Virtual reality banking? Now that IS science fiction.

Virtual Reality

noun

1. a realistic simulation of an environment, including three-dimensional graphics, by a computer system using interactive software and hardware.

- Dictionary.com

Back in early February 2016, Facebook uploaded a photo of CEO Mark Zuckerberg walking through what seemed like an army of VR headset wearing drones. The overall look and feel of the picture has been dubbed ‘disturbingly Orwellian’, but it’s easy to see why VR headsets are becoming so popular. By 2020, according to the study conducted by the Analysis Group and commissioned by Facebook, $14.6 billion in revenue is due to come from Virtual Reality based technology. That’s based on low adoption rates. It could be as high as $126 billion.

Looking at these figures, it’s a wondering why Banks and Financial institutions aren’t jumping at this opportunity? It seems, there are a number of challenges that are recurring for banks, especially in this technologically sophisticated era:

1. Consumer expectations.

Since the introduction of the iPhone in 2007, our expectations of everything have changed. Everything from our local grocer to our favourite restaurant is relegated to the age of the dinosaurs if they have no online presence. Banks are no exception to this. We expect a more personal touch to everything and everything to be about us. The customer expects everything to be up-to-date about them. The demographic of millennials would be the best example of this. 66% of millennials say they would rather lose their sense of smell than give up their technology. If one is willing to lose one of their 5 senses for their phones, that’s an expectation that you will have to live up to.

2. Increasing competition

The advent of the Internet has given the ability to allow virtually anybody to enter the market and become a bank. Banks that have a digital presence can compete with Tier 1 banks on the basis that they know their customers better. The days of huge fleets of ATMs and everywhere branches needed for every bank are no longer here. Banks can complete with a cashless alternative and an intelligent spread of their network.

3. Revenue streams

The grand majority of banks garner revenue through traditional streams i.e. mortgages, loans, ATM fees etc. It’s becoming harder and harder for banks to gain revenue through the traditional means as the market is becoming quite competitive. For example, online banks like Rabo, Atom and Ally, provide many of their services with low, sometimes no fees. That’s hard to compete with. So, as a result, many banks are looking for new ways to gain revenue through newer, more novel and interactive means.

So, how can VR potentially change the game?

A completely immersive and engaging experience

The future of banking is moving towards a more self-service, automated platform. Plenty of banks are investing their capital in mobile apps, Internet banking and expanding their ATM fleet in order to remove the branch as the primary method of banking. Ergo, banks are trying to ensure that their apps and ATMs emulate the services in the branch. The keyword being ‘emulate’. In order to facilitate the transition from bricks and mortar branches to fully virtual branches, we need to be able to do more than what you can do in the branch. For now, both will work side-by-side, but we want to be able to avoid having to build brick and mortar branches in future. But, by using VR, we can combine a self-service platform with a more tactile feel of the branch. You can give the overall experience of the branch (seek advice for mortgages/loans, open accounts etc.) without having to make the investment in brick and mortar. In the future you could even go as far as to create artificial tellers using the motion capture technology currently used in Hollywood films like Avatar.

Pure segmentation

With VR, you can create more than segmented adverts on the mobile app. You can now create whole environments. Mobile apps have allowed adverts to be a twoway street, allowing us to interact with them unlike say a T.V advert or a billboard. VR can do even more, as seen with Google’s “Tilt Brush” (right). Objects, images, entire environments can be created virtually to suit the customer. Like any object in a virtual environment, templates can be created to suit certain segments. But the possibilities are endless. As banks begin to obtain more information from Big Data companies like Facebook, environments can be created based every aspect of the personalities such as hobbies for example. Any environment is possible.

Cheaper than bricks and mortar

Bricks and mortar is slowly beginning to disappear. We are now beginning to move online. VR can give you the Brick and Mortar feel without the major cost of not only building but maintaining the branches with manpower, light and heat etc etc. You can have a virtual branch which has no maintenance and can be coded and shaped however you like in an instant.

Still wondering how VR can address these challenges?

Customer Expectations:

Beforehand, a Smartphone App wasn’t one of the expectations of the customer. Now, virtually every bank has a smartphone app with a wide variety of services. The point is that the customer’s expectations will never be static. As VR begins to make its mark on popular culture, customers will begin to expect the same., the customer is expecting everything to be personalised. VR allows you to immerse your customer in a personalised view and helps you bring your products in a relatable and awe inspiring way.

Increasing competition:

The VR trend is only just beginning to kick off. If you were to create even a small presence in this space, the results will be immeasurable once the technology begins to take hold. This will be an edge among competitors, especially those in the digital space.

Revenue streams:

With VR, it’s another revenue stream for the bank. There’s a few ways you can do it. For large transactions you could have a standalone charge. For example, Dubai with most banks has a charge with branch transactions, usually in the range of 20 AED, the equivalent to about €5 or US$4.50, in order to move people away from the branch and more towards the digital channels. However, with VR, because it’s as tactile as a branch but without the bricks and mortar, it would make sense to reduce this cost. In order to convince people to move towards VR, advertise as a free service first, then introduce charges once the service begins to gain traction.

Actual usage

So who’s doing it? The problem with fringe technologies is that, very often, there is little examples of its usages. But many banks like to keep their app testing under wraps, especially when it comes to wearables. Remember Google Glass? Banks were developing left, right and centre to get on Google Glass as a new method of banking. Banks such as Banco Sabadell (Spain), Bank of America and Westpac (New Zealand) we reported to have Devolved apps for Google Glass. Unfortunately, due the privacy issues of Google Glass, most fell flat and ceased, choosing to focus on the smartwatch market instead. Since the Oculus Rift has only released its development kit in March, banks could have only realistically have started to develop for the set in last few months. That’s not to say, however, that there isn’t any activity in the public eye. Wells Fargo has reportedly been testing applications for use on the Oculus Rift.

Conclusion

The VR movement is young and still unknown to many. But while it is still young, the uses in the future for it are practically limitless. The creation of virtual environments can be powerful for many business types, especially banks as we move further into the era of hyper-personalisation and convenience.