Grouping around technology
Technology is the big trend for banking groups in 2016, and blockchain, big data and mobile services will frame the discourse for months (and years) to come
If 2015 was the year of planning and preparation for banking’s technological revolution, 2016 is the year that has really seen the transformation take off. By making the data and analytics amassed in recent years actionable, banking groups are now in the position to introduce new products, platforms and services that will ultimately improve customer experience to a huge extent.
The blockchain suggests users expect greater transparency from their banks
Of course, such large-scale development within any organisation is no small feat. Consequently, some banks are refraining from taking the bold steps of greater transparency, engagement and partnerships with those outside the sector. However, those that do not adapt to this evolving state will be left behind – and fast. By the end of 2016 we can expect to start seeing the winners and the losers of this race emerge, with more to come next year, as the revolution takes full swing.
Digital transparency
The blockchain is a catalogue consisting of every bitcoin transaction that has ever taken place. This ledger, which is open to the public, is growing exponentially, with new ‘blocks’ of data being added continuously and in chronological order. Not only does the blockchain provide an increasingly popular alternative model to conventional online transactions and banking entities, it also suggests users expect greater transparency from their banks.
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As well as being completely open, the blockchain is also permissionless, meaning anyone can access the catalogue. That said, permissioned blockchains also exist, which only specific and certified users can interact with. While the latter seem to fit into the more traditional banking paradigm, they trigger several concerns, including the ability to easily change and so flout the rules for members, as well as the inability to scale, which would naturally become evident with a large network.
In either of its two formats, blockchain technology cannot and should not be ignored by any banking group. The growing number of fintech companies, emerging with offers for the latest innovations that traditional institutions are still failing to provide, reinforces this fact. In response to this trend and the mounting competition from alternative entities, at the end of 2015 the nine largest banks in the world announced plans to create the R3 Consortium in order to establish a set of industry standards for the blockchain. This year, we are seeing more and more banks sign up to the initiative, indicating the importance and pace of the technology’s uptake.
Truly mobile
Mobile banking is another area that is undergoing drastic changes, with technological developments that provide more rapid and helpful services for consumers. While monitoring accounts and making payments from one’s smartphone are becoming the norm in many countries (see Fig 1), 2016 has seen mobile banking move to a whole new level. Having overcome the massive challenge of gathering, consolidating and analysing data, banking groups are now in a position to make that data actionable.
One development that will begin to promulgate in the coming months is that of location-based notifications, which are sent directly to customers on the basis of their immediate needs. This means customers will receive alerts on their phones with relevant advice in real time, and will even be offered deals from shops and restaurants as they walk past them. When this type of banking service becomes common, consumer behaviour and expectations are expected to change to an even greater degree than they have in recent times. Those banks that use the data they have collected thus far to help empower their customers will benefit from greater customer engagement and greater loyalty, ensuring their position as leaders in the industry in the years to come.
Another consequence of the evolution of mobile banking and real-time advice is that there will be less need for call centres and physical bank branches; recent figures have shown both are already in decline. With intelligent personal assistants such as Siri, Alexa and Cortana, banks will be able to conduct a natural dialogue with their customers, akin almost to having a personalised branch in each customer’s own home – or anywhere they happen to be. This approach will also help banks engage with Millennials, a pressing issue for many institutions at present, both large and small.
Big data
Another way in which banking groups are now using big data is to enable them to introduce an optichannel experience. As opposed to multichannel, which uses multiple platforms, or omnichannel, which is delivery through all channels, optichannel will provide services via the best channel possible based on the customer’s individual needs and preferences. Through sophisticated analytics and algorithms, banks will be able to provide clients with a highly personalised experience, which will again boost customer loyalty and retention rates.
Through this ongoing evolution, traditional banking products and platforms will begin to fade away; this year we are beginning to see the start of that trend. Products such as credit cards and savings plans will be dropped and replaced by highly integrated and embedded banking experiences, while services such as cash withdrawals and in-store financing will take place in any shop. Moreover, savings and offers will be accessible anywhere a customer goes, and all these added benefits will take place without paperwork, handwritten signatures or even bank cards.
With all these trends emerging around a core of modern technology, banks are beginning to outsource more. In fact, another trend we are witnessing this year, which is certain to grow, is that of partnerships forming between big banks and tech start-ups. Instead of developing technology in-house, banks are now acknowledging the importance of the technology sector itself and playing to the strengths of specialised firms that can offer superior products, which in turn can help their customers in the best and most appropriate
way possible.
With the rapid progression of technology, coupled with the fruits of data collation and partnerships with start-ups, a new era in banking is indeed underway. Naturally, there will be challenges that arise, particularly when it comes to employing the talent needed to implement the tools and mechanisms required, and so secure the success of this transition.
In-house attempts and siloed approaches, as well as a slowness to adapt, will mean a significant number of banks buckle under the pressure of this highly evolved and competitive industry. Technology is enabling banks in 2016 to offer so much more to their customers: greater transparency and engagement, and real-time personalised advice and products, as well as the utmost convenience. With these changes, we will most certainly see winners and losers in the industry, but, ultimately, consumers can only benefit from the evolution.