Advent of 5G ! Can Banks do what Uber did in 4G?

Innovation Landscape   –

• Opportunities in Open Banking
• Customised/New Product
• Process and People Alignment
• Advent of 5G
• Advance in Data & Analytics
• Progress in Natural Language Understanding & AI

Table of Contents

1. Introduction. 4

2. Business Driver. 5

3. What We Have Today. 7

4. Approach to Customer Experience. 8

5. The Opportunity. 9

6. The Way Ahead. 11

7. Readings ,References & Acknowledgements. 17

1. Introduction  

'The real is rational, and the rational is real'  – Aristotle.

Hypes and noises making big claims in a crowded ecosystem is a far off from reality. Fancy things around creating sensation cannot be plugged in and played. For example, Ambient computing involves interconnected devices, machines and sensors that are sensitive and responsive to the presence of people. However, this may not be feasible as its natural for the bank to start off with simpler functionalities and graduate further in complexities. Besides the talk of such has been doing rounds much before the rollout of 5 G.

Mostly innovations require a series or layering as they are finally leveraged for business dividends as opposed to an utopian world. Big boys of banking in the US, UK & Europe would have no legacy issues nor would there been issues like regulatory fines. There are constraints of time & resources in a real world. Siri which is popularly appended to Apple products is a spin-out from the SRI International Artificial Intelligence Centre, and is an offshoot of the US Defence Advanced Research Projects Agency's (DARPA) . DARPA took of under President Dwight D. Eisenhower in 1958 after the Soviet sent Sputnik to space. DARPA is an engine within inside the Defence Department challenging our military services to think differently.

Our line of thought is innovation is a culture built over a period of time to became the DNA of an organisation. While there are head turning and attractive technological innovations in our ecosystem, we have to make rational choices so as to do the best to our shareholders. An open banking coming from Open Banking Implementation Entity (OBIE) though Payment Service Directive (PSD) 2 has to be adopted to the implementation of self-propelled innovation add to  our organisation innovative ethos.  With such pedestal we can be at most incremental but very effective nonetheless.

2. Business Driver

1.  A study covering 1100 adults in the United States broadly classified the sample space into was done by NTT data set out to determine how happy people are with the digital customer experience (DCX) offered by financial institutions, and what consumers want from the DCX of the future. who broadly classified the users into two categories -Settlers & Explorers. This confirms the inputs provided in the case study for the purpose of ‘BA Innovation’

• Settlers preference for status quo who want a fast and simple experience that allows them to accomplish their objective(s) quickly without having to learn much. They are thus less demanding and less inquisitive
• Explorers (18-34) who want more from their digital banking experience are much more likely to switch banking providers because they aren’t satisfied with the DCX offered by banks and credit unions today. Habitual mobile users with higher expectations like more personalized experience that is more customized and intelligent.

Settlers

Explorers

Would you leave Bank provider for a better CX

8 %

 86 %

AI Powered – Siri & Alexa

12 %

41 %

Digital CX need to improve

18 %

73 %

Information about retail store purchases

55 %

80%

Information about other Banks

52 %

76 %

The digital experience sought by users as bought out by the research emphasized that financial institutions to deliver a digital experience that is simple, streamlined, quick and intuitive. Thus the top picks for the respondents’ being;:

• Easy to understand (68%)
• Minimal effort required to gain access to digital tools (62%)
• Speed to complete financial transactions (49%)

1. With the advent of open banking banks in European Union (EU) are in the immediate threat of losing the ‘Customer Interface’ to   THIRD-PARTY PROVIDERS (TPP) with  COMPETITION AND MARKETS AUTHORITY’S (CMA’S)  making it mandatory for the UK’s largest banks –  COMPETITION AND MARKETS AUTHORITY’S (CMA’S) 9 to open up their retail customer and SME account data. . “Whereas customers have rampantly migrated across service providers in case of internet service providers to insurance have so far refrained in case of currents accounts. PSD 2 changes all that. The net revenue per current account being GBP 176 annually with about 40 % of that coming from over draft for each account
2. The problem for traditional players being aggravated by PCW (Price Comparison Websites) which may come into play in future though not now though they exist independent of open banking today.
3. The Open Banking Implementation Entity (OBIE)has reported there are now 100 regulated providers, of which 17   THIRD-PARTY PROVIDERS (TPP)s are now using Open Banking in the UK. Open Banking technology was reportedly used 17.5 million times in November 2018, up from 13.9 million in October and 6.5million in September 2017.
4. Banks may lose out as the owner of customer interface conceding the space along with the float funds & revenue to the FinTech, tech giants and price-comparison websites (PCWs). Effectively maintaining customers   without ever taking customer deposits or lending onto their own balance sheets

3. What We Have Today

1. Lower cost & popular advancement in AI had been Chatbots proving to be popular among customers    used almost across the length & breadth of the banking industry.
2. Low cost smart phones with large spread backed by 4 G internet
3. Consumers already use voice for 20% of their Google searches now which is predicted to go up to 50% by 2020.
4. There has been rapid growth in voice-led banking with the Alexa,  Siri  and Alibaba’s Genie to name a few

Voice banking has been leveraged using Alexa, Siri, Bixby and other to carry out to deliver account information, facilitate payments though very few banks do it, provide financial news & advice and track spending functionalities

1. Conversational AI signals a huge advancement in the way we interact with computers. Unlike menus, touchscreens, or mouse clicks, using our voice to have a conversation is one of the most natural ways to use a computer; it requires no learning curve.

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1. Open Banking – A bird eye view of the massive opportunity:

• Regulated third party providers can now access information and initiate payments for customers, by connecting to account providers (such as banks, building societies and payment companies) – securely, efficiently, and with customer consent.
• The Open Banking Standards contain the specifications to securely connect regulated third party apps and websites to account providers using APIs. And because regulated third-party providers and account providers use the same specifications, one solution works for customers of many different banks and building societies.
• Backed by UK Government, the Open Banking Standards are built with data security and customer consent at their heart.
• There have been some impressive early signs of new technologies powered by Open Banking Over 48 countries are pushing banks toward open banking with markets as Nigeria, Brazil, Mexico and Australia expressing intent to adopt open banking with the exception of the US which does not have the regulatory push
• Current accounts have been available in open banking with the first payments being made by money management platform Yolt and Lloyds Bank. Yolt being the first third party provider (  THIRD-PARTY PROVIDERS (TPP)) to successfully connect to all  COMPETITION AND MARKETS AUTHORITY’S (CMA’S) 9 banks using APIs in September 2019

4.  Approach to Customer Experience

1.  
   • Provide customers with an answer always as they are far less likely to accept an error message
   • Scale up on features starting with simpler features like account balances, branch location,
   • Realise that conversations are actually several questions deep
   • Multiple platforms for voice interaction like beyond ECHO if its Alexa
   • Customise as one size don’t fit all

Based on the above cardinal features we can attempt our customer experience ( CX ) journey

1.  
   • We can build a user interface (UI) reflecting well the customer personality as different personality types respond better to different UI layouts, menu structures, or UI colours
   • Language and communication ought to be different for highly extroverted person compared to an introvert
   • Digital banking functionality needs to be tailored as we move beyond the simply starts like balance enquiry type as a highly analytical person will be more interested in using calculators and financial analysis tools.
   • Tailoring the next best actions -and call to actions based on user personality types: e.g. speed of decision making, and customer context, e.g. customer location, time of the day etc.
   •  Marketing is not one size fits all and has to be aligned to suit with the customer personality
     •  A highly organized person who values safety will be more interested in insurance products, compared to people who are more open to risk taking

5. The Opportunity

• Voice & Video

Rapid fire rollouts by Amazon’s Alexa-powered products the fair inference can be that in days to follow Voice-controlled cloud-computing software will soon be built into nearly every new gadget, vehicle and building.in 2018 over 30 million smart speakers were sold globally last year which is likely to be  60 million this year.

According to CapGemini, a majority of consumers (51%) are already users of voice assistants, and interacting with voice assistants via smartphones (81%) is the dominant mode of use. Twenty-one percent of consumers have been using voice assistants from devices other than phones or smart speakers . The major reasons why consumers like voice devices is because of the convenience (52%) and the ability to engage hands-free (48%). Many of the CapGemini respondents also said that a voice assistant helped them with routine tasks (41%). Consumers even preferred voice assistants over human interactions because they believed voice devices were faster (49%).

Working of Alexa – A Brief : 

1. The Echo cylinder comprises of  speakers, a microphone and a small computer that can awake the system and blink its lights to let you know it’s activated but its real capabilities occur once it sends whatever you have told Alexa to the cloud to be interpreted by Alexa Voice Services (AVS).
2. Amazon allows and encourages approved developers free access to Alexa Voice Services so they can create new Alexa skills to augment the system’s skill-set which is about 30000.This helps skill development
3.  Data and machine learning is the foundation of Alexa’s power . As a consequence, the amount the amount of data it gathers increase. Every time Alexa makes a mistake in interpreting your request, that data is used to make the system smarter the next time around.
4. The army of specialists aided by  machines is  Alexa and Alexa Voice Services even better. The goal being  to make spoken language a user interface that is as natural as talking to another human being
5. Data has characteristics that are similar to traditional commodities.  Whereas information is abundant data is scarce. 
6. Banks have tremendous repository of data on clients & their transactions - Bank ledgers, transactional history, channel traffic. With data explosion we have APIs ecosystem which rings more data  which banks can tap into - mobile operators, geospatial data, credit bureaus, social networks, online behavior, FinTech aggregators – Company House , Accounting Data ,Balance sheet ,P & L  and many more.
7. Data governance and quality has done a world of good to data making them usable
8. The complexity of many analytics portfolios leads to slow adoption and slow
9. Besides there is a need to complement existing analytics portfolio by identifying and bridging the gaps between analytics stages & automate the analytics process

• Data & Analytics

• 5 G

Uber disrupted the taxi industry leveraging 4 G. The example was followed by hundreds and thousands of such apps across industry. In a typical 4 G network where so much smarts solution was put into the mobile app it ultimately ended up with a lot of compute on the phone draining the battery coupled with the heavy data traffic between phone and network made the visual display choppy.

1. The app can in a 5 G set up feed information about digital interactions to branch and call centre staff and help suggest real-time recommendations they can deliver in person.
2. Customers can remote connecting digitally to a human who could help him with a complex problem using virtual reality.
3. A financial adviser could walk a client through complex asset allocations, with both looking at a dashboard, for instance.
4. It’s almost like a poly cloud service, but it's not 5,000 miles away; it's very close at the edge of the network. Thus, latency is so low and the computation can be done at the edge of the network,
5.  One speaking in Spanish, & other in English, but that translation and natural language processing can be done fast.
6. The bank has a multiple-apps strategy to give 5G users lightweight yet feature-rich apps while continuing to support users with 3G and 4G phones. This is not unusual — in the past, the bank has supported customers with varying degrees of device and operating system upgrades.
7. Off course we will carry on what we have done using voice or chatbots in a 4G Ecosystem
8. Ambient computing advent whereby devices can be connected using IOT which should take off post widespread adoption of 5G

6. The Way Ahead

The evolving ecosystem provides for enormous opportunity in the medium term with ‘expected $ trillion in wealth will exchange hands from baby boomers to millennials in the following 30 years’. The external environment inserting- regulatory encouraged disruptions like open banking in UK with Open Banking Implementation entity (OBIE)  requiring CMA9 ( Competition and markets Authority) banks to expose their APIs to landslide changes  in the world pf technology as telecom operators rollout 5G in the US ,The UK and elsewhere & maturing with Natural Language Understanding (NLU) & Artificial intelligence .5G will derive light weight but feature rich apps while continuing to support 3G and 4G users .Backed by low latency (Uber Leveraged 4G to disrupt the taxi industry ,many more followed) with voice & video conversation using Alexa and its prototype .Alexa or Siri backed by strong AI capabilities will make voice banking conversational & interactive  .Progress in AI has been leveraged by analytic tools making the analytic space in an organisation enhanced by augmentative and cognitive abilities.

But nothing of regulatory drive or progress in technology is of any effect until we come up with innovative banking products and support both business and technology with strong processes and culture .The culture being of innovation and the process is of agile which responds quick to the market.

The cardinal principle is to scale up starting with simple features with customisation to the extent possible as we progress to at least a higher interim state with something like Ambient computing whereby devices can be connected using IOT which should take off post widespread adoption of 5G.That might make possible something like point the phone with a camera towards a street and get the best food deals during the lunch hour.

• Product diversification and enhancements

Whereas customer experience is something not negotiable the crust is business which cannot be overlooked. The process of digitalisation and CX are effective enabler to take across the business propositions made available in the market place made possible by exposure of APIs under the PSD2/ COMPETITION AND MARKETS AUTHORITY’S (CMA’S) directive. We have to consider the fact that fee is something the customer is averse to and we not only need to guard out turf of net 176 GBP revenue from the primary current account of the client but also look for opportunities in the market place

New opportunities would prop up in the evolving ecosystem for the banks. Much depends on the choices the individual banks invoke. It can be anything from

1. Relinquishing the customer interface and base the revenue model on the sharing of say the payments platform to coming up with competitive banking products
2. Talking other market place players head on with innovative products
   1. . Driven by Artificial Intelligence & other insight tools,, Smarter money management to ensure Financial control, foresight and wellbeing for your retail customers

                                                               i.      Account Aggregation – One stop show for all current accounts/Credit cards etc.

                                                             ii.      Financial Goals – Ensuring future cash flows for mortgage equity etc

                                                           iii.      Planning & Budgeting Tools – Simulations of income and expenditure

                                                           iv.      Spending Analysis – Expense break up

                                                             v.      Financial Summary – Assets & Liability with previous year comparison

                                                           vi.      Peer Comparison. - When it comes to spending or savings

                                                         vii.      Personalized Financial Advice – Asset allocation  ,Loan migrations etc

                                                       viii.      Highlighting money saved using the money management services

                                                           ix.      Manage all aggregated accounts

1. As a banking hub, recommends 3rd-party solutions when required like insurance products, so they have no reason to go elsewhere by Understanding clients’ needs deeper level, based on their financial data, personal circumstances and information.

                                                               i.      Deep understanding of client financial needs from offering student loans to mortgages using PCW (Price Comparison websites )

                                                             ii.      Migrating loans to reap interest rate benefits

                                                           iii.      Instant loan decisions using inhouse tools like Iceberg & third party tools

                                                           iv.      Provision of credit scores and guide client is god credit behaviour

                                                             v.      Focussed planning when a default is anticipated

1. Personalised Customer offers with access to third party website. They receive redeem them using their bank card or mobile wallet and automatically receive cash back

                                                               i.      Display offers clearly in a dashboard facing the client the merchant offers and loyalty points

1. Allow booking of hotels/Air Tickets / Movie and concert in Bank app . Checks the category - > Chooses the relevant city in case of hotels-> Dates -> Offers and deals -> Picks up the offers - >confirm the service provider - > pre populated booking form appears - >option to pay displayed - > confirm mode of payment - > confirmed booking

• Process

• Seamless onboarding - Customised and light application forms
• Rationalisation of lending questions
• No repeating of information already available to bank
• Agile teams in readiness to roll out counter to disruptive products in market place
• The culture of innovation

• Technology for Customer Experience

The leveraging of 5 G is core to our solution as we can have enriched application keeping the app light and preventing battery drain. A brief of 5 G benefits is laid in the section- The Opportunity

• Augmented analytics

Augmented Analytics becomes the next wave of disruption in the data and analytics market with matured organization wondering to use or not and the low matured ones eager to adopt. Tellius  which supports complex search is one such tool leveraging natural language search, automated discovery of insights, and AutoML with natural language explanation of results generating visual insights that highlight anomalies, correlations, underlying trends, and change drivers. It  can be connected in non-extract/live mode. Data transformations, mapping and modeling of data in Tellius can be done via a point-and-click interface. each user only sees the data to which they have access rights. The product leverages the Hadoop Distributed File System (HDFS) for storage, Spark for processing and an in-memory columnar database for analyzing data

•  
  • Cognitive Analytics:

Extra Space Storage is the second-largest self-storage facility operator in the USA. Its website uses real-time data & intuitively responds to particular types of customers by highlighting different actions for different customers. This approach resulted in a 24% increase in mobile conversions for Extra Space Storage A few below;

1.  
   •  
     • For a "fast and logical" customer, the "call now" action is made more prominent,
     • For a "slow and emotional" customer needing a more human connection and affirmation during the buying process, the online chat box appears.

Kensho Technologies’ Warren AI software, for example, can provide responses to complex investment queries such as: “What happens to the share prices of energy companies when oil trades above $100 a barrel and political unrest has recently occurred in the Middle East?”

The above example can be operationalised by cognitive insight that can be used to detect key patterns and relationships in real time from multiple data sources helping banks to better understand the way customers process information and make decisions. Cognitive engagement then uses these insights with individual customers to offer personalised services. Like spending patterns to suggested overdrafts.

•  
  • Preventing Default 

As banks enter into an era of big competition where the Net Interest Income is getting squeezed and clients are unwilling to pay fees it is essential to prevent mishaps like defaults and frauds. A prediction of likely frauds would probably aid the bank in ensuring that the early correctives are taken. A tool to the effect is a  predictive analytics based —credit scoring models  predicting  creditworthiness available with FICO which uses statistical analysis to predict how likely you are to miss payments within the next 90 days.

•  
  • Relationship Pricing 

Rates, fees and offers are trio component of Relationship Pricing of Zafin. As rates rise and competitors ramp up efforts to attract new deposits, even the most stable customers become rate sensitive. As a result, banks need to be able to design and deliver programs that help them retain and reward their best customers. Legacy processes and systems can restrict a bank’s ability to offer relationship-oriented programs that work across multiple systems. The same is powered by analytics taking the following into consideration

• Drive revenue by maximizing product cross sell and up-sell capabilities, with product recommendations derived from client data
• Enhance client experience with product offers and pricing tailored to the needs of specific microsegments
• Increase retention by identifying and proactively targeting clients exhibiting attrition risk behaviors
• Minimize channel costs by identifying and incentivizing activity with lower-cost channels

•  
  • Voice  

As bought out in the section – The Opportunity   there are at least three distinct and undeniably trends

1. Chatbots and their voice counterparts like Alexa and Siri have proved popular & found utility with the customer having carried on tasks ranging from balance inquiry to remittance

Amazon Lex is a service for building conversational interfaces into any application using voice and text providing  advanced deep learning that powers Amazon Alexa functionalities of automatic speech recognition (ASR) for converting speech to text, and natural language understanding ( NATURAL LANGUAGE UNDERSTANDING (NLU) ) to recognize the intent of the text, to enable you to build applications with highly engaging user experiences and lifelike conversational interactions. Amazon Lex provides automatic speech recognition and natural language understanding technologies to create a Speech Language. The Amazon Lex speech recognition engine has been trained on telephony audio (8 kHz sampling rate), providing increased speech recognition accuracy for telephony use-cases. When building a conversational bot with Amazon Lex, the 8 kHz support allows for higher fidelity with telephone speech interactions, such as through a contact center application or helpdesk. Amazon Lex is natively integrated with Amazon Connect, enabling developers to build voice based conversational bots that can handle customer queries over the phone. You can integrate Amazon Lex into any call center application using the APIs.

With Amazon Lex, you pay only for what you use. There are no upfront commitments or minimum fees.

• This drives not only efficacy around call centers with optimal response enhancing CX but is a major source of savings as banks can have much leaner call centers
• Ambient computing advent whereby devices can be connected using IOT which should take off post widespread adoption of 5G whose roll out have already taken off in the US and UK. Such will make communications between call centres / branches apart from making conversations more contextual with camera access and location services
• Amazon Lex is ever evolving with  NATURAL LANGUAGE UNDERSTANDING (NLU)  progresses make sit feasible with two people communicating in different languages in a contextual framework.
• The primary current account of a client brings in a net revenue of GBP 176 whereas the cost of this service is $0.004 per voice request, and $0.00075 per text request without requiring long-term contracts or complex licensing

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7. Readings ,References & Acknowledgements

1. http://www.theasianbanker.com/updates-and-articles/a-voice-led-future-banking-with-alexa-and-similar-services-become-mainstream
2. https://thefinancialbrand.com/77402/digital-voice-banking-trends/
3. https://www.finextra.com/blogs/fullblog.aspx?blogid=15149
4. https://www.forbes.com/sites/bernardmarr/2018/10/05/how-does-amazons-alexa-really-work/#3a4620ae1937
5. https://strands.com/products/clo-customer-linked-offers/
6. https://zafin.uberflip.com/retail-banking/use-case-relationshippricing
7. https://aws.amazon.com/lex/
8. https://www.americanbanker.com/news/how-5g-could-change-the-future-of-banking

1. https://www.finextra.com/blogposting/16725/data-strategy-for-driving-growth-of-financial-institutions
2. https://www.finextra.com/newsarticle/33194/open-banking-year-one-insights-from-the- Competition and Markets Authority’s (CMA’s) 9-and-more/developer
3. https://thefinancialbrand.com/69116/voice-enabled-agents-digital-banking-experience/
4. https://www.gartner.com/doc/reprints?id=1-6RVPP0C&ct=190604&st=sb

The Views are personal and not of my employer