Fintech people tend to think — and opine — about the future a lot. The start of a new year is as appropriate a time as any for their prognosticating.
Several declarations about what's in store for 2017 have already been put forth here. (And here. And here.) But with the emergence of Jetsons-esque technologies like chatbots, digital assistants and the internet of things, the only certainty is that the industry is going to change in the coming years. So a few more informed predictions for the 12 months ahead can only help bankers to game out likely scenarios.
Without further ado…
Banks in the Background
Whether it's through IoT devices, fintech platforms, virtual assistants or chatbots, people will likely spend more time connecting to their money through such channels and less time directly interacting with their banks.
"We are going to continue to see financial services disappear into day-to-day life. This is a multiyear trend, but banking is going to become more seamless," said Aaron Schwartz, head of fintech research at PwC.
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Fiserv said in a November report that the industry is likely at "the tipping point of seeing what form those connections will take."
"Those new connections will help consumers configure the type of information to send, whether it's actionable and where it should go," Fiserv executives wrote. "That may mean checking on bills to pay from the refrigerator or choosing from any number of other ubiquitous endpoints to help you manage your finances."
Much of this trend is driven by large tech firms, like Amazon, Apple and Google, Forrester said in a research note. Those firms may not be interested in becoming banks, but their technology is likely to reshape banking with virtual assistants and other services.
"Your customers spend most of their time in just five mobile apps — and yours isn’t one of them," Forrester warned in its November report.
One of the advantages for banks in connecting with such platforms is that they get in front of the customer, rather than waiting for the customer to come to them. For instance, New York startup Regalii has created a messaging platform that alerts customers when their bills are due — imagine getting a Facebook Messenger notification that your cell phone bill is due this week. The technology is built on application programming interfaces of a variety of billers and CEO Edrizio De La Cruz said the technology is not married to one type of delivery channel — banks or others could deploy it via SMS text messages, various messaging platforms or voice.
As Schwartz said, this will be a multiyear evolution, but some see this as the future of banking.
"As time and technology progresses, voice recognition and chatbots will be the primary resources to complete various banking tasks and online and branch banking will become obsolete," Lantern Credit, a fintech focused on credit monitoring, said in list of 2017 predictions.
This trend, however, may present challenges to banks, primarily in regulation and tech infrastructure, Schwartz said. Essentially, will banks be able to work with third parties in a way that is compliant? As well, the on-demand nature of many of those new platforms may challenge the legacy core technology and pressure the banks to migrate some core processes to the cloud.
Additionally, the change could pressure banks to open their APIs in order to connect.
APIs "will serve as the keystone joining fintech companies and financial institutions to accelerate banking’s digital transformation and better meet the shifting demands of consumers," said Suresh Ramamurthi, chairman and chief technology officer of CBW Bank of Weir, Kan., in an email. "2017 will also see open APIs support a ‘marketplace approach’ to banking that will empower financial institutions to develop services that better anticipate emerging market needs across multiple business verticals, delivering tangible value to both businesses and consumers."
Continued Evolution of the Branch
While plenty of people have declared that the branch is headed to its demise, others are quick to point out that it is the place where the majority of accounts are opened and it is the place where people want to turn to when they need help.
But it is clear the branch is evolving and will continue to evolve in 2017 from a day-to-day transaction environment to a "sales and service" environment, said Steve Nogalo, the general manager of payments solutions at NCR.
Nogalo said to expect financial institutions to continue to invest more self-service kiosks, similar to the banks of check-in computers at the airport. Additionally, more companies will look into or expand remote video conferencing functions. For instance, several banks have such interactive ATMs, but Royal Bank of Canada recently introduced video conferencing for small-business banking.
When asked how the migration to digital channels was shaping its investment in branch technology, 39% of bankers said they are increasing their investment in automated, self-service solutions in branches, according to a survey of tech spending trends conducted by SourceMedia Research last year. Just 11% of respondents said they were merely investing less in branch technology.
"Banks still view their branches as a valuable asset. It is the strongest differentiator to new market entrants," Nogalo said. "They are just looking to leverage the branches in a different way now."
Bridging the Digital Divide
The push for more digital solutions for business will continue in 2017, particularly on the small-business side.
In its predictions for 2017, core systems provider Jack Henry noted that the adoption of digital channels for small-business banking present "a way to drive revenue from the self-service revolution." In other words, the more digital a banks can make its small-business banking unit, the more it can fatten a thin-margin business. Digital services bring efficiency to the business, but digital platforms also allow banks to incorporate other fee-based services to their lineup.
"Such solutions should seamlessly address business needs and create added efficiencies," Jack Henry said in its predictions.
One of the reasons banks are looking to improve their digital products for business is to bring them to parity with consumer products. Entrepreneurs and business leaders often complain that the digital products they use in their business life pale in comparison to those they use in their personal life.
Rather than focus on improving digital products for business, Murthy Veeraghanta, chairman and CEO of banking and payments solutions provider VSoft Corp., suggests banks build a platform that serves everyone.
"As we continue into a new era of digital banking, a single, unified platform is needed to bridge the gap, providing institutions a consolidated view of its customers," Veeraghanta said. "Additionally, one platform would be used not only for business and consumer but also for mobile banking, online banking, and mobile deposit, allowing account holders to address their banking needs anywhere, anytime and with any device."