Time to ‘thing’ big: Building banking with the Internet of Things

On a recent BAI Banking Strategies podcast, Chris Skinner outlined the tremendous implications of billions of connected devices, and how that calls us today to innovate and expand our efforts to embrace a near future when channels and media boundaries will vanish. His reflections come at a time when industry leaders continue to hash out—and hotly debate—how the consumer ecosystem will open up and and what banks can do to meet this challenge without delay.

As is perhaps right, the discussion often turns to generating added insights to glean from big data—enormous data, if you will—improved technological agility through modernization, and leveraging digital technology to bring shiny new objects to market that improve efficiencies and targeting. Yet the trends raise as many questions as they answer, and possibly more:

• Is this a technology innovation problem centered on enabling business or a broader business model evolution for banks?
• To what end will the digital and data capability overhaul address the landscape of product uniformity?
• Do the big risks to incumbents come from online banks, roboadvisors or new payments facilitators riding the rails of cards and bank accounts?
• What do the disruptors have that banks can’t develop and offer—not just now, but in the near term?

In my view, the real challenges and risks stem from innovation that changes the customer experience ecosystem.

This happens whenever a FinTech startup, for example, begins to combine restaurant bills with savings; or loyalty is underpinned by common redemption across multiple industries; or online retailers provide almost all of the banking through a white labeled service. And once lost, this customer experience will not be easy to win back.

Yet banks today have the platform to maintain customer engagement, a point unfortunately lost in the frenzy and distraction surrounding high-tech and customer experience. The same debate plagues the retail sector, a landscape now littered with closed stores and deserted malls. One has to wonder what’s going on within the retail mindset: “What is retail anyway?”

We might as well ask ourselves: “What is banking anymore?”

Do we think of our products as savings accounts, CDs and bank branches—or in terms of meeting a consumer’s or community’s financial needs? When we approach the problem in this way, issues of branch attrition and product innovation take on a different and simpler dimension that yields more valuable insight.

Enter the Internet of Things.  

Internet of Things, universe of consumers

We need to frame the Internet of Things discussion as one of customer journeys in a connected, digital world. We can no longer map these journeys as a series of interactions across our channels, with conversion to a product as the finish line. In fact, today’s technology allows the mapping of customer journeys across industry segments, with focus on what lies behind the transactions they initiate. Customers don’t just want best financial outcomes. That’s important to them, but not the whole story.

Thus, consider that the Internet of Things adds up to more than sensors and large volumes of data. Rather it’s about creating an ecosystem that banks orchestrate:

• Recent innovations by Capital One & USAA seek to provide digital identity as a service, which solves a major problem for customers and businesses alike. This service could then grow into one where customers not only go for the identity component, but also manage various subscriptions and receive contextual offers. Combined with robo-advising features, banks can reinforce their mission to improve financial well-being and strengthen customer experience: remaining in charge rather than providing “essential services.” 
• Visa recently launched the ability to provide offers direct to customers without involving card issuers. This means Visa can now enable multiple merchants across different industries to unite and provide relevant offers to customers. As banks step up their own efforts with merchant offers, the key will lie in building a strong context of predicted customer activities, aspirations and needs.
• In the growing wealth management space, creating a consolidated view across various accounts and investments has become a driving force. As we approach the goals of providing customers 360 views across accounts and investments, multiple industries will have to come together. The reality of an advice platform that triggers major life decisions and influences daily actions is a lot close than we think. Capgemini’s top 10 trends report highlights this and other evolutions–and one only needs to look at the tools and interconnected platforms investment advisors can utilize to gauge rapid advancements in the sector. Connected software is becoming connected business.

IoT: Diving on the platform

Evidence of the IoT’s rise is everywhere: in refrigerators, washing machines, connected cars, Amazon Dash and even the ill-fated juicing machine from Silicon Valley. And in this world of things, banks have people as their biggest advantage: a trusted and secure customer relationship. In fact, banking stands as one of the few industries that ranks high both on the emotional connection and physical engagement dimensions. The ability for banks to choreograph platform-based contextual service brings both those dimensions together

Yet there is more: The emotional-physical dimension also enables banks to provide an outlet for other industry players, resulting in strong customer affinity. It’s a bit like the platforms Amazon and Walmart are building that gather multiple sellers on their own platforms under a virtual tent. Granted, discovery is limited and controlled by the platform. But as platforms evolve, connect and interconnect, sellers and customers alike will enjoy plenty of mutually beneficial options.

Digital initiatives such as better onboarding and mobile experiences will emerge as crucial to stay ahead of the customer engagement curve. So will investments and explorations of blockchain and artificial intelligence. Amidst all this change and potential, the connected world presents great possibilities to meet a customer where they are now and help them make decisions in the future.

Earlier, I mentioned that customers don’t just want best financial outcomes. So what do they want? They also think about which credit card will maximize loyalty points—which in turn is based on how plan to use those points, how the purchase complements other purchases, and how to minimize post-purchase risks. Customers need partners to cut through all the noise and connect all those dots, seamlessly. Banks can do this by:

• Leveraging relationships they already have
• Building digital tools to engage customers in a dialog about needs as well products, and
• Using application program interfaces (APIs) to connect with other service providers to make their ecosystems complete. Also on the BAI Banking Strategies podcast, the power of APIs was discussed by Anne Boden, CEO of the Starting Bank in the U.K.

Once we have good customer context, we can apply extensive big data analytics and APIs much more effectively.

Could the notion of such context prove so powerful that Banking 2.0 eventually disrupts Amazon? Even in Amazon’s world of free shipping, they can’t deliver on physical engagement, emotional connection and the promise of the Internet of Things the way banks can—and hopefully will.

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Manish Grover is the author of “Connected! How #platforms of today will become apps of tomorrow” and “Dancing the Digital Tune: The 5 Principles of Competing in a Digital World.” He can be reached at manishgrover.com.