The shift towards mobile-first activity has affected practically all sectors and the financial and banking sector is no exception. In fact, almost 70% of American consumers now access banking via a mobile app, more than the proportion who visit brick-and-mortar branches.
Unsurprisingly, there has been a wave of activity as both new fintech firms and traditional financial institutions race to integrate banking and financial apps into their service offering.
While some of these apps are relatively straightforward portals into standard online banking services, others are already beginning to adopt fledgling technologies that are widely thought to be the future of IT.
We take a look at four of these technologies: big data analytics; artificial intelligence (AI), blockchain and the Internet of Things (IoT). In some cases, the technology in question is in its experimental phase while others are actually being used in mobile apps today.
What is certain is that all of these technologies are not too far away from entering the market and changing the way we bank forever.
What is Big Data?
Big Data is perhaps the easiest concept to explain although the technologies that lie behind it are complex. Big Data describes the fact that it is now possible to collect, store and process far more data from a wider array of sources than ever before. What’s more, this data can often be analyzed in real-time, presenting instant and detailed insight into customer activity.
Big Data has been made possible by the rise of distributed or ‘cloud‘ computing, enabling connected servers to share storage capacity and processing power. Managed IT services can also help with the analytics side of things where in-house resources are restricted. The challenge with Big Data is extracting relevant information from the huge data lakes that reside in the cloud.
The task for mobile app developers is creating software that responds to the insights provided by Big Data to deliver a personalized user experience.
How Big Data is improving mobile applications
Self-storage company Extra Space Storage provides an example of how Big Data can be used to improve customer experience and deliver measurable results.
The company’s app uses information about its users to change what they see on their mobile screen. The specific data in question comes from Google’s AdWords program and is used to judge what a customer’s preferred communication style would be. Depending on the results, the customer will be presented with either a ‘Call’ or ‘Live Chat’ CTA.
As a result of this one change, Extra Space Storage enjoyed a 24% increase in conversions.
This approach could easily be adapted for use in a mobile banking app. By combining data on buying patterns, locality, time of day, social media interactions, intention, device and a host of other factors, banking customers could be allocated to segments and served with an interface that caters for their needs and preferences.
What is AI?
Artificial Intelligence (AI) is a broad field which encompasses all the ways in which IT researchers, developers and engineers attempt to create artificial systems which mimic human intelligence.
McKinsey & Company, who predict that 70% of companies will have adopted AI by 2030, divides the technology into five broad categories:
- Computer vision
- Natural language processing
- Virtual assistants
- Robotic Process Automation
- Advanced machine learning
AI is already used in our day-to-day lives. For example, voice activated personal assistants like Siri and Alexa incorporate AI in their design.
While natural language processing enables devices and apps to translate human instructions into actions, machine learning (ML) teaches them to recognize patterns and alter their behavior accordingly. Robotic process automation (RPA) adds physical actions to the mix.
AI and Big Data: a powerful combination
The more data that can be fed into a machine learning program, the quicker it will learn. This makes Big Data and AI a potent combination for mobile application development.
Some of the technologies that have emerged from the combination of Big Data and scalable AI strategies include predictive analytics (i.e. inferring future behavior from past data), recommendation engines (providing suggestions based on past buying or viewing activity) and hyper-personalized virtual assistants.
Google has increased the opportunities for mobile app developers to explore the potential of AI by open sourcing much of its AI-related code.
Some banks have already started to leverage Big Data and AI in their mobile applications. For example, the Royal Bank of Canada has integrated Siri with its iOS app ‘RBC Mobile.’ Through the app, RBC customers can verbally instruct Siri to transfer money to a third party before using biometrics to confirm the instruction.
One of the concerns that banks and customers have with such voice-activated payment systems is security. The next technology we will look at could solve that problem once and for all.
What is blockchain?
Blockchain technology came to public attention due to its support for the BitCoin cryptocurrency. However, blockchains can be used in a wide range of transactional systems. In simple terms, a blockchain links transactions together in a globally distributed ledger which can be accessed from anywhere. Since transactions (whether they are BitCoin payments, real estate sales or insurance policies) become part of the blockchain itself, they can’t be tampered with and are visible to anyone (albeit in an anonymous form).
While BitCoin, Ethereum and the like used an open source blockchain platform, it is possible to create private blockchains. It is widely expected that mobile software vendors such as Apple and Google will create blockchain-specific app stores to cater for the explosion in demand once blockchain tech becomes mainstream.
Why blockchain and banking were made for each other
There is a good reason why firms such as DBS, ING, Standard Chartered and Visa are backing blockchain technology. Transactions over blockchain will reduce payment processing fees (there will be no need for intermediaries). They will also be fast, transparent and secure.
Going back to our Siri voice-activated payment example, it would become much less risky to transfer money in this way since a visible record of the originating account, destination account and transaction amount would be instantly stored as part of the bank’s blockchain.
Blockchains can also incorporate smart contracts which would only allow transactions to proceed if the contract conditions were met. This could allow transaction limits to be enforced as another form of security.
What is the IoT
In the words of Los Angeles, IT services provider DCG Inc., ‘The Internet of Things (IoT) is a network of vehicles, appliances, and devices embedded with actuators, connectivity, software, electronics, and sensors that allow users to connect and swap data.’ The IT services provider goes on to say, ‘IoT has the potential to revolutionize the way businesses process transactions.’
The IoT is responsible for the explosion in Big Data and therefore in the evolution of AI as ML programs can be fed with millions upon millions of datasets from which to learn.
Banking and connected devices
The future of mobile banking apps will almost certainly see more interaction between mobile devices and other devices and sensors in the environment. For example, on arriving at a bank branch to speak to an advisor, a customer could use their mobile app to register on a digital queue and receive updates from beacons around the branch.
Beacons are small transmitters which use Bluetooth technology to connect with devices in close proximity. APIs will likely form the threads that connect mobile apps to the IoT, enabling services to talk to one another without input from the end-user. This will bring to life the concept of ‘screenless banking’ where customers can use voice-activated commands via their mobile device and at ATMs.
While all of these four technologies: Big Data, AI, blockchain and the IoT offer fantastic opportunities for mobile app developers, it is in their combination that we will probably see the face of mobile banking transform in the very near future.