The Future Is Real

~6 min read

The speed of technological change is exponential, and what was yesterday’s hot ticket quickly becomes tomorrow’s old news. The Digital Transformation, even though in its infancy, is subtly but surely rapidly expanding into a digital soup of use cases. If you don’t already know what IoT, AI, VR, AR and the rest of the WDL (whole darn lot) mean, you had better get up to speed in a hurry, for they are changing the way data is created, collected, interpreted and communicated.

While it almost certainly remains true that time is money, in the digital age so is data. Financial services business models, processes, costs, risks, and user experience, among many other elements, are all likely to be upended, again, in the next wave of transformation. And as is well known, financial institutions are coming under increasing pressure from tech giants and fintech startups, with the competition in these new areas of innovation intensifying, to become the next battlefield. This week’s Mondato Insight asks, where is the Digital Transformation taking the financial services industry?

The Internet of Things is More Than Wearables

If the original internet connected computers, then the Internet of Things (IoT) connects what we might describe as things that have computers. And in this day and age, that could be, quite literally, almost anything. IoT connects “smart” objects, allowing them to send and receive data over a wifi or Bluetooth connection. IoT has been growing in popularity since the first wave of IoT connected devices – wearables – arrived in 2013 (see here for a previous Mondato Insight on this topic from that year). But IoT is much, much more than just wearables, enabling new digital touch points and providing valuable data that can inform decision-making.

A new generation of digital consumer touchpoints that includes watches, shoes, glasses, apparel, home appliances and other physical objects with embedded sensors has been created. Devices can be used to monitor energy consumption and output, alongside environmental conditions, location, interactions, and just about anything else that the person or object is, does, consumes or emits.

Currently, data sensors are most commonly used to remit information for security and authentication purposes and/or to make contactless payments or order goods remotely (think Apple Watch or Amazon Dash). But the possibilities go much further. In the financial services realm, the information these devices send can be used, for example, to better manage retail spaces and provide useful data to the customer such as location, price, and offers.

Real-time customer sensor data and analytics look at, for example, customer location and mood (i.e. heartbeat, sweating) as well as physical environment, to help customer service representatives and sales personnel to deliver a better user experience and advice.

Use cases: Security and Authentication | Contactless Payments | Remote Ordering | Buying Preferences | Dynamic Pricing

Examples: Amazon Dash Button | Nike’s Fuel Band | Ringly

Artificial Intelligence Beyond Bots

Artificial Intelligence (AI) is the theory and development of computer systems that are able to perform tasks that normally require human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages. Artificial intelligence can also be used to analyse the data produced by IoT, social media, mobile phones and other sources to provide active learning analytics that can create a virtuous circle.

In financial services, AI is being deployed in the back-end to power decision making in lending, trading and financial analysis, where it is the latest iteration of the long-running trend of computerizing the financial services industry. But what really excites ‘futurologists’ in the fintech space is the potential of AI to transform front-end, customer-facing services. AI-powered machines, in the form of bots (a topic in itself that was covered a few weeks ago in Mondato Insight) that have been “humanized”, could become the main interface for interactions between financial services firms and potential or existing customers. Connected networks of bots mean that the next stage of “robo advisors” will be constantly testing and improving their interactions with customers to provide maximum customer satisfaction and to optimize FI revenues.

And while this may sound a little too much like a snapshot from Terminator or Total Recall, at its current stage at least, AI is not replacing humans (though that day is probably not far off), but rather augmenting their abilities. Digital finance and commence (DFC) players, such as alternative lending firm Lenddo, are already using AI-based technologies including evolutionary algorithms to help them learn, find, and act on existing and new data sets created by social media and mobile phones. However, AI can create more “intelligent” systems and go beyond matching and testing data.

Consumer-facing systems such as text chats, text message chats and voice systems deliver human-like customer service or advice experience at a lower cost. Kasisto provides text chat software to financial services and commerce companies, while Juntos offers financial education via text message to customers of banks and other financial services providers that cater to base of the pyramid consumers.

Apple’s Siri, Microsoft’s Cortana, and’s Amy are examples of voice systems, which can be adapted to the financial services environment. IBM Watson has a “digital virtual agent” for financial services and insurance companies. One of their clients, USAA, provider of financial services to people that serve (or have served) in the United States military, has deployed the Enhanced Virtual Assistant (Eva) that enables their app users to do 200 transactions by talking, including transferring money and paying bills. In Europe, Royal Bank of Scotland has launched artificial intelligence, called “Luvo”, to interact with bank staff. Luvo could potentially serve customers in the future.

Smart wallets such as those offered by Wallet.AI can monitor and learn users’ habits and needs. They can then alert and coach users to alter their personal spending and saving behavior. AI can also provide oversight and tracking of employee actions to help with compliance, security, and monitoring. Digitization has made the movement of large sums of money around the world even more easy, and created complementary complex regulatory requirements and compliance costs.

However, the digital transformation itself holds the answer to most of the problems of the digital transformation. By monitoring discrete, repetitive data entry tasks, over time it can learn to verify data entry and test for specific events, assess risk, and find fraud. Regulation creates an opportunity for companies to deploy AI-powered employee and systems oversight.

Use Cases: Customer Support | Data Analysis | Automated financial advisors and planners | Smart wallets that monitor and learn users’ habits and needs to alert and coach them

Providers: Apple’s Siri | Microsoft’s Cortana |’s Amy |Amazon’s Alexa | Juntos | Kasisto

Virtual and Augmented Reality - The Next Channel

Both Virtual (VR) and Augmented Reality (AR) provide new digital channels and allow for improved financial performance of companies and experience for their customers. VR is the computer-generated simulation of a three-dimensional image or environment that can be interacted with in a seemingly real or physical way by a person using special electronic equipment, such as a helmet with a screen inside or gloves fitted with sensors. AR, on the other hand, is a technology that superimposes a computer-generated image on a user's view of the real world, thus providing a composite view. These channels can be used for education, information and direct communication/sales.

Both experiences can create a tailored virtual branch experience from the comfort of their home, office or wherever they choose. So, if you don’t like the décor of your local bank branch, you get to design it yourself. Have a favorite teller or financial advisor? You can get to see them, or at least a representation of them at any time of the day or night. In remote locations or new markets, VR or AR tools can be used instead of brick and mortar branches to decrease cost and increase speed of market entry.

VR and AR are at an early stage of development. The first application of this new generation of tech in the financial services space has been offered by Comarch, which offers the bored or playful investor the chance to fully immerse themselves in their finances, through VR visualizations of their investment portfolios and strategies. Ebankit, an omni-channel banking products vendor, offers their bank clients AR mobile phone apps that provide content-rich layers on top of standard fliers or brochures showing information about the product and its fees and demonstrating how they would impact the user’s finances.

Use Cases: Virtual Branches (Relationship Management) | Customer Acquisition |Marketing Education | Data Visualization

VR Providers: DuGear VR | Oculus VR | Google Jump

AR Providers: Google Glass | Magic Leap |Microsoft HoloLens | ASUS AR

Here to Stay

While some of these technologies are live, the widespread practical application of others is years away. Collectively, however, they will change the financial services industry, along with just about every other one. The current state of the technology and its use cases are just scratching the surface, like the early days of the internet itself. It is likely that the most useful future applications of these technologies have not yet been imagined. Nonetheless, IoT, AI, and VR/AR are here to stay, and financial services professionals need to start future proofing their offerings to take account of their potential.

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Mondato is a boutique management consulting firm specializing in strategic, commercial and operational support for the Digital Finance & Commerce (DFC) industry.
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