The speed at which digital banking is being transformed by new technologies is rapidly increasing. From behavioral biometrics to new selfie technology, financial institutions are being presented with even more ways to distribute their services across digital channels to meet customers where they want to interact.
Whether that’s on their mobile device on the go or in their kitchen while they make dinner.
Glen Fossella, Acting CEO of Urban FT, recently joined Karen Webster for a discussion on where innovation in the banking environment is going and how banks — both big and small — are being challenged to keep up.
Here is an excerpt of the conversation.
KW: Innovation in the banking sector is blossoming. What role do you see AI, voice and facial recognition having on digital banking platforms? Where do you see this going, and how do you see it being adopted by banks?
GF: First of all, isn’t it interesting how fast this is all moving? Just in terms of the biometric authentication — in 24 months, we’ve gone from fingerprint authentication, which really only reached the tipping point with Apple Pay, to the point that facial recognition is real, in use and starting to catch up to fingerprint authentication in terms of implementations.
As mobile and online banking grow and overtake branch and other channel activity, there’s a powerful need for biometric authentication. The industry just has to have it, because it’s the only way to manage fraud and risk in digital channels.
KW: Banks have all of these very sophisticated technologies that all claim to do the same thing — mobile identification that leverages a physical ID, voice authentication, facial recognition, the basic interfaces with voice-activated transactions, etc. How does a bank figure out what to do?
GF: From the authentication side of it, everything you mentioned is being monetized so quickly that it gets absorbed into the fabric of the platform providers, so I don’t think a bank or any financial institution needs to worry about that aspect.
What they need to focus on are the larger issues: What does this mean to the customer experience? How can I leverage it for the customer experience? And how can I leverage it to differentiate my service versus from my competitors’? The authentication piece is going to happen, because, again, the platforms are including these functionalities and it’s getting easier to do all the time — “easy” being a relevant term. But it’s just starting to happen.
If you look at the rapid advancement of natural language processing platforms, whether it’s what Amazon is doing or Siri, it’s moving quickly, and it’s very exciting to think about what can be done with this.
This new channel, which is Amazon Alexa or some variation, is now sitting in my living room or kitchen or bedroom, so now, what can I do with this mobile device and my online experience? Financial institutions now have to rationalize this new voice-interactive or natural language channel with everything else they’re doing.
Just like when online banking launched and where we are with mobile today, financial institutions need to try to align these experiences for their customers. It’s exciting, it’s powerful and it’s great for consumers, but it’s a whole other channel for financial institutions to understand and invest in to figure out for their customers.
KW: What is a natural way for people to be thinking about using these new digital banking services? Do the smaller banks have a disadvantage because they don’t have the resources to take advantage of these technologies?
GF: As usual, smaller to midsize financial institutions will be the last to get these technologies because, as always, they are dependent on their core providers to bring this in. You can’t do anything with Alexa unless the core provider supports it, so once again, they’re stuck.
As a mobile technology provider, the larger question for me is: How does this new channel work in concert with the other channels, including mobile? How will it cannibalize mobile and the branch, and what does that mean?
It has the potential to shift the mix of contact with the consumer. The primary channel within the last year and a half went from being the branch to being online, and we see that interaction moving towards mobile. But if natural language capabilities, products and services catch on very quickly, in the next 12–24 months, will we see Siri and Alexa overtaking online as a primary channel? Does mobile even get bypassed and voice technologies become the primary channel?
KW: The banking services done with Siri and Alexa that are voice-activated may be used differently in different environments. You wouldn’t be using these voice-activated banking services in a meeting, but you would use your mobile app to check out a transaction alert or pay a bill. I think there are going to be complements rather than cannibalizing.
GF: It’s an interesting debate. I see the ultimate journey with the natural language capabilities as almost taking us back to the branch. In its end state, it will be like talking with a teller without having to go into the branch.
But I don’t think mobile banking will go away. I’m just asking the questions rhetorically — right now, online is the primary channel for most consumers, so does that crown transition to mobile? Or does it bypass mobile and go straight to natural language technology?
I don’t know how fast voice-activated services can move, but I think, for a lot of consumers, it’s situational. But isn’t it great to just be able to talk and have this disembodied voice talk back to you and respond? Isn’t that better than tapping away on your phone ultimately?
KW: One of the big news items over the past month is Zelle and its instant payments network. What do you think about P2P from a banking perspective? Is it a service that is designed to keep consumers sticky and it’s monetized some other way?
GF: My personal view is that a lot of this stuff has been cooking for awhile. Early Warning and clearXchange are a piece of that, the card rails are a piece of that, faster ACH is a piece of that — I think 2017 is going to be the year of P2P.
The combination of clearXchange with Early Warning and partnering with Mastercard is going to bring some ubiquity. I think they’re finally going to be able to pull this together in one place. They’re going to need to spend a ton of money around Zelle branding, and then, it will stick.
The combination of Zelle branding and Early Warning risk management makes this a lot easier to go out and push to everybody. Can Early Warning execute on it from a distribution standpoint and roll this out broadly? We’ll have to just wait and see on that, but I think all the pieces are in the right places.
On the point of consumer adoption, I don’t even know that it’s generational. Wouldn’t everybody like the convenience to send money to someone instead of having to mail a check? Small-dollar movement from consumer to consumer is still stuck on cash, while everything else has moved ahead and changed from a payment perspective. I think we’ll hit the tipping point quickly with the average consumer. I think it’s going to be a killer app that gets adopted fast, in the same way that mobile deposit was.
As soon as the larger financial institutions get behind Zelle and start pushing it as a service, it’s going to become real for consumers of all stripes. Whether it’s Zelle or a similar service from another provider, once people understand that this is available, easy and secure, then they’re going to start doing it.
KW: What are your thoughts on the switch made by Early Warning, and how do you see this competition playing out with the likes of PayPal and Venmo?
GF: I think Venmo has a lot to worry about. Anytime the banks get behind something like this, the early leaders risk getting crushed. Now, Venmo isn’t going to get crushed because it’s a part of PayPal, and PayPal will find a way to plug into this emerging, overarching infrastructure that we’re going to see with P2P. Venmo will survive, but it’s going to become a brand battle, I think.
KW: On the security side, IBM recently launched a cognitive behavioral biometrics feature. Can you elaborate on the role you believe biometrics will play in security in the digital banking world moving forward?
GF: We already have some of that in play. The payment networks know where customers are when they make transactions, and the networks match up that locational information to my history. In a very small sense, that’s behavioral, so I think it’s needed. It’s going to be transparent to consumers and one more way that our card transactions are protected. Again, I think it will just get consumed into the fabric of security behind payment transactions.
Because it sounds a little like pre-crime, “Minority Report,” will people have a visceral reaction to it? I don’t know if consumers would even be aware of it. I just see this as the next layer of security around card transactions.
For those of us who are a little more cynical, our minds leap to the connection that, if IBM has this technology for card transactions, it probably has it for government services. What does that mean for me as a citizen? But it’s just the world we live in. You can’t stop technology from moving forward.