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Mobile banking apps need to go beyond the basics

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In 2009, then-Federal Reserve Chairman Paul Volcker opined that the ATM was the only financial innovation that has improved society.

The ATM completely revolutionized the way consumers bank by making it self-serve for consumers and adding a level of convenience that didn’t exist before. In essence, it made everyone bank tellers.

Unfortunately, there has not been much innovation in banking since the advent of the ATM almost 50 years ago. But that is about to change.

When I first arrived at college in 1976, I opened a bank account and received an ATM card to process transactions like withdrawing and depositing cash. It was magic.

I no longer had to wait in line for a teller who kept making mistakes. To be honest, it took me a little while before I trusted deposits, but it changed my life.

I was fortunate that my bank in Philadelphia, Girard Bank, was an early adopter of ATMs. Most of my friends outside Philadelphia still had to use tellers, and they all had the same reaction I did when their banks finally made ATMs available to them a few years later.

Over the years, ATMs have gotten easier to use, but their functionality hasn’t changed that much. ATMs now incorporate high-resolution touch screens, fancy graphics and data that tracks historical ATM behavior. These changes reduce the number of keystrokes required to perform any function, but they still basically only allow a user to withdraw and deposit cash.

So what about the influx of mobile-based banking apps? Haven’t those revolutionized the way consumers bank as well?

Most people don’t realize that mobile apps offered by banks are just ATMs they can around carry with them.

Mobile banking apps have evolved to allow consumers to transfer money between accounts, pay bills and deposit cash, but not much else has changed. These are all functions one can find on an ATM.

To be fair, mobile check deposit was a big step forward, but it’s still just a basic ATM function. Banks just keep building the functions of a teller into additional platforms.

Fortunately, the recent willingness of the financial industry to adopt application programming interfaces (APIs), combined with advances in artificial intelligence, will fuel what will likely be the biggest change in banking since the advent of the ATM.

And the result won’t be a chatbot. It will be a next-generation banking service that allows clients to go from simply managing their bank transactions through an app, to having all of their financial accounts optimally managed for them.

Imagine a world where once a paycheck has been direct deposited, the bank automatically pays the customer’s bills and then routes the remaining money to where it needs to be based on that consumer's financial goals and lifestyle.

For example, if the customer has prioritized buying a home, their savings will be routed to a high-yield savings account. If sending a child to college is of paramount importance then the money will go to a 529 college savings account until fully funded.

In this new world, the consumers does not have to do a thing and everything is optimized.

Of course, this new kind of service will need to earn consumer confidence by explaining exactly what will happen when their finances are put on autopilot. It will also need to take tremendous care with data privacy.

And this service won’t just handle basic banking needs. It will become an all-in-one financial hub. It will even handle investments because computers are better and less expensive than people at executing passive investment strategies.

A world where individuals don’t have to worry about managing their finances might seem like science fiction, but it’s right around the corner. This new kind of service will operate with the same level of convenience as hailing a ride on Uber or Lyft. It’ll be way better than an ATM.

Not only will it allow people to avoid spending time on something they usually dread, but it will also enable them to confidently earn more on the money they save. That should ultimately lead to a more comfortable and satisfying life.

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