What Innovations Will the Internet of Things Bring to Retail Banking?
If you mention the phrase Internet of Things (IoT), in the context of banking, to most retail bankers, they will look blankly at you wondering what you are talking about.
To say that the financial services sector has been slow to adopt, or even start to explore the IoT, would not be unfair. However, if you dig deep, you will start to uncover some early-adopters and some who are planning for that 5G heaven which, we are promised, will be comprehensive enough and reliable enough to power all the IoT devices we will ever need.
While the big banks are solidly innovating in many areas to fight off competition from so-called ‘challenger’ banks and the fintech start-ups they have largely left the IoT field to other industries, such as retail and manufacturing, which are leading the way.
For retail banking, the critical areas for improvement are payments, improved operability (to support open banking) and better mobile services. Despite interest in technologies such as AI and robotic process automation, and what blogger Chris Skinner refers to as “more personal, more contextual and ultimately unique banking experiences”, most banks are behind the adoption curve of many other industries. This is even though IDC estimates IoT will generate $745 billion of commerce this year, increasing to over $1 trillion in 2022 and a potential of $11 trillion, according to McKinsey.
If they would but look, the IoT offers retail banks golden opportunities to garner even more information on customers, provide more personalised services and bake-in real efficiencies. This is a quick look at what the IoT has to offer.
1. Wearable IoT Technology
Wearable devices have arguably been the most straightforward step so far for banks, thanks to a large number of devices and the relatively low cost of getting started. Many banks now provide applications for the more popular wearables like Apple Watch and FitPay, which is working with the Bank of America. Barclays has launched its device bPay which is a wearable contactless payment solution. More wearable tech is due from Caixa Bank, Hellenic Bank and Australia’s WestPac which boasts PayWear.
2. Ice Cold Payments
Would you like to order, pay for and pour that after-work cold beer in less than 60 seconds? Then Pay @ Pump self-serve beer pump is just for you. Barclays trialled it in a London pub last year, and it was a hit with thirsty punters. It allowed users and avoid long waits at a jam-packed venue.
The next step would be for the auto bar to know who to serve next – solving one of the most irritating problems of modern life – why the person who just arrived got served before you!
3. Branching out to Connected Cars
Car manufacturers are exploring all the ways they can offer services in their connected vehicles. This will not only make them money it will tie in their customers in the same way that the Googles, Apples, Facebooks and Alibabas (GAFAs) do. Smart vehicles represent an opportunity for banks, as well: Idea Bank operates a fleet of cars, each with an integrated security deposit box and an ATM, which visits the customer.
Idea Bank says that the average deposit into one of its car-based ATMs is three times higher than the average amount paid into one of its branches. In Canada, credit union Blueshore is looking to install wealth management apps, displayed on car windscreens similar to the Top Gun heads-up displays in fighter aircraft, so that passengers can review their portfolios while travelling. Hopefully, an unexpected dip in wealth will not result in a dip into a ditch!
4. Blockchain-Based Smart Contracts
Blockchain is a technology which still doesn’t excite the banking community at the moment, but it holds the potential to keep a secure record of authenticated transactions and is maturing quickly. Some banks are already trialling the technology:
The Commonwealth Bank of Australia, Wells Fargo and trading firm Brighann Cotton have recently carried out the first international trade transaction between two banks. They used blockchain, smart contracts and the IoT. The transaction involved tracking a shipment of cotton from Texas to Qingdao in China.
5. Smart Branches
The retail bank branch is an institution undergoing change, and some think that smarter branches are the way forward to offer value to customers. Clydesdale and Yorkshire Banking Group’s (CYBG) customer innovation lab recently opened a test bed in London where it tested facial detection technology to judge how users interacted with the space, and web access was offered through interactive touchscreens.
6. Shine a Light on Me!
Bluetooth is a technology which will really come into its own with 5G. Bluetooth beacons are hardware transmitters that broadcast their identifier to nearby portable electronic devices. The technology enables smartphones, tablets and other devices to perform actions when in close proximity to a beacon. They represent an opportunity for retail banks which still have branches to re-invent them. US Bank, WestPac in New Zealand and Citi are all using beacon technology. Citibank customers can use in some branches iPads to conduct tasks previously reserved for tellers. Additionally, Citibank recently introduced a voice-enabled biometrics solution that automatically verifies a user’s identity within several seconds of a phone call.
7. Home Banking
Capital One in the US has made it possible for customers to pay their bills via Amazon’s Alexa. UK challenger bank Starling has integrated its API via Google Home, allowing users to carry out balance queries and payments through voice commands.
8. The Chatbot Experience
A few start-ups have strayed into the social media scene as Cleo which connects to your bank and utilises Facebook’s chatbot platform. The Royal Bank of Scotland’s Assist chatbot for banking FAQs uses Kasisto’s Kai AI platform to allow customers to conduct transactions. Swedbank has launched Nuance’s ‘NINA’ mobile application to answer customer inquiries.
IoT depends for its success on the roll out of 5G for many of the ‘big ticket projects such as driverless cars and Metro WiFi. However if the retail banks start to explore what Bluetooth, mobile and wearable technologies they can exploit they could produce many ‘quick wins’ from customers who want that ‘Amazon experience’ from their bank.