January 20 2016: As services become increasingly digitised it opens up an array of opportunities for banks to dramatically improve services. But what will this means in practical terms? SunTec COO, Max Speur, gives Cards International his analysis of what to expect in the next twelve months.
The retail banking sector is undergoing significant changes as technology advances to a point where all services become digitised. This year we have seen in the UK the arrival of digital only banks such as Tandem and Atom. This is what the banking sector should look out for in 2016:
Utilising the Internet of Things (IoT) to its full effect
Analyst firm IDC forecasts the worldwide market for Internet of Things (IoT) solutions will grow from $1.9 trillion in 2013 to $7.1 trillion in 2020. As IoT technology becomes cheaper and its capabilities expand, the banking sector should look at how they can use IoT to improve banking services.
IoT can improve the processes involved in collateral and loan arrangement verification. For example, corporate borrowers from the manufacturing industry often have to monitor inventory levels to ensure the loan agreement is being followed and the borrower is not participating in fraudulent practices. Using IoT, the bank can install sensors on premise to examine the inventory and complete checks more efficiently.
New security enhancements to cope with new concerns
Security is becoming the number one concern across the banking sector for both customers and vendors. As hackers develop more sophisticated methods to steal personal information, banks need to rise to the challenge.
One interesting avenue that banks are considering is the use of biometrics. More than 770 million biometric authentication applications will be downloaded each year by 2019, fuelled by the popularity of the thumb print verification on the iPhone 6. It is not surprising that the biometric market value is predicted to hit $13.8 billion by the end of 2015. Commercial retina and iris scanners which costs between $2,000 and $10,000, could be how banks protect customer data, because they have higher accuracy rates of any commercial biometric security product.
Whilst efficiency and privacy concerns have to be addressed, this new wave of biometric security could offer the best protection against hackers and scammers.
Whilst biometric security is still in its infancy, adopting two factor authentication (2FA) is widespread among banks. Security keys are now widespread most notably with HSBC, Nationwide and First Direct improving security protocol for both banks and their customers. Whilst these new security measures are making customers more secure it can slow down the login process, or cause frustration if customers cannot login due to forgotten passwords or security keys. Banks need to strike the balance between security and convenience to provide a secure seamless banking experience.
Hybrid banking entering the forefront of finance
Mobile applications and internet banking have become the norm rather than the exception, but the omnichannel banking experience is growing. With the introduction of Google Wallet and Apple Pay the availability to pay for services is spreading to every aspect of a consumer’s online presence.
Barclays is leading the charge in the sector by introducing bPay by allowing contactless payments through stickers, wristbands or fob for customers. With the expansion of IoT new payment products will enter the market, even tattoos will be able to hold key personal information used to pay for services.
Yet the growth of the omnichannel will not cause the death of a physical presence for banks. Physical outlets will become ‘experience centres’ where customers can enjoy an immersive hybrid banking experience. They can access their data and receive personal support using digital tools in a high-street branch.
The hybrid banking experience is seeping into payments as well. Listening to their customers’ demands, banks have reduced the importance of the physical bank branch, becoming digital services providers.
Competing with technology companies like Apple Pay and Google Wallet, banks are using the wealth of customer data and expertise to improve customer retention. This is a good time for banks to go outside the industry and partner with retailers and healthcare providers because customers could be further incentivised to use the banks’ mobile payment service by receiving individualised offers and deals based on previous purchases.
Read more on the interview here.