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Are Banks Becoming Invisible?

January 4, 2017 | Cheryl Cross

Are Banks Becoming Invisible?

The face of banking has changed a lot in recent times but throughout the transformation one thing has sustained – the customer relationship with banks and banking service providers. But what would the future look like if that dynamic changed?

KPMG has a view. It suggests that day to day activities in the not-too-distant future will be managed through interactions with a personal digital assistant. It created the hypothetical Siri-like EVA (Enlightened Virtual Assistant) to illustrate its point.

EVA, with an almost omniscient presence, accesses data from a range of sources and makes decisions on the consumer’s behalf based on its deductions. For example, unprompted, it moves savings to get a better interest rate and suggests a yoga class to counteract the impact of a rise in junk food purchases and downturn in health (apparent from the user’s wearable device data). After soliciting the user’s agreement, EVA books and pays for the class.

Middle Layer Facilitator?

In this world, banking services form one part of a seamless, digital personal management system. KPMG’s “invisible” bank occupies the middle layer where it can facilitate purchasing and saving. The consumer has no interest in interacting with the bank directly; its purpose is a means to an end, there is no direct customer relationship there. It is, indeed invisible.

The questions an ‘EVA’ raises about human independence of thought and the part that emotion – as well as reason – plays in decision-making could no doubt occupy social commentators for some considerable time. For the technology enthusiast – and indeed finance industry stakeholder – the opportunity for EVA says a lot about the sophisticated use of data in the future, a more far-reaching transformation of the customer front-end and the interaction of applications.

The potential for EVA already exists. Artificial intelligence, advanced data analytics, connected devices, the cloud and so on are all there as KPMG points out; they: “merely need to be combined and enhanced to make EVA a reality.”

Desire for Change

The way we bank has changed a lot already but today’s customer habits and behaviors suggest a desire for more. A Blumberg Capital survey, for instance found that 72 percent of respondents would find it helpful to have a customized, automated way to never miss a payment and minimize the total interest on their loans. Over half – 57 percent – of respondents believe traditional financial institutions will cease to exist in their current state within their lifetime.

These viewpoints are echoed in Business Insider Intelligence’s Digital Disruption of Retail Banking report. The survey of millennials found that almost three-quarters visit a bank branch (for something other than to use a cash machine) once a month or less, while 38 percent of them never visit.

No-one knows exactly how banking will transform. It could continue to be a progressive replacement of traditional means of money management with digital services. Or the industry could be on the brink of its ‘iPhone moment’ from which some institutions may not recover.

Will financial service providers ‘own’ the customer relationship in the future? That remains to be seen. One thing though, is abundantly clear – manual, stove-piped processes in the back-end will have no place in any version of the future bank. Speed, digitisation and automation won’t be essential just for growth but for survival.