Pretty much all of the major retail Banks now have banking apps for smart phones and progressive-designed (i.e. it scales well on any screen size) web banking. But digital banking should - and will soon - go further than that. There are trends in digital design that are common place in other sectors as well as some interesting developments in smartphones and omni-channel retail (i.e. co-ordinating your strategies for both bricks and clicks) that will start to have a massive influence on banking from 2015. There are also opportunities behind the scenes that digital could bring - in areas such as in-branch productivity, customer analytics and what I call Embedded Digital Banking.
In this article I run through some key trends and give a sporting prediction about whether or not each will be offered by the mainstream Banks in 2015.
#1 - Your phone is your wallet, just tap-to-pay
The idea that your phone could replace your payment cards has been around for several years. However, recent developments are about to make that a reality. NFC chips have been embedded in most Android phones for around two years. These allow your phone to work like a contact-less card. Furthermore, Android 4.4 (also known as Kit-Kat) has supported HCE (host card emulation) for a year now. This is a change in how the security of the NFC chip is managed and means that we should expect mainstream Android banking apps to begin to support tap-to-pay in 2015. There are early adopters rolling this out in New Zealand and Australia already.
More recently, Apple announced the availability of NFC chip in the iPhone 6, as well as a payment method called Apple Pay - which will allow you to pay by tapping your phone and authenticating by swiping your fingerprint. This simultaneously offers the Banks opportunities to have tap-to-pay on their iPhone apps and brings up the specter of Apple as a competitor.
It's not just Banks. Businesses in many sectors will release apps that will allow you to 'store' debit and credit card numbers in your phone and use tap-to-pay (as in Google wallet.) Watch out for Tech companies, Telcos, and payment companies/consortia like PayPal and Zapp. I would expect the entire pre-paid card industry to switch from using physical cards to purely virtual cards stored in apps before long. Countries where pre-paid is big (Italy, South America) should lead the way.
A whole new sector of businesses providing methods to authenticate and secure these payments is emerging, and Visa have announced their Visa Digital Solutions service to make it easy for phone manufacturers and financial institutions to deliver these mobile-based payment services. This is an important area because the potential for fraud is huge.
tap-to-pay will be big, but Banks will be followers if they don't get busy
#2 - Gamified banking
Gamification is the application of computer game concepts to day-to-day software applications, apps and web sites. It doesn't just mean the making the user interface work like Space Invaders, it could equally apply to adopting concepts like collecting points or spotting matching visuals. In terms of banking there are many experiments going on from apps that reward users with points when they explore new services, to ones that unlock in-app game levels when saving deposits are made.
Banking gamification will generally be targeted at encouraging regular engagement - i.e. logging on more often. This will drive more use of digital - which drives down the use of branch-based banking (which costs more.) I would expect it to be a feature that many users will not be interested in - so it will be optional. Ultimately I can't see it making enough measurable difference versus other digital initiatives.
Banks will abandon most gamification after early experiments
#3 - Banks bringing out multiple Digital products
At the moment the main Banks tend to focus on their core retail banking App as the core platform - which makes perfect sense. But as they begin to move from just using digital banking as a replacement low-cost channel, to using it as a competitive differentiator, they may start to think about releasing niche apps aimed at customer acquisition.
As an example, one area that I am very familiar with is remittance or international money transfers. This is a huge global industry dominated by cash-to-cash players like Western Union and Money gram. However, it is moving inexorably online with players like Xendpay (which I started), Transfer Wise and Xoom entering the market and winning substantial market share by being more convenient and significantly cheaper. Whereas Banks can easily bundle this functionality into their standard banking app, they could also use it to acquire new customers with a targeted money transfer app and digital marketing campaign.
The same could be done with things like US, Eurozone and Indian P2P transfers and bill payments, mobile wallets, share trading, pension management and switching, money management and so on.
#4 - Omni-channel banking
Omni-channel banking is a combination of branch banking and digital banking. There are countless interesting scenarios that merge the customer experience of both of these channels to a seamless, integrated one.
For example, as you're watching a programme about moving to Spain one night you browse your banks web site or app for Spanish mortgages. Later that week when you enter the branch to take out some money from the ATM (now deliberately moved inside) a smart Bank employee approaches you holding a tablet and asks if you are Mr Smith, and would you be interested in reviewing the Bank's range of overseas mortgages. They know it's you because either the ATM told them, or your phone told them (see location based services below), or possibly the door face scanner recognised you! It sounds intrusive, but you could have clicked on a button on the app or web site requesting information the next time you entered a branch.
All Banks make efforts to characterize their customers and there would be profiling to try to predict which customers would like this type of merged experience, and which ones would not.
Not for 2015, commonplace by 2017
# 5 - Location and activity-based services and offers
Your phone, tablet and computer all know where you are and have a pretty good idea what you are doing; e.g. at home watching TV (or Netflix), out running (or out shopping), or even out of the country. e-Commerce businesses are tapping in to this information to offer targeted, relevant services and offers to their customers.
We all see this in the way image ads are targeted at us as we search or browse. Based not just on where we are but also our online history, our demographic, even our marital or social status.
Will Banks be using the same information to offer us specific products and services? Well they already are, via targeted advertising on platforms like Google Ads, Facebook Ads, LinkedIn, etc. So it's not a huge leap of imagination to begin to do the same via their own web sites and apps.
I have already described the idea of omni-channel banking, but there is lower-hanging fruit that the Banks could consider.
For example; you are at home and have logged on to internet or mobile banking for more than 10 minutes. You have paid a few bills, deleted a couple of standing orders and/or moved significant amount to or from your savings account. Yes, you're having a financial tidy-up! What a good time to offer you a bit of in-branch facetime with a Relationship Manager. Or an online financial health check. Or the Bank's new Financial Planning app?
Or in another example, you are out shopping and are in a shopping mall (as reported by your phone's location tracking via the radio mast triangulation, GPS or BLE*.) You have made several card purchases. You have spent much more than in previous months on clothes or consumer electronics. Yes, you're having a splurge! Maybe now would be a good time to offer an unsecured loan? OK maybe this is a bit too cynical, but you get the idea.
it will become more obvious in 2015 - 2016
*BLE is bluetooth low energy, known as iBeacon on Apple. A way to identify your location to within a few 10s of metres that doesn't drain your battery. This will be big in retail for shopper identification and targeting.
#6 - customer analytics and lots of lovely data
Digital platforms offer marketing managers and data scientists huge opportunities. With the financial and purchasing information available to Banks, they will have the potential for understanding their customers in great detail.
This does bring issues of data governance, data management and privacy, which Banking Regulators are rightly keeping a close eye on.
The opportunities for using this data to improve digital offerings (usability, experience) and banking and associated services are massive. It could be the biggest ROI from digital banking of them all.
It's not just about understanding individual customer behaviour, it's also about optimising app and web user experience through A/B or multi-variate testing. Essentially using data-driven methods for improving the business value derived from online experiences rather than design-led or feature-led approaches.
Banks that really exploit it will pull ahead in 2015 - 2016
#7 - embedded Digital Banking
The idea here is to deconstruct banking services and offer them digitally embedded in other products. This is not uncommon for payment services - for example with Sofort and iDEAL. These allow you to pay for a purchase at an e-Commerce checkout directly with your bank account.
So why not expose parts of the banking service to other web based businesses who have relevant customer interactions? For example, if someone is buying a new car online (which I have done so yes it does happen) the car sales web site could offer a Bank loan at the point of sale to pay for it. Or more obviously, the foreign exchange if that car is to be imported.
Banks are slightly resistant to this kind of approach - not least because of the impact of Regulators and the potential for fraud. But I do see some Banks beginning to really deconstruct what it is to be a Bank and think how to offer those services in the best way possible.
Only modest experimentation in 2015 - 2016
Digital banking is in it's infancy and, if the Banks are smart, they will attempt to learn from the experience of industries like retail, gambling, gaming, news and entertainment.
2015 & 2016 will be the years when digital banking moves beyond the Banking App.