In Ten Years Banking Will Look Like a Sci-Fi Film

It kinda does already, but this time it won't be primarily because of bankers' behavior. JL

Tim Wallace reports in The Telegraph:

Future technologies could lead to personalised shopping assistance, highly specific help building your business, and the type of financial advice currently only available to billionaires

Imagine the scene. You want to buy a house and you spot the perfect property.

But you are not prepared. You have not got your mortgage lined up, and surely in this hot property market the place will be snapped up in no time.

So you take out your phone to take a photo of your driving licence and a quick snap of the house, send them off to the bank instantly and receive a mortgage approval in principle in minutes.

You call the estate agent, put in an offer and the dream house is yours.

It sounds like science fiction, at least for those who have struggled to get on the housing ladder, but according to Santander this is what the future holds.

Theoretically, the computing power and data banks already exist to do this, but it will take time for banks to make the technology work smoothly and effectively, and for customers to agree to their banks rooting through public and private information in quite such eye-catching style.
Indeed, the next decade could easily see scenes from sci-fi movies come true in the banking industry.
In the 2002 film Minority Report, Tom Cruise’s character is confronted by personalised adverts on billboards which recognise his face, speaking to him by name to offer a car he might like, or a beer which could tempt him.
When customers carry smartphones everywhere and pay for everything on plastic card or online, their bank can know where they are and what they are doing.
Customers have adapted rapidly to new banking technologies in recent years, with the London transport network encouraging commuters to use their contactless payment cards or gadgets to travel around the capital  Photo: Chris Stone for Telegraph
Even now, banks strike deals with shops that you regularly visit, to offer cashback or discounts when you make a purchase.
If you walk into a shop in 2025, your bank could update you with alternative shops or websites where you could buy the same products more cheaply. It could suggest which account to use for a transaction based on how much money you have.
Or it could even point out that it is a week until payday, and you will run into your overdraft if you buy those shoes because your utilities bill comes out of the account tomorrow.
It might sound creepy to give a company so much access to your data, but think of how far we have come in the past decade.
Facebook was launched in the UK 10 years ago – since then, tens of millions of Britons have freely shared detailed personal information online.
The iPhone was launched in 2007, prompting a mobile technology revolution which sees customers share data on their location, conversations and spending habits.
While online firms have learned over time that customers value privacy and want to be involved in decisions on their data, banks have come to the digital party a little bit later and hope they are better informed about the wider public’s aversion to invasive technologies.
All of the banks promise that these highly personalised services which crunch customers’ data will be anonymised, and only used with individuals’ consent.
However, it will not be simple to convince customers that their data is absolutely safe. We are still in an era where banks’ IT systems suffer glitches on a regular basis and where data can be stolen, and as banks can benefit from increased computing power, so can hackers and saboteurs who want to harm the financial sector or its customers.
One way banks hope to persuade customers that this is the future is to show them tangible benefits of analysing the data – after all, the banks have the information already, but much of it is locked away unused.
“Banks sit on enormous amounts of data, and for the first time we are able to personalise it, applying it to the individual so they feel they are getting a service which was previously only available to billionaires,” said Peter Simon, head of information at Barclays.
Currently the bank is using so-called beacon technology which can alert staff when a disabled customer enters the branch, so staff know more about their specific needs immediately.
Mr Simon expects that in future all customers will be able to choose to have this beacon capability, meaning staff will be alerted to their exact financial situation so they can provide a more tailored service more akin to the private banking scene than the mass-market service usually provided on the high street.
It could work in other shops too. A customer could be identified as they walk into a supermarket, the products they pick up automatically registered and their bank account charged when they leave the store, avoiding the need to queue up or spend time paying.
Crunching data can also be extended to business customers. Barclays recently rolled out a publicly available service called Local Insights which lets anyone look up spending habits and financial statistics in their local area.
RBS already uses the iPhone's fingerprint system to identify customers, and in future facial recognition or eye scanning technologies could also be used  Photo: Apple
Business customers can see this broken down for their own SME, so they can compare their own performance with that of similar firms nearby and get tips on how to improve their own position.
Individual customers who sign up right now can see how their energy bills compare to those of similar households – and click through their online bank account to switch to a better deal.
Given customers are keen to get involved when they can see the financial benefit, it does not seem unimaginable that they would be happy with this hyper-personalised service on the move in other areas of life.
As computing power increases, so does the potential to perform such analytical acrobatics with the data on a daily or even live basis – something which was simply not possible just a few years ago.
“Calculating this might mean processing 2bn data points. Two years ago that would have taken six weeks, but now it takes 21 minutes and can be done at one-tenth of the cost,” said Mr Simon.
RBS’ chief administration officer Simon McNamara has invested in a quantum computing firm called 1QBit, and expects great things.
“Quantum hardware and software is being developed – it will clearly play some role in the future, but we don’t know what that will be other than the fact that the power available to us will be orders of magnitude greater. Tasks that currently take days will take seconds,” he said.
That will help with new security measures, and new ways for customers to prove their identity, though it will take time to reach consumers.
“We tried out eye vein recognition technology which is supposed to be more secure than finger prints. We found some challenges with it which they are working to address, so we are not going to go live with it any time soon,” said Mr McNamara.
But RBS has rolled out fingerprint identification for customers with iPhones, and 80pc of those who can use the technology already do so, indicating the enthusiasm for high-tech biometrics.
Lloyds Banking Group trialled heartbeat ID earlier this year and while it was just for show at the time, applying it to consumers is not unfeasible if wearable gadgets like the Apple Watch really take off.
Indeed, carrying phones and watches is not just a means of contacting your bank or proving your identity – it could replace debit and credit cards altogether.
As unlikely as it seems right now, at a time when millions of Britons pay for everyday items with the new contactless payments system, some in the industry predict the demise of plastic altogether.
“As smartphone security increases, credit and debit card information will merely be stored on the device, making the actual cards themselves redundant,” Nationwide’s Nick Middleton said in a report for Vocalink, the bank-owned company behind much of the UK’s payments infrastructure.
“Beyond this, the potential of facial recognition technology for reducing the friction of paying is huge.”
Again part of the hurdle is one of computing power – the machines will need to recognise an individual’s face when it is moving, or presented at a different angle to the photograph, or when the customer has a new hairstyle.
If digital innovation is going to change life for shoppers and businesses, it could also come into your home.
The balance between convenience and surveillance could be put to the test most dramatically when your own white goods start spending on the credit card.
“Imagine when all devices, from your fridge, to your car, to your washing machine will have a SIM in it, or another form of networked connectivity,” said Anne Boden, chief executive of startup mobile-only bank Starling.
“Could your car insurance be paid for by the mile driven on a daily basis direct from your bank account? A part failed on your washing machine - the part is ordered, the engineer booked and the payment takes place, without the customer having any direct contact with the bank. With smart metering, would your energy bill be on a daily basis, with advice on keeping costs down, and daily billing?”
None of this is to say that traditional banking will disappear entirely in a decade. There will still be thousands of bank branches, and customers will be able to meet bank staff face to face when they want to carry out a complex transaction or take financial advice.
But those branches will be fewer in number and as banks’ focus turns to flashier technology in the years ahead, those who do not want to bank on their mobile will risk missing out on some of the personal attention they want.