In our 2018 prediction for Banking-on-Things (Banking on the Internet of Things), we maintained that banks and financial institutions would start preparing for a future teeming with intelligent machines that make decisions and perform transactions on behalf of their human owners. The skyrocketing sales of smart speakers and voice assistants are a precursor and a leading indicator of this intelligent future. 1In the first quarter of 2018 alone, Google sold 3.2 million Google Home devices recording a whopping 483% growth y-o-y. In banking and financial services, the enhanced uptake of IoT and GPS technologies over the past 12 months confirms a move towards the mainstreaming of IoT. Japan’s Shinhan Bank has successfully made a case for responsible banking by using digital technologies to mitigate the risk of loan default for automobiles, an application we talked about in our commentary for 2018. Other applications that merit a mention are ‘pocket checkout’ wallets launched by some progressive banks. These wallets offer experiences similar to a shopper’s experience at Amazon’s no-touch-go store ‘Amazon Go’ by performing seamless payments that require zero action on the customer’s part.
Far from an overnight transition, the journey towards the progressive reduction of human intervention for seamless integration and invisible banking will continue well into 2019 and beyond.
When it comes to retail banking, we see two applications gaining wide adoption in 2019. The first of these is “Banking at Home”. Here, some progressive and digital banks have attained primacy, and we expect the uptake to increase significantly in 2019. Capital One was one of the first banks to offer Banking-On-Alexa. Since then, several banks including NAB, Westpac, Amex, USAA, and JP Morgan have integrated the functionality for their retail and institutional customers. Customers can check balance, track spending, pay bills and access stock information using the virtual assistant at home. Another example is Starling Bank in the UK that has an integrated its APIs with Google Home to allow its customers to carry out balance inquiries and bill payment on the smart speaker. In 2019, more and more large incumbent banks will integrate a digital channels for basic and advanced functionalities. Secondly, applications that complete transactions in the background on behalf of a customer by making use of credentials available with the bank will flourish. Barclaycard’s Dine & Dash settles a customer’s bill using the credentials stored on the customer’s smartphone and subsequently sends the receipt to the phone. The app thus serves to enhance the dining experience by eliminating any waiting time and allowing the customer to simply walk out of a restaurant after enjoying a sumptuous meal. In corporate banking, data from interactions with connected things will enrich services. For instance, Trade Finance applications powered by real-time insight-driven action will evolve in 2019, making transaction settlements faster and cheaper.
Banking and financial services organizations have enjoyed reasonably moderate success with their proofs-of-concept and pilot projects for a couple of years now, but the adoption of IoT in the industry has not been as high as in other industries. One of the principal reasons for this is that the success of IoT in banking depends on the success of IoT ecosystem that spans multiple industries, and is influenced by these industries. For instance, to offer banking services in a self-driving car, banks on their part can reimagine their customer journeys and also align their digital strategies, but the implementation and the success of the implementation depends on the maturity and capabilities of the autonomous car. However, with the rise of the platform business model in banking, this is beginning to change. Open banking APIs will accelerate the pace of development of IoT strategies at banks with free movement of data across devices and things within and across ecosystems.
In 2019, there will be accelerated adoption of IoT in use cases such as monitoring and diagnostics of sensory data in trade finance or monitoring of leased assets for proactive maintenance in the case of lease financing.
In our view, it will be crucial for banks to develop their IoT strategy as a subset of their digital and open banking strategy instead of building one in isolation. Extending the existing digital engagement layer to interface with new and emerging intelligent devices would be the next logical step towards driving value with IoT. Additionally, integrating security into the application architecture and including controls as part of IoT security governance will be paramount.
In 2019, banks will not only accelerate the adoption of IoT but also find the right answers to justify the business case for it.
“We are in a brave new world where not only do our children talk back to us, but so do our appliances.” – Mohammed Dastagir, Vice President and CTO, Sears Home Services.