As we take a look back at 2015, we can see that the banking industry as a whole, finally began its journey towards digital transformation. In the UK a force has awoken, and the battle with Silicon Valley for Fintech leadership is a topic of many discussions. ‘Downloadable’ banks like Atom, Number26, Moven and Fidor continue to challenge the incumbent model and there are small signs that the seismic shift to 21st century banking has begun. If 2015 represented the year of designing and planning your digital strategy, it would seem that 2016 will be the year of implementing it.
Blockchain
In as far as self-led disruption goes, for many bankers the word ‘Blockchain’ will no longer be a concept buzzword discussed in the board room, and will now become a key project deliverable with very tangible results. Expect to see a battle for cross border FX transfer supremacy, and talk of how the trade finance industry will move towards the digitization of the bill of lading. The ‘smart contract’ will be the new buzzwords for bank executives, and companies like Ripple and Ethereum will frequently pop up in discussions. The Blockchain will continue to dominate discussions throughout 2016, and expect to see a new wave of fintech’s startups that gain funding through bank accelerators and incubation vehicles, and command impressive valuations. For those bankers looking to understand the Blockchain better, and in particular what it will mean to their organization, they should purchase the new book by Chris Skinner called ‘ValueWeb’ which should be out around March 2016. Click Here.
Data and Analytics
2016 will be the year when data and analytics finally get a decent, well designed front-end. For many banks the challenge has always been to gather, consolidate, structure and analyze their data. With significant investment already made in doing this, the fruits of this labor should now emanate in new contextual and valuable advice being given to customers in a bid to make life easier. Beacons hidden everywhere will begin to send geo-location based alerts and relevant ‘advice’ to mobile apps, and expect to see things like retails stores and restaurants offering you great deals as you walk past them. In airports, theme parks and hospitals, real-time advice from your bank or insurer will become more common, and when combined with mobile payments will change consumer behavior. The degree to which organizations use their rich data to empower and educate their customers, will determine the leaders from the fast followers, and the rewards should make themselves visible through lower attrition, increased loyalty, and increased brand advocacy.
RoboAdvisors, Machine Learning & Algorithms
In the wealth management, private banking and high net worth space, investment banks will look to embrace ‘digital’ and offer new solutions for managing and monitoring their clients’ portfolios. For many of these organizations, the journey towards building a truly digital bank will begin by building one from scratch. Already in 2015, many large banks have announced their intentions to do this, and this looks to be a growing trend for those goliath banks struggling to transform themselves, and overcome ingrained and old fashioned policies, change resistance and incapable legacy systems. My simple advice to banks is that building a digital bank as a green field project will probably cost a little more in the short term, but agility and survival are two great incentives that may justify the decision. Elsewhere in the wealth management technology domain, customers can also expect to be given professional tools like roboadvisors to empower self-service of their portfolio management, and help develop personal investment strategies that allow you to ‘follow the leader’ in portfolio performance. Banks will be able to determine your persona and allow you to financially compare yourself with others who have similar income and lifestyles. In 2016 the evolution of machine learning and automated trading algorithms will begin to show compelling results that will make these technologies hard to ignore, and those banks who have not invested in this area will do well to reconsider such decisions.
Bio-Phygital & Natural Language Banking
Banking in 2013 was all about omni-channel, then in 2014 we moved to digital channels, and finally in 2015 it was about phygital convergence. In 2016 it would seem that we will start to see the rise of Bio-Phygital. Ok I made that term up….but the mass adoption of biometrics across digital transaction channels is something that has been threatening to become a reality for some time. It is more than likely that mobile banking and mobile payments will soon use biometric authentication to reduce fraud, and in 2016 we will see several banks that allow you to talk to them. I don’t mean your branch manager, or your personal relationship manager…nor do I mean the Call Centre….what I am referring to is the coming of age of natural language engines and artificial intelligence engines. Whether you have a preference for talking to Alexa, Siri, or Cortana….or perhaps the more mature Watson, banks will increasingly look to engage with customers at home or in a branch with a device that can understand your speech and have a natural dialogue in assisting you. What Amazon’s Echo (aka Alexa) has done for natural language adoption, is allow affordable Artificial Intelligence to be sitting alongside you in your living room. Asking your Alexa enabled bank app to give your account balance, bill details or initiate a money transfer will soon seem very natural, and could start to signal the dominant method for conducting transactional everyday banking. Call Centre agents should have a real cause for concern as this technology is improving day by day.
Another much anticipated read on these subjects for 2016, will be the new book ‘Augmented’ by bestseller Brett King available in June 2016. Click Here.
Accelerators, Fintech partnerships and Hackathons
Such is the urgency to connect with millennials and understand digital banking over the next 5 years that banks will continue to invest in Fintech and the disruptors looking to shake things up. What is clear nowadays is that the motives driving the Fintech revolution are those of simplification, honesty and transparency. The days of commanding large margins due to process complexity and infrastructure investment are long gone. Banking in 2016 will be great for consumers…but not so great for banking bonuses. Whilst there is a persistent withering away of the universal banking business model (often coined the unbundling of banking), by challenger Fintech’s, there is also a willingness by both parties to partner. Increasingly throughout 2016 you will hear about banks creating accelerator startup funds, co-investing with young, ambitious entrepreneurs, and the ‘hackathon’ will increasingly become THE event which inspires the next big thing in innovative ideation.
Summary
2016 looks to be a year of real progress for digital banking. From a consumer perspective, all the great technologies that have been talked about over the past 2 years, should start becoming a reality. Paying for things, and transferring value across the globe will become near instantaneous processes with minimal friction, and it is likely that customers will start getting genuinely useful advice from their mobile apps. In 2016 banks looking to engage with millennials will still struggle to find the Eureka answer, but it probably entails making your organization more transparent, and simplifying financial services to the point where it is understandable. This may involve a product review and in some cases a product sunset, but will almost certainly mean that bank’s need to ‘rebundle’ what the Fintech industry is having as a cheap lunch.