In less than a lifetime, computers evolved from room-sized monstrosities to pocket-sized intelligent assistants. Each phase of this transformation saw computers become smaller and faster, from bulky desktops to ultraportable laptops to mobile devices that outperform last year's top-of-the-line hardware. We've also become more connected through telecommunications, transitioning from analog dial-up to digital DSL signals, cable, fiber, and now wireless wide area networks.
We're still experiencing this transformation. Our lives are increasingly driven by technology, from tracking our health to managing our money. But is it us, as consumers, demanding greater speed, ease, and convenience in our daily lives, or is it the technology itself changing our expectations of what's possible? And for that matter, which came first: the technology, or the desire?
Technology and Banking
Technology revolutionized the financial industry by paving the way for tech companies such as Google, Apple, and PayPal to provide financial services. Digital wallets such as Android Pay, Apple Pay, and WalMart Pay are being used by over 24% of smartphone users. Digital payment services, such as PayPal, will account for 15% (or $800 billion) of total payment volume in the US by 2020. Despite these innovations, only about a quarter of US bank technology budgets are spent on digital transformation.
The challenge with adopting new technologies, is the risks that it can introduce. Banks and consumers alike are initially reluctant to adopt new technologies, due to the associated risks, but are forging ahead. Banks will need to continue to protect their platforms from cyber threats, to comply with regulations and to integrate with third-party services. And consumers will continue to want the convenience of accessing their accounts on the go, with the assurance that their assets and information won't be compromised or leaked. These risks need to be addressed; otherwise, neither banks nor consumers will be willing to push for adoption.
One area that is seeing successful adoption rates, is mobile banking. 89% of financial institutions offer mobile banking options, despite citing security concerns and a lack of trust in technology as barriers. For consumers, security and control have been the second most important factor in adopting mobile banking. However, these concerns are causing consumers to become more aware of their mobile banking habits and what they have to give up in exchange for security.
But it's not just mobile banking being affected. Technology also impacts:
- Online money management services: Internet-only banks and person-to-person (P2P) payment services are popular because of the convenience they offer. Customers can transfer money, view statements, and even deposit checks without ever setting foot inside a branch. Since mobile transfers are the most in-demand mobile banking feature, banks need to keep pace with organizations like PayPal.
- Customer service and personalization: One in three customers abandoned a business relationship in 2017 because of a lack of personalization. Customers are willing to provide information if it leads to higher levels of personalized service. Banks can leverage AI-powered chatbots, analytics, and other data analyses, to better understand and serve their customers. The desire and the technology are there, but banks need to adopt.
- Privacy, fraud detection, and fraud prevention: High-profile breaches like the 2017 Equifax breach have made consumers and banks more wary about data theft and fraud. Techniques such as biometric authentication offer a more secure alternative to traditional authentication measures, such as usernames and passwords.
- Customer expectations and demands: A poor customer experience can have far-reaching effects. The ease of online banking means a customer can very easily switch banks if they have a negative experience. Even small, local banks find themselves competing in a global marketplace once they go online.
- Customer purchasing behavior: With instant access to shopping and payment services, customers make purchasing decisions faster and more frequently. There are more options for payment and more opportunities to make purchases using digital wallets or physical cards. Technology makes it easier to purchase, but it also has to support this increased volume.
Modern banking demands a "technology first" approach. Consumer expectations are changing with the rate of technological development, and this includes their expectations about banking. For banks to become and remain competitive, they need to offer consumers services that are both convenient and secure. A key way to accomplish this is by using more secure user authentication methods that have minimal impact on the user’s experience. This can be achieved by implementing behavioral biometrics based technology.
Looking Towards the Future
Trends such as the Internet of things (IoT) are turning everyday devices such as TVs, thermostats, and even coffee makers into intelligent Internet-connected assistants. Refrigerators can reorder groceries when they detect empty shelves, and thermostats can adjust the temperature when they detect us leaving the house. Soon, everything from our cars to our clothes will have a microchip and a wireless antenna.
What does this revolution mean for the banking industry? We've already seen a shift from physical branches to online services. We may start to see banking services appearing in other aspects of our lives, from notifying us of our borrowing limit when we enter a car lot to warning us to avoid certain expensive stores. The technology is there, as is the consumer interest, the question is, which one will push the industry forward?
In reality, both will. Technology will never stop evolving and driving consumer engagement. Banks need to leverage new technology to mitigate threats and provide better service to their customers. It's a cycle that requires both parties to be engaged and willing to transform.