Every year in May, the town of Santa Clara in the heart of Silicon Valley hosts the FinovateSpring conference. Speakers at this year's event provided some interesting detail on financial solutions and banking sector offerings expected in the near future.
Bank branches do have a future
of bank customers
prefer to go into their branch to talk to staff
Speakers made a number of important observations regarding consumer preferences. Firstly: bank branches do seem to have a future. Jacob Jegher, Senior Vice President, Banking and Head of Strategy at Javelin Strategy & Research, told the conference about a survey carried out by his company, which indicated that only 24% of overall bank customer satisfaction depends on online services. Even today, offline communication channels still dominate, with 44% of the survey respondents saying they prefer to go into their bank branch if they have a question or a problem and discuss it directly with an advisor. Daniel Latimore, who heads up a team of analysts focusing on the banking sector at consulting firm Celent, quoted even higher figures: out of 2,500 US consumers surveyed by his firm, 55% said they preferred face-to-face dialogue, compared with only 6% who actually prefer online interaction. During the last two years, 80% of those polled had been into their branch to deposit or withdraw money without using an ATM – which would have involved interacting with an advisor – and 53% had been to a branch to obtain specific information and advice or to request a loan. The same Celent survey revealed that close to 90% of all bank customers prefer to go to a branch to speak to a member of staff there – with or without an appointment – rather than having an online exchange. These figures seem to indicate that branch service is far from being an outdated approach, and that only a minority of people seem to have such an appetite for online banking that they would be prepared to give up all human interaction with banking advisors.
Against all expectations, the statistics produced by Javelin Strategy &Research show that members of Generation Y have greater trust in banks than the rest of the population: 69% of all Millennials trust their bank when it comes to, for example, product recommendations to meet their specific financial needs. The Celent survey results run along the same lines: while young people are more adept at using mobile banking services than their elders, there are still plenty of them who like to go into a branch. Moreover, those numbers tend to increase. Explained James Van Dyke, founder and CEO of Futurion: "Looking at the datasets, we see that younger people are going to their branches more. There are older Millennials moving to Gen X with their first credit card, first mortgage... As you get older, you like to go to a branch more."
The personal touch and Customer Experience
Daniel Latimore, who is Senior VP of the Banking Group at Celent, pointed out: "The branches that remain are being redesigned to meet new customer needs." He stressed that customers "may not need a branch very often, but when they do, they really do. Customers visit the branch for specific reasons. 'Mobile-first' makes a lot of sense if supported by knowledgeable branch staff. At the end of the day, it's all about the customers and personalization does help: being greeted by name is the factor most widely appreciated by consumers." A powerful idea seems to be emerging – the notion of innovation going beyond digitization, given that the key point is to improve the Customer Experience. Jacob Jegher does not think that this is necessarily all about mobile banking, but more about precision and recommending products that meet customers' specific financial needs. Some 64% of millennials polled agree that they would be much more likely to remain customers of a bank which provides them with advice on their personal finances, and 57% of that age group say they would like their bank to advise them on how to manage their finances or improve their financial state of health. In general terms, Jegher argues that "sensationalism is distracting banks. Solution providers, consultancies, 'influencers' and media are all creating noise or hype with statements such as '71% of bankers believe that AI is capable of becoming the primary face of their organisation or brand', or 'Artificial Intelligence could wipeout half of all banking jobs in a decade'."
AI IN BANKING
AI will need to improve both the Customer Experience and the Employee Experience in the banking and financial industry
Greg Boudreaux, VP of Business Analysis for Digital Channels at First Republic Bank, fully agrees that any technologies deployed ought to be serving the Customer Experience. Artificial Intelligence will not replace the human factor but will be able to add an extra dimension. "Technology is great to bring the service to the client so he doesn't need to come to the branch. Digital has to be a personalized or personalization tool. We want to make our staff as efficient as possible, and part of that is giving them the tools to do the job", Boudreaux told the FinovateSpring audience. And while over three quarters of all consumers in the 22-49 age bracket would potentially be interested in receiving advice from a virtual financial wellness coach designed by the Aite Group, Tiffani Montez, a Senior Retail Banking Analyst at Aite Group, underlines that banks should also be "using technology such as AI to also improve the employee experience". According to Bradley Leimer, Managing Director and Head of Fintech Strategy at Explorer Advisory & Capital, there are today slightly more than two million people working in the banking and financial sectors in the United States.
Expectations of a new-style offering
new banking products
"Banks have to reinvent checking accounts", Ron Shevlin, Director of Research at Cornerstone Advisors, told the audience, explaining: "Checking accounts will become temporary places for people's money to stay before they move it somewhere else." Shevlin quoted some telling figures. Today, users of the mobile payment app Venmo have a combined total of over $2 billion on their accounts. Some 44% of millennials say that they are likely to use a debit card designed by the peer-to-peer payments platform PayPal – and might even usePayPal as their main debit card – while 43% of the GenY-ers would be prepared to open an Amazon current account which, for a monthly charge of between $5 and $10, would include smartphone insurance, travel insurance, and identity theft insurance. He points out however that "three quarters of that 43% would do so but also keep their existing bank account open. So banks can fight back, they're not out of the game." On the payments side, Greg Smith, Managing Director of Financial Technology Partners, underlined that "it's all about making payments seamless", in the background, and without the consumer's active participation. He cited Uber, Amazon and PayPal, which are already offering this kind of experience, where users do not need, for instance, to re-enter their password in order to validate their payment.
Alex Jimenez, VP and Senior Strategist at Zions Bancorporation, commented that "interestingly, we're seeing a lot of discussion about innovation, but the everyday user isn't seeing a lot. A few years ago, we were talking about mobile banking and mobile payments and yet a majority of people still don't use mobile wallets." Jimenez underlined: "On the small business side, checks are still kings, and we can hardly move them to other products. Checks are flattening – a couple of years ago, we even saw them going up – not even diminishing, and yet we expected them to go away." JP Nicols, Managing Director at financial technology partnerships FinTech Forge, told the conference: "We need to get serious about innovation. We need a common definition of what innovation really means. Innovation is about exploring the unknown. We have to test things and learn." So, what will be the basis of financial services going forward? FinTech solutions abound, and Alejandro Carriles, Executive VP and Director of Mobile and Online Banking at BBVA Compass, reminded the FinovateSpring audience of the golden rule of innovation development: "three days to set up the team, six weeks to come up with a prototype and nine months to deliver the product". Jerry Silva, Global Retail Banking Research Director at IDC Financial Insights, put forward four basic questions that should asked with a view to ensuring successful collaboration between banks and startups: "1) How well do you know the industry? 2) How well do you know the institution? 3) Can you solve my problem? 4) Where have you done this before?"
Increasingly secure transactions
When it comes to security, the Blockchain and biometrics are very much at the forefront of the innovation drive. Bettina Warburg, Blockchain Researcher, Entrepreneur and Educator at Animal Ventures, who produces the podcast Tech on Politics, summarized the basics of the modern economy: "If we think about our economy, it started with one-to-one trades. The distance and the complexity of our trades grew significantly, and we ended up not knowing who we were doing business with. So we invented institutions that are basically formalized rules to lower our uncertainty towards one another. We then put these institutions online: eBay, Amazon, Alibaba. Lowering uncertainty expands our ability to trade, and the Blockchain is this layer of technology that allows our uncertainty to be lower without using a middle man." She went on to underline: "Decentralization affects how we make, how we design and how we deliver our products, and our supply chains today are getting smarter. People often ask how we're going to move from surviving to thriving in a decentralized economy. Blockchain is the continuation of the story of how our trades have evolved, and how we're incorporating machines even more in our system. We can also think about blockchain as a risk management tool, and for sure banks are working on adopting blockchain technology."
At the moment, payment technologies are centered mainly on users' physical characteristics – especially fingerprints, plus also face recognition. However, voice is also sure to play a role in financial technologies going forward. Innovator and technologist Theodora Lau told the audience that "In the next three years, 30% of consumers are going to be using voice banking instead of going into a branch or using a mobile app." When people talk about 'voice banking', they usually mean using a synthesized voice created from a user’s recorded sentences. Theodora Lau pointed out that voice technologies could also help to foster financial inclusion. While it is true that over 700,000 languages are spoken worldwide, and the technology still has some way to go, "voice could provide services to people that couldn't navigate a mobile app, can't use a certain device or have limited mobility", she told FinovateSpring conference attendees, concluding with a final question: "As regards the adoption of voice banking, people are quite prepared to play with voice technology – playing music, using a kitchen timer and so on. So is the lack of progress because consumers don't have the imagination or because banks don't have the imagination?”