffee shop, etc.). The impact will be speeds that are 3X as fast as available today.
Blockchain Technology: A Difficult But Important Transition
While we listed blockchain as a technology trend to watch in 2019, the banking industry was slower than expected to embrace the potential. Many believe 2020 will be different.
To be sure, there is still caution surrounding blockchain initiatives, due to issues such as regulations, scalability and interoperability. That said, significantly more blockchain tests are occurring in retail and corporate banking due to the ability to improve trust, provide transparency and potentially lower costs, reduce transaction times and improve cash flow.
The initial forays into blockchain will most likely be centered on remittances, KYC/ID fraud prevention, and risk scoring. Even with the benefits, financial institutions will need a significant evolution in culture, since the use of blockchain requires trusting between different organizations, with collaboration and the sharing of data. This has been a stumbling block for many organizations.
From Public and Private Cloud to Distributed Cloud
It seems like just yesterday that banks and credit unions began to rely on cloud computing to handle increasing loads of data. Formerly a technology trend to watch, cloud computing has become mainstream, with major players AWS (Amazon Web Services), Microsoft Azure and Google Cloud dominating the market.
The adoption of cloud computing is still growing, as more financial institutions migrate to a cloud solution. But it’s no longer the emerging technology. By 2022, 75% of enterprise data will be created and processed outside the centralized data center or cloud, according to Gartner. This represents an increase from less than 10% generated today.
Compared to a public cloud, that is owned and operated by a third-party cloud service provider, a distributed cloud provides public cloud services to external locations, with the original provider still being responsible for cloud service architecture, delivery, operations and updates.
This provides financial institutions greater flexibility, more deployment options, and better optimization for infrastructure, security and compliance. It also reduces the risk of network-related outages.
The Future of Work: Rise of the Human
Wait, how can the ‘rise of the human’ be a technology trend in banking? We have all heard the doom and gloom scenarios for massive human displacement caused by technology and automation, including Robotic Process Automation (RPA), artificial intelligence and machine learning. Many have predicted the elimination of millions of jobs from the banking industry … and several mass reductions in staff have already taken place.
That said, automation is also expected to create new jobs and enhance human skills and expertise. Not the same jobs that existed in the past, but reconfigured and redesigned jobs, that move people from middle-income routine work to employment that will emphasize creativity and enhanced thought processes that will improve the performance of digital technologies.
The challenge for banking leaders will be to find and/or train the needed talent and to integrate and make the most of both kinds of labor (digital and human). The biggest change when it comes to this labor transformation will be the pace of change itself. The required skill upgrades and workforce adaptations will occur faster than any organization can handle alone. This will increase the use of outside partners and collaborations to move at the pace of digital.
According to CIO, “Human and digital labor will increasingly coexist. Company leaders from the C-suite and the IT team to HR professionals will need to work to provide a productive integration of both aspects of labor — to make the most of both and take advantage of the benefits of digital transformation, including reduced risk, increased efficiency and lower costs.”
Integration of Fintech and Healthtech
The majority of healthcare payment transactions remain cumbersome and confusing for all stakeholders – the consumer, payer and the provider. By taking advantage of the increased digitization and consumerization of healthcare, innovative payment, software and processing companies are beginning to emerge, offering specific solutions that accommodate the shifting landscape.
Additional payment opportunities will include digital payments, SMS and other value-add solutions, including mobile point-of-sale solutions, online payment portals and integrated check-ins.
Beyond payments, 2020 will see the emergence of fintech applications that help consumers afford higher deductible healthcare plans and to be able to receive financial benefits from improved healthcare. The success of wearable technology to track and enhance personal wellness through performance will provide fintech organizations the ability to build rewards systems that benefit healthcare firms and financial services organizations.
Similar to how automobile tracking can lower insurance costs, health tracking can do the same for insurance firms and even traditional financial institutions. This integration of technology, attention to personal wellness and financial services will see an emergence in the coming year.
Deployment of AI for Improved CX
Most ways in which financial institutions competed in the past have become commoditized. From pricing, to locational convenience to services offered, almost all traditional financial institutions deliver close to the same products, through the same channels at the same cost.
The primary competitive differentiator in the future – and the foundation of any brand’s overall growth – will be the experience delivered to the consumer. The foundation of experience, in turn, will be how well a bank or credit union can use data and insights to customize and personalize engagements.
Artificial intelligence (AI) and advanced analytics can be deployed to deliver a seamless and intelligent customer experience at any point of the customer journey, resulting in greater satisfaction, increased relationship value and competitive differentiation in an increasingly crowded marketplace.
The key will be the ability to create personalization at scale and in real time. Customer engagement leaders know that the key to a strong customer experience is to behave like a financial relationship management “concierge,” proactively providing insight to the consumer based on real-time financial opportunities or threats.
The entire process must run seamlessly, with minimal consumer intervention required. Over time, consumers should believe in the decisions being made on their behalf, in much the same way that they would feel being handled by a financial advisor who treats them as the largest relationship in their portfolio.
Autonomous Ride Impact on Engagement and Financial Services
We all are aware of the futuristic autonomous car that can take a person anywhere with less and less personal involvement. In reality, many of us may never have this experience in our own self-driving car. The future will more likely involve a scenario where you will no longer need to own your own car at all.
The reality is that an automobile is one of the most expensive purchases a person ever makes beyond owning a home. Despite this significant investment, the car spends an overwhelming percentage of its time sitting in a driveway, parking lot or garage not being used.
In the future, ride-sharing may be the future of transport for the vast majority of individuals in urban and suburban areas. And most of these cars may be community owned, or per-ride leased autonomous vehicles.
So, what does this have to do with financial services? First, it can be assumed that the number of auto loans will continue to decrease as a percentage of a bank or credit union portfolio. We are already seeing this, with many Millennials already opting for an Uber ride as opposed to using their funds on their own car.
More importantly, drivers (or passengers) of the future will find themselves with a great deal of free time in-car. Rather than focusing on driving, time can be spent on working, being entertained, banking or just relaxing. Automobile companies are already developing systems that can take advantage of the increased free time. Other industries are also realizing that immersive technology offers a huge opportunity to turn a car into an engagement opportunity.
Should banking consider this opportunity as part of their open banking platform?
The Voice Revolution
According to Statista, over 34 million smart speaker devices were sold in the U.S. in 2018, with 2019 sales projected at 36 million units. At the same time, smart speaker usage is projected to rise at a compound annual growth rate of nearly 48%, to include over 76 million users by 2020.
As more people purchase and become more accustomed to interacting with voice devices, the use of voice search will increase accordingly. Advancements in Artificial Intelligence (AI) and machine learning have also made a huge impact on how we interact with our smart devices.
Successful voice interactions going forward into 2020 and beyond will require brands to go beyond search engine optimization terms into the realm of artificial intelligence and natural language. The expectation is an intuitive understanding of what a consumer is trying to say.
Integration across platforms and between branches and a variety of other touchpoints is also important to a successful voice commerce strategy. The consumer will assume that the voice technology is seamlessly integrated with the entire customer journey.
Finally, voice interactions of the future will need to embody the spirit and personality of a brand. The tone and even the actual voice will need to become part of the brand experience. A switch from visual to audio will mean brands will need to consider how to connect customers with a brand identity that is built around voice and personality.
The Battle Between Cyberthreats and Cybersecurity
Organizations and the public at large are increasingly aware of the threat of cyber crimes and the importance of cybersecurity. That said, most organizations are struggling to to keep up with the risk of cyberthreats. From data breaches and IT security staff shortages to security automation and integration cybersecurity will remain a top technology trend in banking.
Ensuring data privacy, and the security of personal data, continues to be a challenge as data breaches continue daily. The challenge is exacerbated because of the cybersecurity skills gap. In fact, as many as two in three organizations worldwide reported a shortage of IT security staff. While automation of some functions can relieve some of the pressure, web applications combining multiple web services are increasingly hard to secure.
On top of the traditional threats, the increase in mobile devices, internet of things (IoT) devices and the continued threat of state-sponsored attacks only adds to the challenge.
Change Continues … Only Faster
Throughout history, new technologies have disrupted what was previously in place, creating controversy and stress. In each case, the future of work changed as humans had to adjust to a new reality. Over the long term, these new technologies of their time redefined economies and societies in mostly beneficial ways.
We are currently experiencing a rate of technological change in banking and in our total economy like never before. It is impacting people and sociopolitical dynamics in ways that were unforeseen. Much of this is being driven by the increased use of data, AI machine learning, analytics, IoT and digital technologies in ways that feel like science fiction.
And because of the advent of 5G wireless systems and higher speed WiFi, the technological change is coming faster than most are prepared for. This will require an adjustment in the culture of most financial institutions as we redefine work and the interactions between humans and machines.
Some organizations may opt to ‘ride out the storm’. Unfortunately, when the storm settles down, much of what was remembered from the past will be forever changed. The survivors will be those organizations that took proactive action to embrace change, take risks and disrupt existing business models.