As I write this article I’m viewing an advert for Echo, Amazon’s smart speaker for the home of tomorrow. Google has just announced a rival device that will allow users to perform tasks from streaming music, through to controlling their thermostat just by talking to it. If the tech companies’ promises are to be believed, then 2017 heralds a future of unprecedented simplicity for our domestic lives, as interconnected devices begin to combine with Artificial Intelligence (AI) in the home.
The future for retail banking also looks set to be in AI, with 2017 the year when it really starts to take off. In its most recent inquiry into the sector,1https://www.gov.uk/government/news/cma-paves-the-way-for-open-banking-revolution the Competition and Markets Authority (CMA) clearly recognised the importance of technology as a driver for change in how we will be banking – by requiring an Open API standard by early 2018.
What could an Open Banking API do? A third-party service provider could, for example, gather all your personal information from a variety of sources (such as your current accounts, savings accounts, credit cards, mortgages, insurance policies, utility bills or even social media and shopping behaviour) and put all of this information into a single user-friendly app. When we presented UK consumers with the idea of such an app, 35% said they would be likely to use it, increasing to 52% for 16-24 year-olds. There is a real appetite for services which can help consumers better understand and access their own financial data.
This is only the first step to a broader personal information economy. Some predict that an open banking API will eventually combine with the Artificial Intelligence of the likes of Amazon Echo and Google Home, allowing algorithms to assist in personal financial decision-making, switching accounts or utility providers automatically, so that consumers get the best deals at particular moments in time. Imagine knowing that each purchase you make while on holiday will get the best currency exchange rate based on that specific moment in time – something which will matter even more if the value of sterling continues to fluctuate.
Banks and insurers are preparing themselves with fintech partnerships, incubators and accelerators, with over a third of UK consumers trusting the likes of Amazon to provide an app to manage their everyday finances and 35% seeing a future in which their main bank account provider has no physical branches. Such a change would disrupt the relationship between leading financial services providers and their customers, effectively relegating established banks to the role of providing a utility.
Ex-Barclays CEO Antony Jenkins is even more sanguine, seeing a future where banks vanish entirely as they are replaced by ‘distributed ledger’ technology. In this world, retail banking may move away entirely from a model where financial data is created, controlled and shared by banks, towards one where the data itself is created, distributed and edited publicly over the internet. While Mr Jenkins clearly has a personal interest in this view of the future – he now heads up his own fintech venture – the financial sector clearly has plenty to be wary of in the coming years.
With more than 600 bank branch closures in 2016, and more planned for the coming years,2http://www.bbc.co.uk/news/business-36268324 bank bosses are painfully aware that the future of banking does not lie in bricks and mortar.
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