Banking in the Fourth Industrial Revolution

In 2016, Klaus Schwab, the Executive Chairman of the World Economic Forum wrote that we are currently experiencing the fourth industrial revolution. According to him, this revolution is “unlike anything that human kind has experienced before” 1 in its “scale, scope, and complexity”1. The fourth industrial revolution is characterized by an amalgamation of physical, biological borders and technology. The impact of the fourth industrial revolution will be felt across our way of life, and will have broad impact on every industry.

For example, the automotive industry has been facing changes due to technology evolution – from changing views on ownership – platforms like UBER providing easier options to ride without ownership to changing views on operation – autonomous driving changing our views on driverless cars. While some of it sounds like science fiction, there is concrete work being done on this front. Several car makers (new entrants and traditional) are focusing on driverless technology – ranging from assisting a driver to fully autonomous cars which don’t require a driver. In fact, earlier this year, Nissan revealed their research on “Brain to Vehicle” technology, which reads the user’s brain signals to make driving decisions – proving the point that physical, biological and technological worlds are increasingly interconnecting.

The impact is being felt in banking as well – banking industry is perhaps one of the industries that has seen leading indicators of this revolution. Digitization of banking services and processes is gaining ground, not only in enabling smoother customer journey but also in fine tuning internal processes. Future of banking will be truly digital – like the fully autonomous cars. It will be integrated in the day to day activities of the consumer, not requiring a separate interface for banking.

A typical customer journey would be seamless, completely integrated, and intuitive. For example,

The common thread running across the various stages is that human involvement will be minimal, with technology enabling most of the processes. While the above example is retail focused, corporate customer service and product offerings will also reshape in the fourth industrial revolution. For example, IoT information for tracking of shipment can be integrated with trade finance which can automate the trade finance process.

The same will be extended to the banks internal processes as well. Activities like product design & distribution, marketing, customer management, operations etc will be automated – technology will augment humans in some cases and will completely replace in others.

Fintechs and neo-banks are already down this path, using technology effectively – their extensive use of APIs, advanced analytics, AI, IoT etc enables them to provide better products and services to their end customers, at a fraction of the time and cost of the traditional banks.

The ball is now in the banks’ court, to use the technologies available in their processes in order to turn the tides to their advantage or to step into the future without the tools to survive.

Sources:
https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/