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Financial Services - Disruption on the Horizon.

By Shayne Edmondson, Head of Technology, Retail and Business Banking, New Zealand, ANZ

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Shayne Edmondson, Head of Technology, Retail and Business Banking, New Zealand, ANZ

There is no shortage of people writing and talking about digital disruption and the one thread of consistency is the removal of friction from customer interactions. This is a remarkably simple statement and no different from traditional sales and service goals. So what has changed?

A combination of factors including:

  • Lower hardware costs have helped lower the barrier to entry.
  • Cloud services have further lowed cost and complexity for new entrants.
  • Powerful 3rd generation languages like Java and C# have reduced the effort required to develop great software
  • Successful technology start-ups are driving increased interest in technology studies

This has driven a significant increase in software start-ups resulting in a fantastic diversity of ideas on how to solve old problems in new ways.

"Most banks have recognised the need to invest in mode rnising; simplifying and automating their  traditional service offerings"        

For example, UBER recognised there were 4 key points of  friction when ordering a taxi.

  1. Time: by providing an “app” showing the drivers position as they approached and their ETA, UBER removed this first point of friction.
  2. Safety: UBER responded by enabling customers to rate the driver which was then published via their app enabling other customers to review ratings prior to booking
  3. Cost: UBER provided an estimate prior to booking thus providing peace of mind
  4. Payment: UBER removed this overhead by automating the payment via the app when you arrived at the destination.

Traditional taxi organisations that had been operating with the same business model, processes and systems for several decades found them selves struggling to respond, enabling UBER to gain a significant share of  the taxi market.

In the financial services industry,  the opportunities for disruption are vast. Payments are a key battle ground with Samsung, Google and Apple and many others in competition with banks to create the best mobile payment solution.In addition to payments, new entrants are offering many alternatives to traditional banking including lending, trading, retail banking (aggregators), financial management and insurance. So far the disruptors are siloed in their offerings, each focused on a particular niche - solving problems in one area but failing to provide a holistic financial service offering for early adopters. This is helping banks to retain relevance as they scramble to catch up with the nimble start-ups.

Most banks have recognised the need to invest in modernising; simplifying and automatingtheir traditional service offerings.The race is now on to get optimised products fully automated and available to customers via unassisted channels, predominantly mobile applications.But mobile is just the tip of the iceberg, the next wave of digital will provide a far more radical shift in the way customers interact with banking services. Virtual assistants leveraging AI, search, big data and personalisation are poised to provide the most significant impact on how we interact since Blackberry changed the way we manage email in 2005 and the smart phone changed the way we did everything else in 2007.

Google, Facebook, Microsoft,  Apple and Amazon are investing heavily into their virtual assistant  programmes. Virtual assistants are not new,  but  since they went main stream in 2011/2012 they have improved dramatically and user numbers are growing. Users are already asking for new features like “order me a pizza” it is not a huge leap from there to request  that  the pizza is paid for by the virtual assistant. Over time, people will start to trust  their virtual assistants. They will allow them to take over mundane tasks like paying bills, finding the best mortgage provider and negotiating the best rate. They could even arrange for the removal company to move you in to your new home.     

This new fully digitised channel enabled by virtual assistants will require some radical changes to the user interface which is likely to move towards reports of  what  has been done and approval screens for what needs to be done. For banks to participate in the world of the virtual assistant they  will have to have public API’s which are discoverable and available for use by these virtual assistants. Banks that do not have public API’s will not be “seen” by the virtual assistants resulting in loss of market share as customers migrate to this new “channel”.

Although the technology to deliver on this virtual assistant vision for financial services is available. The financial services industry has a long road ahead to work through the legal, regulatory,  risk  and financial implications a digital assistant (artificial intelligence) channel will introduce.  As Siri, Google, Cortana,  Alexa and other virtual assistants mature, the potential these new channels have to drive the next  significant  wave of disruption is becoming increasingly  apparent. So while it is difficult  to predict when digital assistants will start interacting directly with financial services, there is little doubt  that  the pressure to make this possible will increase as the technology matures and adoption grows.

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