The term “Digital” is not just a buzzword in today’s business lexicon. It is suggestive of a new economy riding the digital computing wave of technologies transforming processes, transactions, operations and business models. In financial services we should expect digitization and digitalization to revolutionise banking. So what could the next-generation bank look like?
People like banking, but not all of them like banks. Tomorrow’s banks should aim and aspire to be amongst the most-loved and popular global brands such as Disneyland or some popular technology brands. They must equip and help customers in fulfilling their ambitions. And everyone working at such a bank will be required to focus on activities generating value for customers and looking after customer relationships. Cutting-edge technologies will be at the heart of operations.
The next-generation bank will have a digital platform like the App-Store to host value-adding applications. The apps and accompanied digital services will be available for customers to pick and use as they wish, to accomplish their goals. The app-store can be the platform for banks to offer diverse product blends and to inject capabilities from FinTechs or other partners. Such a platform approach can enable financial institutions to go beyond vanilla money management, add smart offerings on top of theirs, or even link to non-financial products and relative digital services to meaningfully meet a wider range of customer needs.
The new bank will act as a key partner to help retail customers achieve their financial goals and to provide personalised guidance on how customers can meet their financial obligations (pay back a loan, clear a credit card), or hit a saving milestone (save enough money for kids’ college education, deposit needed for mortgage to get on to the property ladder etc). Personal financial management will include analysis of customer cash flows, spending patterns, peer/segment consideration and price-comparison mechanisms (like Amazon) to indicate how money could be spent smartly in various retail transactions, bills or other payments types.
The role of a data bank will become as important as a money bank. Banks sit on a wealth of personal information that can be harnessed using analytics, the key ingredient to truly personalize the services offered to customers. Machine learning and cognitive banking is the next stage of enterprise intelligence. It refers to a system’s ability to learn based on data inputs and outputs and improve with every iteration. Personal Robo advisors for asset and wealth management will rise. When all the data about customer fortunes along with all events in various important fields is processed by a Robo advisor, the consulting financial structure will be able to make swift actions, hence a virtuous cycle of customer satisfaction will be formed.
The bank of the future will also boost entrepreneurial economy and pay a lot of attention to this dynamic customer segment. Renewed product offerings could target entrepreneurs to help them enter the business arena and move from the inception of a business idea to practice. Uber-speed support could be provided on how to write the business plan, how to ease the business set-up with premises, resources, how to automate their business with digital offerings sourced from the bank, how to expand and enter foreign markets, almost anything to help these individuals pursue and fulfil their ambitions.
Innovation does not always imply invention. Innovation could either mean implementing a new entrepreneurial idea, or introduce an existing product with to an untapped customer segment. A very representative example is a dedicated online banking application enriched with gamification elements and facelift for kids to make banking look and feel like a game. The purpose would be to increase kids’ financial literacy by using finance puzzles, to train kids to establish good saving habits for purchasing items they desire and to familiarise them with their first online purchase while providing parallel control to parents to be aware and informed of usage and operations.
Adults love play-machines too. Augmented Reality (AR) is a new way of distributing and interacting with dynamic media content and it can help banks play a larger role in the everyday life of their customers. The next generation bank could be offering a home-finder AR application to help home buyers pull up real-time data as they cross houses for sale on the street. Asking price, property valuation, price guides, local trends, forecasts and house history could instantly be made available, together with available loans to supply buyers with all the information they need to make a prompt decision in a real estate market with a high ratio of potential buyer to property. AR branches or AR agents could also turn it to a more fascinating experience for those not able to visit a branch nearby.
Robotic Process Automation has been touted as one more disruptor in financial services. The name may imply robots, but mainly they’re intelligent software systems able to execute and automate repetitive tasks of low value and high volume in the back-office, or in the front-office such as typical customer inquiries. Now imagine the impact of conversational banking with devices that are able to understand natural speech, or chatbot banking with devices that are able to understand chat interactions written in a language as natural as the one you use when you type your Google searches. The next generation bank will be operational 24×7 using robots, always available when customers need it, help customer service representatives cope with thousands of customer queries improving workload management and, as a consequence, customer satisfaction levels, and feel so truly human.
Blockchain technologies will be heavily adopted by the next-generation bank. Blockchain represents a common store of data between institutions improving the know-your-customer systems and combating identity fraud. It is also a marketplace where any form of value can be exchanged like money, property, and shares in a transparent, conflict-free way using smart contracts, while avoiding the services of middlemen. Blockchain will expedite cross-border payments and all trading activities and settlements. But the most fascinating thing about Blockchain is that it can become a medium where new forms of transactions can be invented. For example all text messages currently convey characters and thus information. Using Blockchain and artificial intelligence we could enable text messages to carry value and transfer money using sms, or Facebook and Skype messages. And there are quite a few experiments on revolutionary transactions that will change the financial world as we know it.
It is important that financial institutions reimagine themselves and prepare for tomorrow. Modernization of core banking systems and channel applications will simplify business operations and provide the agility needed to power digital transformation. The question is not whether to transform the organisation, but when and how. All technologies referenced above can allow banks to rethink their business model, transform the channels of engagement, distribute fresh digital content and augmented financial products on a renewed technology layer and upon customer’s access integrate banking with people’s everyday lives to provide relevant and personalized customer experiences.