The Bank of Things

Advances in digital and mobile technologies are driving fundamental changes in customer behaviour and expectations. Today’s customer cannot be defined by traditional demographic factors such as age, gender or income. The customer of today is hyper-connected, highly informed, very demanding and spoilt for choice. They expect to be engaged as individuals, and on their terms — when, where and how they want.

In response, banks are searching for ways to transform data into insight to better understand their customers — and use that knowledge to deliver an outstanding customer experience. At the same time, a new information revolution known as the “Internet of things” is unfolding. This revolution will create unparalleled opportunities for financial services firms to deliver finely tailored advice, products and services in near real-time. By harnessing the power of the IoT, banks will be able to change their role in the life of their customers and evolve into something new and exciting. We call this new reality, the Bank of things.

For banks, the Internet of things will deliver an unprecedented level of data and data-driven customer insight. This will allow banks to provide their customers — individuals and businesses alike — a truly bespoke experience, with insights, advice and offers that reflect the day-to-day events in customers’ lives. The Internet of things is the key factor that will enable a bank to fully transform into a Bank of things.

Banking Scenarios

The Bank of things scenarios we are about to describe are not as far-fetched as you might think: Internet of things-related technology and services revenue is forecast to grow from US$4.8 trillion in 2012 to US$8.9 trillion by 2020. The future is coming fast — and to capitalise on these opportunities, today’s banks need to invest in developing the ecosystems and capabilities that will drive tomorrow’s Bank of things.

Personal banking with the Bank of things Tokyo, Japan – 2019

Hinata Saki needed to take her car to the mechanic. Her car flashed an alert on its dashboard while she was on her way home from work. She wondered how she’d pay for the expensive motor repairs. Arriving home, Hinata pulled out her phone and opened her bank app. At a glance, she could see the budget would be tight. Her bank continuously pulled data from her smart fridge, electric meter, water tank and other appliances, her smartphone’s digital wallet — and even her car — to provide a real-time snapshot of her spending, saving and budget activity. As she looked over the figures, an alert from her bank popped up on-screen. The bank knew her car needed repairs — and here it was with two mechanics’ quotes and available appointment times. As though reading her mind, the bank also provided Hinata with suggestions on how to finance the repair: she could find the funds by reducing her vacation savings for six months, or raise her credit card limit by the amount of the repair. The bank had factored in the latest reduction in her auto insurance, based on the car’s recent data about her driving habits. Hinata decided she could stay a bit closer to home for this year’s vacation, checked her calendar and booked the repair. Instantly, the screen updated her vacation fund goal.

Business banking with the Bank of things London, UK – 2019

Medical device maker Hawkins + Weill (H+W) is just like most manufacturers around the globe: the supply chain is its lifeline. Managing their supply chain well, operationally and financially, is essential to the company’s well-being in a world of rising expectations and thinning margins. Each day, data streams into H+W’s head office, painting a finely detailed picture of the company’s inventory as it makes its way from supplier to container to truck, and from factory to warehouse and distributors. At any point in time, the company can pinpoint its products and their constituent components — helping the company plan delivery, manage the value exchange, and minimize inventory levels so as to control infrastructure costs. The same supply chain data also makes its way to the company’s bank. The bank uses this data to build a deeper understanding of H+W’s balance sheet and stock turnover, and dynamically adjusts the inventory financing it makes available to the manufacturer. A few months ago, the bank anticipated that H+W could have a cash flow issue; with supplier payments due before key sales were made — and pre-emptively offered the company terms for delayed payments.

To bring the Bank of things to life, banks need to focus on three key areas to establish a business ecosystem that will support this new model.

The right partnerships

They need to collaborate with ecosystem partners to extend reach and integrate products into all areas of their customers’ lives. These partners could include other financial services institutions, mobile payment companies, utility companies, telecom companies, retailers or innovative IoT technology firms.

Collective data analytics

Customer insights drawn from bank’s internal analytics structures will continue to form the backbone of strategic business decisions, however the Bank of things will only be able to deliver a truly complete, personalized and integrated customer experience when it aggregates data with all ecosystem partners.

Connectivity

Create a seamless, consistent experience across multiple channels to deliver a superior customer experience and drive enhanced revenue opportunities. The Bank of things will build on this, integrating new external distribution channels and developing an interconnected network reaching beyond traditional, “bank-owned” channels of today.

Conclusion

To thrive in this new world and build and retain a sustainable competitive advantage, today’s banks will need to continue to invest in data gathering and analytics capabilities. Moreover, they will need to invest in building new partnerships with a wide range of organisations to ensure they can obtain the data they need to deliver a true Bank of things experience to each and every customer. Those who embrace these opportunities will stand the best chance of becoming a ubiquitous, central player in their customers’ lives.