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Banking is becoming more convenient thanks to the Internet, and the future of the banking industry is growing increasingly digital.
Whether discussing the future of retail banking or the future of mobile banking, technology is playing a larger role in our everyday transactions. The Internet of Things (IoT) is part of this rapid evolution toward the bank of the future, and both consumers and financial institutions need to adapt to these retail and mobile banking trends.
Below, we’ve detailed the past, present, and future of the banking industry as it relates to the IoT, and how these emerging technologies will transform the way we conduct our financial business.
IoT in Retail Banking
Retail banks have actually been using an early prototype of an IoT device for decades: the automated teller machine (ATM). Since their widespread adoption, ATMs have been one of the top IoT devices that make banks far more efficient by removing the need for long wait times to see a teller at a brick-and-mortar bank.
These “smart ATMs” should help drive down costs for banks by reducing the number of employees needed inside traditional branches. Furthermore, a recent Chase survey showed that younger generations are more likely to use ATMs than older people.
As we move forward, banks are turning toward new IoT technologies to enhance the user experience and reduce costs. Some banks have started using beacons, for example, to send customized offers right to customers’ smartphones as soon as they enter the branch. And some ATMs now have live stream video support that allows customers to speak to tellers if they need additional assistance.
Financial executives are pouring significant money into these technological changes to help stave off competition from tech companies that are sticking their hands into the financial services industry.
Business Insider Intelligence reports that by 2021, global banks’ IT budgets will rise to $297 billion, up 14% from $261 billion in 2018.
Below are some of the ways that the Internet of Things is disrupting the banking industry.
Customer-centricity
Amid a massive digital disruption, banks are capitalizing on how the IoT can help design products that adhere specifically to customer desires. Some of the world’s largest banks are re-organizing their front-office due to a spike in prioritization of customer-centricity.
Today, banks’ IT spend is primarily focused on the digital customer experience (79%). Banks are listening to the mobile demands of tech-savvy Gen Zers, while maintaining traditional services for older customers – such as phone banking.
Simplifying operating models
Operating model improvements have soared with the introduction of IoT in retail banking. For example, in Q3 2019 Chase announced that it improved on digital account opening, cutting down the time it takes to just 3-5 minutes on average.
Being able to operate more efficiently is a crucial part of optimizing the customer experience, and the shift in consumer desire toward digital banking has allowed banks to slash operating costs.
Chatbots
The IoT has led incumbents to develop a 24/7 customer service experience through the use of virtual assistants, or chatbots. Business Insider Intelligence reports that by 2022, conversational assistants could allow for operational cost cuts of over $8 billion across global banks.
Smart chatbots use natural language processing and machine learning to improve with each customer interaction and offer a more personalized experience over time. For example, Capital One’s Eno was the first natural language SMS text-based assistant offered by a US bank. Eno can alert customers about suspected fraud, potential double charges by a merchant, or an overgenerous tip.
Wearable and smart speaker technology
The IoT has enabled wearable and smart speaker devices to break into seemingly every market, and banking is no exception. Consumers are gravitating toward smart devices, leaving a wide scope for growth in the banking sector.
Banking via smart speakers provide customers with the convenience of issuing voice instructions rather than having to physically look at a mobile device. In 2019 NatWest, for example, piloted a voice banking feature with Google Assistant. The feature was compatible with the Google Home smart speaker and allowed customers to inquire about account balances, latest transactions, and pending transactions.
Blockchain-Based Smart Contracts
Security and privacy are a top concern among consumers, regardless of age. And the IoT has enabled banks to adopt blockchain technology for better customer authentication. According to Business Insider Intelligence, the benefit of using blockchain for identity authentication is that, because the identity credential has already been logged, it cannot be changed or altered.
Blockchain has the ability to ease the cost of cross-border payments and increase efficiency of trade finance processes. Financial institutions are investing about $1.7 billion annually in blockchain technology.
Given this information, it’s clear that banks must continue to throw their considerable resources into digital offerings, and the Internet of Things will help them do just that.
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Banking will continue to evolve as the Internet and the IoT continue to grow in prominence. Those customers and financial institutions that do not stay ahead of these retail and mobile banking trends will be left behind.
Business Insider Intelligence’s Digital Banking Ecosystem report examines what incumbents are doing to transform themselves into digital-first organizations to compete in a customer-centric, data-driven global economy.
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