Glimpse Into the Future: What Banking Looks Like 10 Years From Now
When wearables become implants used for real-time payments, will banks and credit unions still be consumers’ primary financial institutions? The answer depends on how well an institution responds now to three challenges disrupting traditional banking providers.
“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”
That famous line from Bill Gates certainly applies to the banking industry. While banking may still look much as it does today in the next year or two, the springboards for dramatic change already are in place.
Two of these: the mobilization of almost everything, and the explosion of artificial intelligence. Those forces — operating in tandem with shifting consumer expectations — will have an unprecedented impact in the decade ahead, accelerating the transformation of the banking landscape.
It’s not too late for traditional banks and credit unions to thrive in this dynamic environment. But they must do three things:
- Tune into the changing preferences and expectations of consumers
- Fully embrace the potential for artificial intelligence in personalization and other financial applications
- Keep up with the what the mega brands are doing (in and out of banking) relating to consumer experience.
Satisfying Tomorrow’s Banking Consumers
Shifting consumer attitudes is one of the most profound changes that the financial industry must acknowledge — and deal with — in order to stay relevant. Much has been said and written about Millennials, and for good reason. This large consumer segment (born between 1979 and 1995) will be in- or approaching their 40s in the next ten years. Over that period, Millennials will have become the largest age-based demographic, and retail banking providers should carefully note their behavior and preferences as they approach middle-age and their spending power grows.
Millennials have had access to smartphones for most of their adult lives. Generation Z can’t remember life without these pocket-size digital tools. Because younger consumers’ are so comfortable with mobile technology, hundreds of mobile financial applications such as Venmo, Credit Karma, Acorns, and Mint have gained traction, disrupting the status quo in banking and challenging financial institutions to keep pace.
Studies have noted that while younger generations do seem to be brand loyal, they tend to even be more loyal to convenience. Millennials and younger consumers embrace a “do-it-for-me” culture (hence the “lazy” label they so often get slapped with), and have come to expect technologies that simplify their lives. Their preference for streamlined and personalized experiences colors how they evaluate banking options.
Even older generations have adopted — and come to expect — “do-it-for-me” digital solutions across many aspects of their lives, from one-click purchases to ordering rideshares through Uber or Lyft.
The Age of Artificial Intelligence
As self-driving cars, virtual assistants and other smart devices become more and more advanced, banks and credit unions will need to leverage artificial intelligence as the key for developing a “smart” banking experience. Consumers already are welcoming AI in many aspects of their lives, and will soon expect it in their banking interactions.
AI has the potential for a multitude of practical applications in the banking industry. Already it is being used to reduce payments fraud, improve service through personalization, and assist consumers with financial decisions (e.g., investments). Banks and credit unions must embrace the AI-driven “do-it-for-me” revolution and take their place along with other consumer industries that have firmly embraced AI-related technologies.
Many large banking institutions are well along this road already. They recognize that financial institutions have a huge advantage in this emerging new world of AI. Banks and credit unions have a wealth of valuable consumer data drawn from account records and transaction histories. This data is the essential “raw material” that fuels artificial intelligence engines; it’s how AI creates more personalized, streamlined experiences across a range of devices and banking services.
To tap this wealth of data, the biggest challenge for most banking providers — even the largest — is twofold: overcoming legacy systems, and defusing organizational roadblocks. Fintech startups don’t have those hurdles. For the most part, they don’t have much of a customer base to speak of, meaning that they also lack access to the large volumes of data that banks and credit unions have. Over time, however, these disparities will disappear.
AI advancements around virtual assistants in particular have the potential to change banking drastically. Computers are now thinking just as fast as humans, and other industries are already test driving such technologies. (Check out Google Assistant’s remarkably human-like conversations with a hairdresser and restaurant staff member.)
Keeping Up With The UX Giants
Certain companies continue to distinguish themselves through superior user experiences and their ability to outpace the competition. These companies have the ability to complete tasks in seconds, transform the user experience through smart recommendations and integrate with smart assistants.
Amazon, for instance, blows all the competition away through nonstop innovation coupled with a calculated expansion into a variety of new channels — e.g., its launch of Amazon Echo, the most popular smart-home speaker, powered by Alexa. It has also been widely reported, the tech giant has had discussions with large banks to offer banking services.
Banking executives can expect to see Amazon along with Apple, Facebook and Google deliver enhanced integrations with smart cars, refrigerators and other home appliances in the near future. These companies, along with brands like Venmo, PayPal and Square, are well along in their encroachment into traditional banking services.
Banks and credit unions still have the opportunity in to push back this onslaught and even to leapfrog these formidable competitors by leveraging the data and trust they have with their consumers along with the right technology to create value added experiences that will keep them relevant.
In Ten Years, Will Traditional Retail Banks Still be Relevant?
Over the next decade, banking providers, their consumers, and the environment in which they all exist will likely be transformed. Physical cash will be used less and less as digital currency becomes the norm and true real-time money movement is adopted.
Consumers might use a variety of wearable devices to conduct transactions, eliminating the need for physical debit or credit cards entirely. These wearables will evolve into medical implants, which would be very difficult to steal or corrupt. They will remove friction — and risk — from many transactions.
Within the next ten years consumers will rely on their virtual assistants to send their smart-cars to pick up and pay for their dry cleaning and groceries, and even shuttle their children to after-school activities.
Banks and credit unions should be looking for ways to integrate with these voice-based assistants to complete financial tasks and even offer personalized recommendations in real time. Specifically, financial institutions’ contact centers can evolve to take advantage of artificial intelligence and chatbot-based technology, as these capabilities become more lifelike and intelligent.
Banks and credit unions have a real, but limited opportunity to put into place plans to ensure they thrive in the next decade. They must not forget their advantage in this rapidly evolving environment, namely the trust consumers have in financial institutions because of strict industry regulations and the secure manner in which they treat the valuable data they hold. Leveraging this advantage and partnering with the right technology providers to overcome legacy challenges will allow those institutions to succeed.
But traditional financial institutions must act now while the window is open if they are to transform ahead of the curve. As Wayne Gretzky said “To be successful, you must skate to where the puck is going not where it is.”
Article is found online at: https://thefinancialbrand.com/76040/retail-banks-relevant-artificial-intelligence-millennials/