Bank branches staffed wholly by robots. Apps that know better than you do how much you’re going to spend on a weekend away. Algorithms that automatically shift your money between banks to make the most of interest rate changes.
Mere speculation those examples may be, but the fact is that technology has already changed the financial services industry. Many of us routinely use apps or online banking to make payments or move funds from one account to another. Chatbots are commonplace, rapidly replacing the humble call centre operative to answer our questions. Insurers are well on the road to pricing policies based on telematics – the ‘black-box’ technology that’s a standard in all new vehicles, measuring consumption and driver behaviour.
In a sign that this financial future is nearer than we think, 70% of UK consumers believe technology must become a central part of their daily dealings with banks and insurers (source: Missing Billions 2 Report, Jacob Bailey). That even extends to more than half of the huge 55-plus demographic, even though wisdom suggests a large proportion of older adults aren’t au fait with tech.
This is one of the reasons why “fintechs” - tech-driven challenger brands - have such currency in the market at the moment. The likes of Monzo, Nutmeg, Revolut, Habito and a host of others are stealing share from their much bigger rivals because they’ve tapped into a desire for a more frictionless experience. Want instant access to all your accounts in one place? No problem. Don’t want to sit in a stuffy branch for hours to open an account, only to be told the system’s crashed/you need further ID you weren’t asked to bring/the paperwork’s been lost in the post? That’s fine, too. Young people in particular are signing up for this type of virtual banking in droves.
It’s at this point in the evolution of fintechs that big banks are starting to develop their own fledgling, funky offerings. Royal Bank of Scotland is set to unveil Bo, a digital bank run separately to the main business. The brand name is a Scandinavian word meaning “live”, and it sounds more lifestyle and leisure than finance. Meanwhile, rumours abound of the major players circling various fintechs with offers in a bid to accelerate their own drive to digital. It’ll be interesting to see what happens next and how digital banking evolves thanks to the likes of Artificial Intelligence (AI) and machine learning.
Rise of the robots
AI is a buzzword across sectors, but there is much excitement about its possible benefits to financial services. The humble bank account aside, there are big plans afoot from authorities within the industry and beyond to revolutionise many aspects of consumer and corporate finance. It’s little wonder the sector is being targeted for tech-driven growth: it’s already worth a staggering £119bn to the UK economy, employs more than one million people and equates to 6.5% of the country’s total economic output (source: 2017 Parliamentary Research Briefing).
The opportunities are immense, promising a much more satisfying customer experience but also rapid growth for businesses. Firstly, they must decide what technologies they want to develop and, secondly, they’ll need to create new roles and staff up to make those tech dreams become a reality.
Innovate UK, part of Government-backed agency UK Research and Innovation, co-ordinates and invests in research and development across a range of sectors. An Innovate spokeswoman says: “AI is set to disrupt every corner of the industry, with Tractica predicting investment within financial services will exceed $4.5bn by 2025. There are already more people working in UK fintech than in New York fintech.“As the Government’s Sector Strategy makes clear, AI will be crucial to the future competitiveness of financial services, with just some of the applications including asset management, enhanced fraud detection and automated regulatory compliance.”
There are conflicting reports about the effect of this new technology on the jobs market. Some observers foretell a blip in employment while swathes of more menial, low-value and repetitive tasks are taken over by technology. Others are more optimistic, claiming the removal of those day-to-day jobs will result in the creation of more challenging and interesting roles that are ultimately beneficial to the industry and its customers.
There’s also the question of ethics. Who decides what tech will be used to identify and investigate? How can AI stay on the right side of data regulations? And who’ll be held accountable if it doesn’t? Legislative scrutiny is under way. A 2018 Parliamentary report prepared for the Select Committee on Artificial Intelligence states: “The autonomous power to hurt, destroy or deceive human beings should never be vested in AI.”
Whichever side of these issues you are on, it seems no part of the financial services sector will be untouched by the power of technology in the very near future. Business intelligence publisher Informa counts investment, fraud detection, risk management, regulatory compliance and stock prediction as its top tips for disruption alongside, it goes without saying, customer service.
With such an adventurous future in store for the sector and its legion of workers, brands will soon have another focus for their marketing. Who can prove they have the best robot-run products, the market-leading machine learning that can really help us stretch our hard-earned money further or underpin sustainable business growth? One thing is for sure, with the likes of Apple Pay taking a big bite out of the lucrative payments market, brands will have to innovate to keep up and protect their customer base as best they can.