CX design can make or break your finance brand

A 2020 Walker study found that customer experience overtakes price and product as the key brand differentiator. CX design plays an important role in acquiring and retaining consumers. CX is the new battlefield with over two-thirds of brands now competing primarily on the basis of customer experience alone.

When it comes to delivering great CX design, understanding what consumers want is critical. Yet, more often than not, finance brands are getting it wrong. Redpoint Global did an extensive survey to find the three key areas finance brands aren’t delivering great CX for consumers: They are:

• Understanding the consumer (77%)
• Personalisation (77%)
• Omnichannel marketing (72%)

Understanding the consumer

Like with any aspect of financial marketing, it’s critical you understand your target audience well. Gaining superior data quality is a key area of opportunity for your finance brand.

While it’s easy to feel like you’re drowning in data, you need to set parameters for the type of data you’ll analyse. Your checklist may look like:

• Target market (age, gender, income, location, etc.)
• Marketing and social media analytics (click-throughs, impressions, conversions, etc.)
• Customer data (persona, spending patterns, offers they’ve declined, online activity, social network activity, service preferences)
• Prospect data
• Qualitative data
• Competitors

By understanding your consumer’s data you can find customer pain points and areas for improvement, leading to the creation of a great CX design.

Personalisation

Personalisation is becoming increasingly more important as consumers continue to increase their dependence on digital finance management tools. In fact, 72% of consumers say they only engage with personalised messaging. But where should you focus your personalisation strategies?

According to research by McKinsey, here are the five top areas your finance brand should focus on:

• 75% of consumers want personalisation to make it easier to navigate in-store and online purchasing
• 67% of consumers want relevant and tailored product/service recommendations
• 66% of consumers want messaging tailored to their needs
• 65% of consumers want targeted promotions
• 61% of consumers want brands to celebrate their key milestones

Omnichannel marketing and CX design

Consumers are wanting more consistent, omnichannel marketing from finance brands. With brands that implement omnichannel marketing experiencing 23x higher customer satisfaction rates, it’s a key area your finance brand should improve.

Omnichannel marketing in the context of CX design means no matter where your consumers interact with your finance brand they always have a great customer experience. Rather than focusing your CX design on one area, like your website, taking a holistic perspective and identifying areas of improvement across your entire marketing strategy can give you a competitive edge.

The Redpoint Global report asserts, “with consistency being consumers’ most important dimension and also among the top area they feel brands are falling short, focusing on overcoming the challenges this dimension presents to marketers should be a top priority.”

It’s time to improve your CX design

At the end of the day, CX design is now one of the most important aspects of acquiring and retaining consumers. While your finance brand may believe it’s delivering great CX, it probably isn’t aligning with your consumer’s expectations. It’s time to reconsider your CX and align it with what your target audience is demanding.

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The three types of digital banking consumers

It’s not quite as simple as every consumer out there wants an exclusively online banking or digital financial experience. PwC has instead identified three different types of finance clients:

• Physical – These consumers still rely only on physical branches to complete their digital banking requirements. Since the pandemic, these consumers have steadily been declining from 42% in 2019 to 35% in 2021.
• Phygital – ‘Phygital’ consumers do most of their banking digitally, but still enjoy the ability to visit physical branches for certain needs and requirements. This blended consumer has slowly been rising, with it now making up 25% of the market base from 17% in 2020.
• Digital Natives – As banks continue to advance in the online banking space, more consumers are exclusively banking online. Today, over a quarter (25%) of adults have opened a digital-only bank.

According to Peter Pollini, Banking and Capital Markets Consulting Leader, PwC US, “Direct banks are no longer a niche play; to a growing number of consumers, they are more relevant than regional or community banks.­”

To remain competitive long into the future it’s critical traditional banks implement an online banking experience that’s easy to use and addresses consumers’ digital needs.

How banks can address consumers’ digital needs

A bank’s geography will soon become less of a selling factor for consumers as digital banking continues to rise. Instead, the solutions you provide to consumers digitally will become the battleground for banks across the country. Define a market niche and create solutions packages that address your target market’s key concerns.

What consumers want in a digital bank

It’s clear consumers are increasingly demanding that traditional banks and finance organisations also offer digital solutions. In a Finder survey, they discovered digital banking services were rated as the second-best feature of people’s primary banks. But what do consumers want from their digital banking experience?

• Personalisation
• Omnichannel customer service
• Easy and clear interactions
• Competitive pricing
• Accessibility

It’s critical to remember that while consumers want digital banking and financial experiences, they also want to be able to speak to real people when they have complex problems. This is why your finance brand should aim to seamlessly blend your digital and in-person experiences, with 72% of consumers saying it’s important for companies to connect their digital and in-person experiences.

The effects of COVID-19 and the advancements in technology have meant more consumers are demanding digital finance tools. To stay ahead and remain competitive in the long term, it’s important your finance brand addresses these demands by creating a great digital experience.

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Creating a frictionless in-person experience that transfers seamlessly into the digital space can be difficult and requires new and emerging technologies to be incorporated into your finance brands’ technology infrastructure. Adobe and Stripe are some technology brands helping finance brands build integrated systems that better enable them to accommodate all customer experiences. Another way of facilitating a hybrid shopping experience, is for finance brands to build partnerships with retailers to enable them to integrate their digital products within the in-person shopping experience. A hybrid shopping experience balances the best of both worlds by providing the hyper-personalised and accessibility of the digital space within the real world. So, how can your finance brand create a hybrid shopping experience and why should you?

The hybrid shopping experience

Younger generations, like Gen Z and Millennials, are digital natives and highly value online experience for its personalisation and ease of use. Yet, many of them, alongside older generations, still value the in-person shopping experience. Creating a hybrid shopping experience, that incorporates digital technologies within the physical space, is the way of the future. In fact, 74% of consumers now expect a hybrid shopping experience.

Tesco and Amazon have already implemented this style of customer experience, implementing a “just walk out” technology where they’ve removed the need for checkouts – and consumers are loving it, with many of them enjoying the efficiency and ease of use. This technology

Addressing consumers’ digital and social needs is an important factor in the overall customer experience. Consumers are demanding more personalised customer experiences and hybrid shopping enables this. Research by McKinsey noted personalisation yields a 20% higher customer satisfaction rate and a 10-15% boost in sales conversion rates.

But what can your brand do to create a hybrid shopping experience?

Two technologies helping finance brands create a hybrid shopping experience

Stripe is one fintech highlighting how they have created and integrated a hybrid shopping experience within the retail space. While usually they exclusively provide online payment systems, they have recently introduced their online payment structure into the physical world.

By building a point-of-sale terminal product Stripe bridges the gap between online and offline payments, providing merchants with an omnichannel platform that helps make it easier to manage eCommerce transactions with in-person transactions. This product helps to streamline merchants’ workflows and provide a greater customer experience by improving the customer service. By creating an integrated offline and online payment system for merchants, consumers’ information is more accessible meaning purchase history, warranty, and receipts can be stored, making customer claims easier to process.

Tesla is another example of how finance brands can integrate themselves within the physical shopping experience through retail partnerships. As a customer purchases a Tesla, they are also encouraged to purchase insurance digitally during the process to ensure consumers’ car insurance is completed even before they leave the store. Partnering with Aviva and Liberty Mutual Insurance Company in America and Canada, these finance brands have made the customer experience even easier by providing their digital services during in-person shopping experiences.

Technology brand Adobe has created an innovative technology that enables banks and finance brands with physical stores to build a hybrid shopping experience.

Adobe’s creation of Sensei has revolutionised the physical store experience. Sensei is a digital technology that enables banks to adapt their digital content and online experience into physical stores. Adobe Sensei can do a number of things including:

• Automatically reformat content on a finance brands’ website or app to fit a screen inside the branch helping to consolidate marketing campaigns.
• Finance brands with physical stores can capture and analyse location data. This means when a consumer enters the store staff are alerted, if the consumer walks up to a screen personalised suggestions are available and finance brands can analyse consumers’ time within the store.
• Finance brands can understand and accumulate data on what consumers are doing both in-store and online, which hasn’t previously been possible.

Learning lessons for finance brands

The customer experience is critical to retaining consumers and acquiring new ones. In fact, consumers who have a great customer experience are 5x more likely to recommend a brand and 54% more likely to make another purchase. As technologies continue to improve, consumer demand for more advanced, personalised, and seamless customer experiences will increase.

Hybrid shopping is the way of the future.

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Human connection

Customer service is often seen as one of the top reasons for cultivating consumer loyalty, trust and retention, yet is often scored the lowest in customer satisfaction scores. In fact, 47% of customers would switch brands after a poor customer experience and 91% would leave without warning. While people are doing their banking more and more online, they still desire human connection when contacting customer service.

80% of consumers say speed, convenience, knowledgeable help, and friendly service are the top things they’re looking for when interacting with customer service. Your finance brand should therefore prioritise technologies that support these core areas rather than ones you adopt simply because they’re considered cutting edge. Technology like AI and chatbots are becoming expected from customers as they enable easy queries to be solved quickly while remaining personalised and ‘human’.

CX design as a product

In this regard, the CX design improvements your finance brand has made across the pandemic must be maintained and continually updated to ensure customer retention. Consumers now expect a forward-thinking, personalised, and easy-to-use online experience. Without constantly improving your CX you are losing out to brands that do.

Financial wellness and improved trust

According to Accenture, only 29% of people trust their banks to look after their financial wellbeing compared with 43% two years ago. Consumers are wanting more help from their finance organisations with the pandemic increasing financial uncertainty globally. There’s now a link between financial wellness, CX design and customer satisfaction. This indicates a growing need from consumers for their finance providers to help them understand how to manage their money.

Offering educational resources and tools to manage spending easier are some ways to improve the financial wellness of your clients. Consider what your clients need and are struggling with when creating a customer-focused CX design.

Why CX design is important for financial marketers to consider

CX design is now one area consumers consider the most important when making their decisions. Ensuring you maintain the digital evolution your brand has adopted is critical to ensuring you retain customers and improve conversion rates. Think about the customer’s needs, digital habits, and wants first and foremost in your overall customer experience design.

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How does API technology work?

Simply put, APIs are a technology that enables two applications to communicate with one another. Whenever you use a messaging app or the weather app on your phone, you are using an API. In terms of financial services they enable your finance brand to link your database with other applications or programs. This is done securely, without the need for third party applications meaning your customer’s data is protected. By allowing your finance brand to link to other applications this enables you to expand the services you can offer and enables you to create and implement innovative tools in a matter of weeks not months.

In terms of financial services, API technology can be utilised in several ways. Some ways APIs can improve your customers’ experience include:

• Account authentication
• Payment processing
• ATM or branch location software
• Credit score checking
• Loyalty programs
• Link services to fintech apps

Deutsche Bank nailing API technology

One example of APIs being utilised to better the online financial experience is Deutsche Bank who have rolled out, in partnership with Swift, their new Beneficiary Account Validation (BAV) service. This service enables consumers to verify payee account information before an international payment is sent.

This directly addresses consumers’ concerns regarding international payments being sent to the wrong person. Additionally, it also helps reduce consumer dissatisfaction by improving end-to-end efficiency. In terms of the benefits for the bank, it reduces fraud rates and sets them apart from the competition enabling greater lead generation and brand awareness.

The benefit of APIs for financial services

At the core of it, API technology is critical for your finance brand as it enables innovative ideas to be created easily but also implemented quickly. This means you can respond to consumers’ needs and wants fast, benefiting the customer and helping to improve brand loyalty and trust.

The ability of APIs to enable innovations means they have the power to increase a bank’s revenue by 20% when implemented. Employing APIs shouldn’t be seen as a maybe but instead a must-have piece of technology for your finance brand.

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Move along Xbox finance apps are in

Gamifying your finance brand’s app or digital platform isn’t quite like making it an interactive game. Instead, it’s about incorporating game elements and mechanisms to incentivise users and create greater engagement. The gaming industry has deployed various tactics, that have been well-documented by psychology, to create more addictive habits, generate more fun and ensure users feel rewarded for spending their time playing. By taking these elements and incorporating them into the financial sphere, finance brands can gain a competitive edge. In fact, using gamification can help a company increase customer interactions by 40%.

The fundamental aspect of gamification isn’t to turn the user experience into a game like you’d play on an Xbox but instead create:

• An engaging and enjoyable experience
• Challenge the user to create a feeling of accomplishment
• Turn a boring finance problem into a fun activity
• Change user behaviour to make them continue to go back to your platform
• Educate and teach the user about financial topics (check out Zogo who are nailing this area)

Shifts to a more fun financial experience

Millennials and Gen Z have grown up around technology and video games, meaning a gamified experience in the finance world is a simple way for your finance brand to stand out and gain attention. This shouldn’t come at the expense of providing meaningful and quality content, instead finance brands should merge valuable information with a fun online environment if they want to capture the attention of a younger demographic and keep it.

Some gaming elements that can be incorporated into a finance digital platform include:

• Leaderboards
• Points
• Missions and objectives
• Sounds and illustrations
• Avatars
• Performance markers
• Rankings
• Progress bars
• Story elements.

Where can gamification be used?

Gamification is great for finance brands to encourage better financial behaviours, build trust and loyalty and capture an engaged audience. By creating a fun user experience your finance brand can create a meaningful connection with users. Not only does it encourage greater engagement but it’s also a way for finance brands to gain valuable data, as making financial decisions on apps leaves a digital trace. This can be another method for finance brands to create a personalised customer experience.

While it’s dependent on each finance brand, you should ensure a balance between a gamified experience and maintaining a trustworthy reputation as too many elements may make you seem cheesy and unprofessional.

Gamification is a practical element to include in a number of ways across a range of financial services. Some include:

• Encouraging better savings. By making saving more enjoyable and applying a sense of achievement to it, more of your customers can create a savings goal and achieve it.
• Educating your customers. Creating informative and high-quality educational content about a range of finance topics is a must for finance brands and adding game elements can make this experience more enjoyable. In fact, informative content is what your users want and can improve trust as educational content makes users 131% more likely to buy.
• Change overall behaviour. Games allow for positive reinforcement enabling character changes and habits. While this won’t necessarily improve a finance brand’s revenues, what it can do is build rapport and trust as they improve their financial habits as a result of working with your brand.
• Create an online community. Depending on what gaming features your finance brand adopts, a community can be created through leaderboards and avatar features for example, increasing customer enjoyment working and improving loyalty.

Finance brands nailing gamification

While gamification isn’t a very new concept in the finance world many brands have been slow on the uptake. Those that have embraced it have seen large benefits in customer acquisition, loyalty and positive user experiences. The US finance app Mint encourages better saving and budgeting habits by creating a fun and gamified experience. Users can track their expenses, investments and credit scores through fun infographics, progress charts and goal-setting.

Emirates NBD incorporated a more fun approach to their finance app by merging fitness and finances through an engaging gamified experience. Emirates NBD synced with fitness apparatus like Fitibit to keep track of users exercise. For example, if users hit 12,000 steps they would earn 2% interest everyday. This launch saw great success with 99% positive sentiments and in just one month over 53 million steps were counted and AED 16.07 million saved.

It’s time to get creative with user experiences

As the finance industry continues to go digital it’s time finance brands embraced this trend and incorporated creative and engaging elements into their user experience. One way to do so is through gamification but how each finance brand does so will be unique to its target audience. An older demographic may not appreciate the sounds and graphics but could respond well to goals and progress trackers, whereas a younger demographic may enjoy the community-based element more and personalising their experience through avatars and leaderboards. With companies who employ gamification elements experiencing seven times higher conversion rates, it’s an area finance brands should look to incorporate into their own marketing strategy.

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Before content marketing was mainstream

I got into digital and content marketing in the mid-90s, and before that worked in broadcast design (the branding of television networks). When I co-founded The Dubs I used my broadcast connections to build websites and content publishing programs for the largest entertainment brands in the UK – The X Factor for ITV and The Apprentice for BBC.

As creative director I was focused on building enormous online audiences around these brands, slicing and dicing and extending the content from these TV programs as the vehicle for repeated, audience-targeted engagement. It was content marketing, but that concept wasn’t part of the mainstream marketing vernacular like we know it today.

In the background I had a passion for architecture, and later in life I took a break from the digital world to study it. In my first week I was introduced to a design exercise that again shared the foundations of the approach we apply to financial content marketing today. The exercise was to sketch 16 simple building forms out of the letter ‘H’ – which seems easy on the face of it, but after you’ve stretched it up-down, left-right, thick to thin, that still leaves 6 to 10 to go. One becomes absorbed in an internal dialogue of experimentation; testing and criticising increasingly wilder ideas, with each incarnation making it harder and harder to originate an alternative from the one before. 

At the time I didn’t realise the process was a very simple introduction to design thinking – an approach that just like content marketing puts the challenges and needs of the user at its core. And looking back on my entire academic career, it showed me the value of a systematic approach to problem-solving built on research and analysis, collaboration with community, the modelling of complex ideas and the critical assessment of their results. 

Where the X Factor, architecture and content strategy meet

Returning to digital as the GM of The Dubs Agency’s Sydney office, I’ve looked at our early content marketing experiences with fresh eyes. Seeing a clear relationship between our early digital learnings and the rigor of the architectural design thinking system, we’ve adapted and fed these into our always-on financial content marketing process – creating our own iteration of traditional best-practice financial content marketing. 

Architecture is at its core a social orchestration, and through the activation of a physical space an architect’s aim is to create delight when its user experiences the space. 

Virtual space – and I categorise any website or social platform as that – apart from its materiality, or the lack thereof, shares a lot of similarities to physical space from a social and information perspective.

Whether it’s a physical or virtual space the starting question is always why? Why are we doing what we are doing, what challenges are we trying to solve and how does the user ultimately benefit? Universal across content marketing and design thinking, it’s also television 101. If you don’t produce content that appeals to the needs and interests of the viewer, inevitably the show will get axed after two episodes. 

In financial content marketing we draw on audience-based research that we author, and the strategies we develop are user-centered both in terms of the content we create and the way it’s delivered. Step one in any new project is to determine what the target audience wants. The second step is gaining an understanding of the business’ needs via a qualitative workshop process. And from there, only once we have a clear understanding of both the target audience and business’ needs and challenges do we begin formulating a content and distribution strategy.

Drawing on the ‘H’ exercise from architecture we ideate and conceptualise multiple strategies to marry up the two sides and ultimately land on a creative platform that unifies both the audience’s and business’ wants and needs. This union underpins the proposed strategy across content, formats and distribution. Once we implement the strategy and content publishing commences, we constantly measure and refine throughout the project life-cycle.

We are a team of strategists, journalists, technologists, filmmakers, designers and an architect. And after all these years we are still enthusiastic about the digital medium because it’s constantly shifting alongside the world of influences that evolve it. 

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What’s popular for consumers is generally good for marketers, and Alexa, along with Google’s new Home assistant, is providing an excellent new avenue for brands to reach their audience. So why is it taking so long?

With Alexa, it’s personal

Alexa is precisely where many companies would like to be – right in your living room or kitchen. It’s almost too good to be true. The information gleaned by Alexa can help companies get to know their customers better and tailor their products and services more effectively. By far the simplest way to start marketing via Alexa is to create an app specific to the platform that users can engage with by talking (Alexa calls these apps ‘Skills’). The likes of BBC and NPR are already prominent, but there’s mounting evidence that many of the apps being released aren’t retaining users. When you consider Android and iOS apps currently have retention rates of 13% and 11% respectively, that may be a cause for concern for some brands. That being said, Alexa is still a relatively new technology and this may well be something that changes with time as the tech finds its market.

Every brand has something to offer, and given that countless brands are vying for the attention of shared audiences, it makes sense to look at how they can present their offering in a new way. Though marketing in this new way does require consideration.

Marketing in this way can seem intrusive if not handled with a light touch, and newly developed skills (apps) shouldn’t just be about selling. Cary Tilds, chief innovation officer at WPP’s GroupM (the world’s largest media advertising agency), told The Financial Times: “We’re no longer telling a brand story. It’s about creating and interacting in a story where each consumer is your star. It’s a very different way to work.”

Alexa is personal, and the value brands can derive from it will be personal too. It’s about having a two-way dialogue with consumers and building a 100% consumer-centric model.

Alexa is personal, and the value brands can derive from it will be personal too.

The challenge facing finance brands, and how Alexa can help

The main problem facing finance brands in 2017 is finding new ways to stay connected with their audience. With the rise of social banking and digital wallets, consumers are finding it less necessary to interact with their banks on a day-to-day basis. This creates a marketing vacuum for banks in particular, making it harder for them to make consumers aware of new products and services. Could Alexa fill this void?

There are currently 130 Alexa skills in the business and finance category on Amazon, but few of them are service based. Capital One, however, are bucking this trend. Their new skill allows customers to ask Alexa questions such as:

“How much did I spend at Costco last month?”

“What’s my current account balance?”

“When is my car repayment due?”

There’s no doubting the functionality this brings to Capital One customers, and it could be just enough to continue engaging them while other consumers get distracted with the likes of social banking and other third-party platforms. Customers want convenience, and this delivers in spades.

What’s more, Capital One will gain data and valuable insight directly from its interactions with customers, much like any business would from, say, clicks on a website. This will help the brand to tailor its services to be more in line with what customers want when they want it. Put simply, it keeps an advertising channel open and gives the brand direct access to its customers.

Considering the success of WeChat in Asia and other global markets, and the fact that chatbots on platforms like Facebook Messenger may soon automate banking entirely, maintaining this direct line with customers will prove to be invaluable for finance brands.

Alexa, are you the future of content marketing?

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While many superannuation companies are offering apps, most only allow users access to their super balance and nothing more. According to Canstar, two in five Australians don’t even know how much super they have, let alone anything else about their account. People are out of touch with their super and generally rely on the occasional letter or email from their fund for updates. However, that’s all changing as some tech-savvy superannuation companies embrace the mobile mass adoption and release engaging new apps.

Keeping up with the cool kids

UK insurance company Back Me Up has released a Tinder-style app targeted at the much sought after Millennial demographic. While the app has nothing to do with matchmaking, it is actually smart marketing. By speaking a language millennials respond to, Back Me Up has devised an ingenious way to entice young people to purchase insurance; particularly travel insurance. The functionality is simple. People can insure their three favourite possessions by simply uploading photos of the items they want to cover. If a customer wants to swap out an item it’s as easy as uploading a photo of the new item to replace the old one. The monthly £15 flat fee also covers instances such as lost keys (car and house) and broken phone screens. Possibly because of their younger skew, you must be 17-49 years of age to be eligible for cover

LUCRF Super’s new app allows clients to check their balance on the go and easily roll over their accounts when they change jobs

Gadget insurance and super

LUCRF Super’s new app allows clients to check their balance on the go and easily roll over accounts when they change jobs. It also enables users to keep tabs on all contributions for the past five years. You can also see how particular investments are performing. An additional feature called The New Daily offers updates on trending news, money, sport, entertainment and more.

Liberty Mutual have produced an insurance app with a difference. Similar to Back Me Up, the Home Gallery app allows customers to catalogue their household items by uploading photos and important data such as purchase price, item description, date purchased and serial numbers. The app is designed as an easy way to keep inventory for your contents insurance.

Superannuation newcomer MobiSuper proclaims they’re doing away with paperwork for good. Customers can easily access their account online and are also assigned a personal account manager who stays of top of issues such as making sure your employer is up to date with payments. You can also find, rollover, monitor and manage your super using technology rather than having to make a dreaded phone call to a multi-national. With a firm focus on mobile and online interaction, an integral part of MobiSuper’s innovation is a cool new app that is soon to be released, so stay tuned.

The takeaway

The finance sector is famously slow on new tech uptakes, as we’ve seen with social media. But it finally seems to be catching up, particularly when it comes to trying to snare the younger market, who are mistrustful or financial organisations and can’t bear the thought of sitting down in person with a representative. Between the move to mobile and apps, and the slow but sure adoption of chatbots, it seems a new era has dawned in how people will sign up for – and connect with – their superannuation and insurance.

Related Article: 5 Ways Insurance Brands Are Using Gamification To Cut Claims

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In five years’ time a share market or currency investor could well be checking the profits from secure, remotely generated transactions made on their behalf on their smartwatch – thanks to the rapidly developing world of the Internet of Things (IoT).

“Banks need to ensure their offerings meet consumer expectations for ‘anytime and anywhere’ services,” warned Yan Lida, President of ICT heavyweight Huawei’s Enterprise Business Group, in his opening speech at this year’s FSI Forum to Accelerate Digital Banking Transformation. And it seems his audience is taking notice: the financial services sector is one of the biggest global investors in sensors capable of interacting with the IoT.

A 2015 analysis has predicted that by 2020 there will be a total of 21 billion devices connected to the IoT, generating a global economic value-add in trillions. Already the electronics industry has responded by developing a plethora of consumer tech offerings capable of communicating with these smart devices, including domestic appliances, health and exercise monitors, home security systems and temperature control equipment, with products using sensing and communications technologies, such as self-driving cars, snatching headlines.

But another, even more important dimension to the IoT phenomenon, which is being hailed as the biggest disruptor since the Industrial Revolution, is cybersecurity and privacy of data, both individual and corporate. Samsung, whose latest smartphone incorporates high security iris scanner technology, is already partnering with major American banks, and the blockchain-based distribution platform Ethereum recently unveiled its ‘Lightning Network’ Raiden, which is designed to work with IoT devices.

The Lightning Network promises to reframe the Bitcoin digital ledger blockchain to minimise the amount of data broadcast by having thousands – if not millions – bundled into a single on-blockchain transaction, allowing instant micro-transactions without fees and opening up the potential for iOT or micro-payments for web-based content.

Raiden creator and CEO of Brainbot Technologies, Heiko Hees, says his open technology stack provides IoT app developers with a handy tool, one where the actual transfer during a transaction takes place off-chain. “I think that’s very good from the perspective of IoT developers, and especially as the IoT economy will benefit from interoperability between multiple devices which could be senders or actuators, and the blockchain could be a common rail to put the infrastructure on.”

For the finance sector instant transfer of huge blocks of data via cloud computing is shaping up to be an industry game changer. Hees is already in conversation with privacy-conscious corporates interested in Raiden’s potential to enable underwritten payments between any two parties while limiting the broadcast of transaction data.

Other banks, such as Union Bank of Switzerland and Barclays, have quickly seen the potential of blockchain payments to streamline back-office functions and are developing in-house applications, while others are investing in start-ups such as R3 CEV, which already has 50 banks in its consortia, to develop custom blockchain-enabled solutions for the financial industry. The savings in costs are predicted to be as much as US$20 billion.

A 2015 analysis has predicted that by 2020 there will be a total of 21 billion devices connected to the IoT

The other area that has significance for the finance sector is personalisation of services. Telematics are being used already to individually tailor car insurance to usage and history, for example, and sensing technology has the potential to be used with ATMs and credit/debit cards to take action on the owner’s behalf. The scope ranges from the mundane to whole of life.

“If you’re paying for groceries with your refrigerator, as a banker I want to have my credentials in your refrigerator making that payment,” J Paul Leavell, senior marketing analyst at Charlotte Metro Federal, neatly summarises why banks should be interested in these types of applications.

By extension, the IoT could also enable transfers and even brokering for an individual account holder. In a world where customer experience and above all ease of operability, more than product or price, is increasingly the brand differentiator, the market potential cannot be underestimated.
“Banks will need four key capabilities to thrive under this wave of digital transformation,” predicts Foo Boon Ping, managing editor of The Asian Banker, “Refined customer management, product and service innovation, omni-channel optimisation and transformation, and extensive, ecosystem-wide collaboration.”

In other words, in addition to working with innovative systems, the financial institutions are going to have to work with each other.

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