The retail banking industry is facing the greatest period of disruption in its history. Digitally savvy customers conditioned by modern, on-demand services—such as Uber and Amazon Prime—expect all businesses to proactively engage with them and predict their needs. However, the heavily regulated banking industry has been slower to adapt to these expectations. In fact, according to a Salesforce research report, 26 percent of millennials, 28 percent of Gen Xers and 23 percent of baby boomers strongly or somewhat disagree that banking is innovating at the same pace as healthcare or retail. Into this void have stepped more agile Fintech companies that are providing consumers with new ways to borrow, lend, and manage their money.
Traditional banks are left with only two options: embrace this disruption head on and reinvent the way they engage with customers, or risk being displaced by Fintech upstarts. For those who choose the former path, three key technology trends will dictate the future of the industry—analytics, artificial intelligence (AI) and internet of things (IoT).
"AI technology takes data analytics a step further and has already become a part of consumers’ daily lives"
Analytics Helps Banks Make Sense of a Wealth of Data
Today's banking customers have their finances scattered across multiple financial services firms, causing a proliferation of data. However, despite the fact this information can be easily aggregated, bankers still struggle to stitch together this data and other critical customer information. This is partly due to outdated and siloed systems that make it a unnecessarily difficult process—until now.
With the right technology, banks can leverage data to become smarter about their customers and create more personalized experiences. The right tools, such as customer relationship management (CRM) or data aggregation applications can enable retail bank associates to pull together data from multiple accounts and then overlay it with macroeconomic data in an analytics app to provide more customized guidance to each customer. For example, bank associates can leverage analytics to segment their customer base to better understand their financial needs and provide the right products at more competitive rates to, encourage consumers to move to their bank.
Financial Services Organizations Gain Interest in AI
AI technology takes data analytics a step further and has already become a part of consumers’ daily lives. For example, Google Voice Search leverages natural language processing to recognize voice commands. Facebook’s facial recognition technology instantly identifies a user’s friends when a photo is posted. And Amazon uses machine learning to understand customers’ preferences and make product recommendations accordingly.
But AI is just starting to gain momentum in financial services with the introduction of chat bots that can handle common service requests across banking and insurance, and robo-advisors that give investors automated advice around investment strategies in wealth management. This year, retail banks will finally begin to take advantage of the potential of AI. Bankers will gain the ability to automatically learn customers’ spending patterns, predict behaviors based on them, and then recommend the best and most relevant products that align to their unique needs. For example, an AI tool could automatically flag a major deposit in a checking account and then send an offer to the consumer from the bank’s private banking division for investment opportunities.
Banks Invest in IoT Technology
IoT has gained tremendous buzz in the tech industry over the past few years, but is only recently being looked at by banks and financial institutions. While most IoT use cases center around retail products—such as smart refrigerators automatically notifying consumers that they are running low on food and ordering replacements—there are also major opportunities for banks to tap into this trend.
With IoT, bank branches have the ability to embrace the growth of smartphone usage to maintain in-branch visits. For example, banks can leverage iBeacons or near-field communications technologies to identify when a customer is near a branch and automatically send those customized offers to their phones.
This is the magic of IoT—its ability to take a traditional channel, such as a branch office, and breathe new life into it.
Banks are in the midst of a multi-wave trend of digital innovation that has presented them with unprecedented challenges and opportunities. Embracing technology—analytics, AI and IoT—is not only the key to survival, but also a fundamental strategy helping banks move from reactive to proactive relationships with customers. And that’s a disruption even a traditional retail bank can get behind.