The future of banking will be characterised by clients having better control over their finances and unnoticeable banking. This will be made possible thanks to open cooperation based on partnership and online advising, writes Indrek Heinloo, chief transformation officer of Luminor.
In the near future, the next big thing in banking will include the opening of banking services to third parties. In other words, this means that banks are creating a so-called super-connector to which innumerable solutions can be connected.
By 14 September this year, banks must open their payment services to third parties. In the next few years, this will result in a flood of new solutions from companies who are intrinsically linked to banking services. This does not merely mean the marketing of services by banks, but a win-win-win scenario for all parties. The existence of banking services in an application of a company provides added value for the client of the company, allows the bank to provide more added value to their own clients and saves time.
It could be claimed that nearly all banks in Estonia are currently engaged in opening payment services. For example, Luminor proposed an entire range of valuable ideas in this field during the Idea Garage for open banking organised during May in Tallinn, Riga and Vilnius. By developing these ideas further, it is possible to create entirely new solutions related to banking services – for example, smart VR headsets that provide bank workers the ability to better service their clients, solutions that allow one to more conveniently handle annoying payment obligations, having a more compact overview of one’s financial status, or sharing expert investment advice.
During Idea Garage, exciting ideas of all manners were introduced. Since companies themselves are opening their services in addition to banks, it will eventually result in an enormous network of services interconnected via applications where, ideally, the client will manage their matters with little effort. The majority of the current log-ins, authentications and payment order conclusions will take place automatically.
A similar and all-familiar example in this field is using a taxi app where payment for the ride is automatic and all the passenger needs to do is enter their card data once. By now, the same logic applies to many transactions, and this trend is further developing with the vigorous growth of online trading and online services. While we must still make our payments via bank link on some sites, we will soon forget the “Back to Trader” message. And, naturally, all these automated payments will be concluded at the speed of light in order to allow the service on the other end of the application to launch.
Cyber-adviser to the rescue
Curiosity and cooperation are essential driving forces. Adding a certain natural laziness that is characteristic to humans, we can arrive at new, exciting solutions that will make our everyday lives even easier. Automation and convenient banking created thanks to applications are increasingly the keywords signifying the cooperation of banks and companies.
As clients are also ever more demanding ‘unnoticeable’ banking, the bank keeps finding its place in the pockets of people – in smartphones, along with a number of other apps required for daily lives.
These apps are already communicating between one another or will start to do so. As the bank moves to the pocket, it will inevitably bring about the continued decrease in the number of bank branches and ATMs as the majority of clients no longer need cash or physical communication with the bank. Instead of finding a suitable time, going to the branch and managing one’s affairs via a bank teller, everything can be done and dusted with a few simple taps on the smartphone display.
Most likely, people will need to use their phones even less in the coming years as technology will start to manage their finances. In the future, banking services will become increasingly personal as artificial intelligence is able to think faster than humans, process gigantic data volumes in a second, and draw conclusions based on the latter. Cyber-advisers will be monitoring the status of the client’s accounts, portfolio, insurance contracts, etc. in real-time and, also in real-time, propose recommendations based on changes in income and expenses, changes in share prices, better insurance offers and many more factors.
For example, the cyber-adviser would signal when a person has spent more during a shopping spree than reasonable within the limits of their budget or provide recommendations for depositing money in order to collect the capital required for the desired investments. Real-time financial counselling will also be given added value by the services of the companies connected to the bank via the super-connector. The smart robot will be able to respectively provide recommendations about these services according to the interests and needs of the client.
As such, it could notify you that your washing machine needs to be replaced soon (since you bought it with hire purchase 15 years ago), or that you should prepare your car for the regular technical inspection. By analysing the past financial and other transactions of the client and their present financial status, the cyber-adviser will be able to suggest proposals for the future that are personal and would be too time-consuming for human advisers.
However, cyber-advisers will still be supplemented by human advisers who will be able to focus on clients who need a more complex approach and whose needs cannot always be met with artificial intelligence. For example, in the case of communicating with and finding solutions for a client who is in a tough financial situation and is therefore emotionally vulnerable, a human is still more likely to be more efficient than a robot. Machines are not yet prepared to offer the empathy inherent in human beings or a personal client relationship. In future banking, the best possible solution for the client will be created in tight cooperation between humans and artificial intelligence.
Security is more important than convenience
For both current and future banking services, the secure and verified interoperability of data is essential for services. Every person must have the right to choose whether and how the data related to them are used. This requires very efficient control over the accuracy of data, the use thereof, and the legality of transactions. Topics related to data security and combating money laundering are extremely important in this era of rapid development of technology. There can be no concessions.
Madis Müller, the governor of the Bank of Estonia, said in March when giving a presentation in a conference for financial services that in the long term, the security of financial services is more important than their convenience because the confidence of clients is the most important value in the financial sector right now and will remain so in the future.
Müller’s opinion can only be considered to be valuable. The focus must be on ensuring that fast and convenient banking services are completely secure. Considering that instant payments are the future, the parties to the transaction and their legitimacy must also be instantly verified. Work is being performed around the clock in order to ensure it. No self-respecting bank can allow unsecure solutions.