To understand what is top of mind for others I looked at an internal Wiki Site dedicated to industry trends and technology foresight. I took the ten most visited posts for the past few days and copied all of the text into the Wordle web site to create the following picture. Wordle allocates the size of the word based on the relative frequency it was used. This not scientific by any means, however it does give you an indication of what the posters thought was important over the past few days.
The question of technological innovation and the expected impact on the financial services industry is one I am often asked. This was highlighted at a few sessions we held last week where employees asked what the next big change would be in banking and how mobility will impact our workforce over the next few years. Both are topics worthy of their own posting so today I will stick to highlighting a few innovations I have spotted that may impact the financial industry and discuss workplace mobility in a later blog.
Near Field Communications ("NFC")
In the fall of 2011 most of the new smart phones sold will have a chip inside them allowing users to beam and receive information at a distance of up to 4 inches. This provides the potential for every new cell phone to be a mobile personal payment system as the NFC technology can be used at point of sale for consumer purchases. There are some thoughts that Apple may be able to utilize their already vast user information (iTunes) to allow for payments through an iPhone or iPad, providing direct competition for Visa, Mastercard and Paypal. For an interesting article on the potential for this technology, please check out this Bloomberg report. It is a little dated as it is from January of this year, however it does provide some insight into how the $2.6 trillion dollar payment industry might be impacted by NFC. Just imagine using your cell phone to pay for back to school clothing directly from your iTunes account or Google wallet, bypassing the traditional payment stream. This can be made even more efficient if all of clothes have a RFD tag in them so that they would be automatically totalled as you walked past a RFid reader.
Bitcoin P2P Virtual Currency
For those of us in the banking industry this one is a little difficult to believe it will actually work, but it is gaining traction in the online community. Bitcoin is a peer to peer currency system with no central authority issuing money or tracking transactions. The entire Bitcoin monetary system works in a virtual world where individuals trade Bitcoins among themselves with a system based on Satoshi Nakamoto's paper Bitcoin: A Peer-to-Peer Electronic Cash System. This is a system that eliminates the third party requirement to monitor the potential for double spending and completely by-passes the traditional monetary settlement system. This network was initially designed for peer-to-peer transactions only, now we have seen the introduction of the first virtual bank. Flexcoin is the world's first Bitcoin bank and will allow Bitcoins to be accessed from any mobile web accessible device (i.e., smart phone). This has now spawned a new virtual entrepreneur in Bitcoin Mining. There is some good information on the Bitcoin Wikipedia Site if you would like to learn more.
Credit Card Innovation
Citi Bank has already invested in a credit card that allows the user to input a PIN to change what the card would be used for. Imagine if a client only needed to carry one card that they could change from a debit card, to a Visa card to a Mastercard all by entering a PIN on the actual plastic card. Here is a video of the creator of this card being interviewed on CNBC last year
Transactional Innovation - Remote Deposit Capture
Many banking clients still deposit cheques, especially clients who own/operate small and medium enterprises (SME) and the trip to the bank is both time consuming and expensive. There have been some pilots in the U.S. with credit unions on utilizing Remote Deposit Capture (RDC) technology to allow both consumers and business clients to make deposits from either their home or place of business with immediate credit to their account. There are a variety of methods including processing the transaction in an online environment and then mailing the deposit to the bank for processing or even scanning the cheques and processing the transaction entirely electronically. So far this has not expanded past the domain of the credit unions, likely due to the transactional risk associated with the process, however there are several technological solutions being worked on to increase the efficiency of the customer's time to make paper based deposits. For further information on RDC, please read the Federal Reserve Bank of Atlanta's White Paper on Retail Payment Risk.
Video Banking
The world of personal communication changed several years ago with products such as Skype, FaceTime and other instant messaging platforms allowing for easy streaming of real time audio and video. Hand held devices such as iPod's allow consumers to utilize video conferencing in a way that is reminiscent of Star Trek shows from the 70's. Many banks have looked at this as the next way to serve customers in various ways such as allowing bank employees to meet with client's via video conferencing from their home, the use of Telepresence Units in branches to allow for conversations with experts off site and many other video applications. One credit union in the U.S. has even taken this further to install virtual client service representatives in their branches. This Face-to-Face Banking with a Video Twist has allowed the Maine, U.S.A. based Five County Credit Union to open in more locations due to a smaller footprint and centralized staffing requirements. The UGenius Video Banking System allows a client service representative to meet with the client via branch located video terminals. These units allow the service representative to cash cheques, take deposits and many of the other same service activities normally completed by a representative who is physically in the branch. Just imagine how this could assist when a branch has that sudden surge of clients, there would be the ability to add more client representatives instantly if there were video terminals present.
These are just a few of the innovations that are currently being made public in the financial industry. The typical competitor to a large bank is changing as a result of technological innovation, Google, Apple and Facebook have strong balance sheets and an innovative consumer focus that looks like it is extending to at least the world of payments if not banking in general. The next large market disrupter to traditional banking likely is being considered somewhere but not being made public yet, with the speed to commercialization being quicker then ever. Just think about how long it took to get the consumer to adopt online banking and contrast this to the consumer uptake on banking through an App on their smart phone.
I would love to hear what you think innovation in banking will look like and where it will come from, please use this discussion thread to let me know your thoughts.
