Ben Robinson, chief strategy & marketing officer at banking software firm Temenos, explains how the future of finance will be shaped by artificial technology.
Google’s DeepMind triumph this year over one of the world’s highest ranked champions at Go is a sign: computers with artificial intelligence (AI) are learning how to outperform us.
If computers can learn to beat us at a game, why not at things that we can’t afford to get wrong – medical diagnostics, risk analysis, legal and investment advice? And what effect over time – say 20 years – will this have on the way a host of services, such as banking, are delivered?
Eliminating human error
“Service will be all about data and algorithms,” David Brear, co-founder and CEO at 11:FS recently suggested.
“This will allow the bank to really know and understand the customer. Humans are inconsistent and banks are already looking at how they can use AI to offer a better service to customers.”
Brett King, author and co-founder of mobile banking startup Moven, agreed but added that banks will have to make sure they are integrated fully into people’s lives: “A good bank offering a good service will mean nothing. It will have to be plugged into the ecosystem that runs everything.”
In King’s world, banking services will be requested by bots on our behalf. While today a customer might use an app to check their balance or make a payment, in 20 years a customer won’t use either. Siri, or something similar, will find the answer and will have to be integrated into banks’ systems.
As more services are delivered and consumed remotely, more branches will close. This view is backed up by the regular redundancy announcements from retail banks about front office staff and the rise of startups like EQ Bank and Mbank, with hundreds of thousands of customers but only handfuls of staff.
At current pace, the transition will be relatively swift. Banks will initially become more like an Apple Store where customers go to trial products and get advice about how best to use them. “Apple’s Genius bars are high use because people want to learn how to make the most of their devices. The same will be for banking,” Brear said.
Eventually, even these could disappear to be replaced by something akin to a photo booth, with banks providing digital access points in busy places to be used when customers are out and about and have dead time.
King goes further, believing that within 20 years banking will be consumed exactly as we consume electricity, broadband or water – we sign up to a utility provider and never enter a shop or office. Retailers already use SMS messages to draw shoppers in with personalised offers; banks will take this to a whole new level. Interactions will be direct via wearable technology incorporating geo beacons and biometrics, with credit offers made according to past behaviour as customers walk into stores.
No plastic, fantastic
The implications of this are far reaching. Banks will take over short-term lending from credit and store cards and no one will need the bits of plastic at all – accumulating more data, learning from behaviour and offering a better service. A digital, virtual, virtuous circle.
In effect, the physicality involved in today’s banking will disappear – the paper, the plastic, the cheques, branches, all of which is good news in terms of efficiency and the fight against fraud.
The rise of providers focused on one service will also accelerate another trend: those banks not willing to collaborate will suffer for it. “Traditional banks with traditional product lines will try to reject it,
“A cultural transformation is needed to get there. Santander has already done quite a lot of work… but the main activists are the FinTechs,” Brear warned.
Now we’re motoring
Technology is moving quickly towards fulfilling many science fiction predictions – AI being just one of them. The Internet of Things is another, where machines talk to machines, bypassing human interaction altogether. This will have a huge impact on banks as the number of payment transactions seen today will be massively multiplied.
Cars, for example, will have internal wallets that can pay for fuel, power, order parts, book services and check-ups. Phones will be able to “listen” to conversations, hear you have just accepted an invitation to a meeting in Madrid and look up and book the flights, arrange airport parking and for a car service to pick you up. No one will be involved in these transactions – they will be seamless and unseen.
The role of government and the regulators in all this change is critical. If they do not help to create the legal environment within which the banks can modernise and thrive, the banks will be at a disadvantage. We can already see financial services being held back in jurisdictions that have not embraced the cloud, for example.
Cash and cheques will disappear – they are inefficient and costly to process. And since cash is untraceable, governments will support the digitisation of payments. Stores can cut costs and fraud by relying solely on digital payments. Already in Sweden, Finland and the Netherlands, there are stores that don’t accept cash.
These changes will make our lives easier. But for today’s ‘unbanked’ population, the change is going to be even more dramatic. Some 2-3bn additional people will have access to banking services thanks to digitisation, mostly in Africa and Asia’s emerging economies.
Dennis Volemi, head of technology at the Commercial Bank of Africa, has signed up millions of new customers since his bank teamed up with Safari.com just four years ago to offer banking via mobile. “Africa is leapfrogging advanced markets when it comes to mobile banking. We don’t see it as an option, it’s a requirement for the market. It’s the only channel accessible to everyone,” he says.
Banking has hardly changed for 200 years, yet the next 20 promise a digital revolution. Given the scale of change, it is hardly surprising that the experts have differing views, but what is amazing is how much they agree on – that banking will become experience driven, providing services to fit into our lives in a seamless and frictionless way. When we reach that point, banking should be better, safer, quicker and more efficient than it is today.