Sergio Chalbaud_resized
Sergio Chalbaud Apr 26, 2016

Three technology innovations to change banking

In 2015, retail banking startups raised $6.8 billion in funding, more than three times the amount raised in 2014 according to CB Insights, showing a significant investment in financial technology (FinTech) innovation. Several areas of developing technologies, specifically biometrics, artificial intelligence and wearables, are poised to revolutionize everyday financial activities in the near future.

Biometrics. Security is a major issue that both financial institutions and their customers have top of mind due to breaches such as the 2014 JPMorgan Chase hack that compromised the data of 76 million households. Pin codes and passwords are outdated security methods, giving biometrics a chance to be the authentication method of choice in years to come.

According to Goode Intelligence, over 1.1 billion financial services customers will be using mobile biometrics by 2020. Mobile finance apps have been using biometric technology since Apple implemented the biometric Touch ID. Personal finance apps, such as Mint, have used fingerprint scanning since 2014 and retail banks are only recently following suit. Following its 2014 breach, Chase said it plans to double its spend on digital security from $250 million a year. They took a step in the right direction as the first U.S. bank to offer fingerprint authentication last June by incorporating Apple’s Touch ID.

As mobile payments gain traction through applications like Apple Pay and Samsung Pay, biometric integration will be more prevalent. Biometric verification for financial information will need to be easy to use and well integrated with existing platforms, like mobile apps and ATMs, in order to be successfully adopted by consumers. Successful implementation of biometric technology will save financial institutions vast sums of lost money due to security breaches and restore the trust of their clients.



Artificial Intelligence. When we think of robots, we tend to think of physical machines that resemble humans. However, the real promise of artificial intelligence in banking mostly happens in the back-end technology. Banks can utilize the rich customer data that they already have and apply machine learning to do everything from making better recommendations for customers to preventing identity theft.

One area where artificial intelligence can support banking institutions is customer support, which can more rapidly answer and resolve customer questions and issues. Goldman Sachs announced at the beginning of the year that it would be investing in artificial intelligence as they believe machine-learning can improve customer service among other business objectives moving forward. Last year, the company invested $15 million in Kensho Technologies, which creates robots that can answer “complex financial questions posed in plain English.” Kensho’s technology connects with Goldman Sachs’ platform, which then allows Goldman Sachs clients to better model potential trades. Goldman Sachs is confident that an open platform and automation will give their offering a significant advantage. With artificial intelligence, banks can better harness the rich data of their clients and make more informed decisions for them.

Combining financial data with behavioral data through the use of machine learning can also greatly improve the credit experience. Startups such as LendUp and WalletHub have developed machine learning technology and data analytics algorithms that enable people to get credit scores in a fraction of the time it would normally take. Ultimately, the benefits of machine learning for credit scoring can open up financial opportunities for the 45 million Americans who do not currently have a credit score.

Wearables. Wearables have been a hot topic in recent years, making it an area that banking and FinTech players need to be present in to stay top of mind for end-users. According to Gartner, worldwide wearable device sales will increase 18.4% and sales of smart watches alone will exceed 50 million units this year. Smart watches are especially complementary to mobile payment technology. Wearables can provide timely updates and include functionalities like bill payments so users can avoid overdraft fees.

For example, Apple Pay is integrated within the Apple Watch so that users can easily and securely make purchases with the tap of a wrist. The convenience of wearables saves users both time and money because they can quickly make monetary transactions and instantly pay off bills when alerts come up. For banks, there is the benefit of getting real-time data on user transactions, which can help with product development and ultimately client satisfaction.

A hurdle for financial firms that want to incorporate wearables into their strategy lies in consumer trust. When asked about Internet of Things (IoT) devices on the market right now, nearly 52% of consumers believe that these products do not have the necessary security in place, according to Accenture. However, this sentiment is always the case when new technology arrives at the market. Take for example, the ATM, which was invented in 1967 but did not see widespread adoption until the 1980s. The convenience of ATMs profoundly changed the way people accessed money but the everyday person did not immediately appreciate its benefits.

EY predicts that adoption of financial technology could double among digitally active consumers this year. Payment services have the highest adoption rate compared to other FinTech offerings and as consumers realize the convenience and reliability of these services, they will readily incorporate this technology into their lives. As technology continues to evolve and garner interest from end-users, the banking experience will certainly improve. Biometrics, artificial intelligence and wearables are just a few technologies that can transform the finance industry, but certainly three of the most important.

Mr. Chalbaud is CEO and founder of Madrid, Spain-based banking app Fintonic. He can be reached at sergio@fintonic.com.

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