The future of digital banking may be just over the horizon
The metaverse and other innovations hold considerable promise for the financial services industry.
Peer over the horizon, and you may find bankers and their customers routinely doing business in the metaverse—the immersive 3D digital environment—or frictionlessly transferring funds in real time with some form of digital currency.
Those are just two of the near-term digital innovations that a trio of banking experts foresee transforming the financial services industry.
“As banks think about digital banking, the mobile app is where most banks are focused today,” says Lamont Black, associate professor of finance in the Driehaus College of Business at DePaul University in Chicago. “But we have to go beyond that to these more immersive experiences, and the metaverse is one example of that.”
Black, a former economist for the Federal Reserve Board of Governors in Washington, says the metaverse has the potential to drive richer, more productive customer conversations than the current model of people staring at each other on a flat screen. “That may be three to five years in the future, but there are certainly many banks and credit unions exploring the metaverse right now so that they can position themselves for these changes.”
Black, whose recent research has focused on digital assets, points to an acceleration in the move toward digitalizing money.
“Cryptocurrency, which emerged with bitcoin in 2008, introduced a paradigm shift in the way we think about digital banking,” he says. “Bitcoin introduced the idea of peer-to-peer electronic cash to transfer value from one person to another using a network—in this case a blockchain—rather than going through a financial intermediary.”
Design visionary Jean-Pierre Lacroix, president of branding and design firm Shikatani Lacroix in Toronto, shares Black’s belief that the metaverse holds great promise for financial services organizations.
“Banks are already dabbling in the metaverse,” Lacroix says. “They need to view it as a channel, much like mobile or online. But they need to approach this channel differently than they would do mobile or online as these virtual communities emerge.”
Lacroix also expects to see emerging digital technologies, such as robotic greeters in branches. “The first thing bankers cut are the greeters,” he says, noting that banks in China have been using robots to welcome and direct customers for several years. But the concept is new to North America and will be useful in giving customers a sense of direction as more banks turn to universal bankers instead of having customers queue in teller lines.
Security is an overriding concern of bankers and their customers in this era of digitalized banking, according to his firm’s research. Lacroix says new anti-fraud technologies must immediately address those concerns.
From his office in Boston, Gregory Kanevski, global head of banking for ServiceNow, says, because of the pandemic, banking customers are much more open to purchasing online and via mobile, and that those digital transactions have greater potential for fraud.
“Fraudsters are very well funded. They are not regulated. They don’t have the bureaucracy of programs and institutions,” Kanevski says. “They are more nimble, and they can be more flexible than any banking institution.”
He says the pandemic and its aftermath are forcing bankers to “modernize the way they look at fraud. There is an onslaught of new fraud coming their way. They need to respond much more nimbly to the dynamic of what’s in front of them. They can’t wait 30, 60, 90 days to change their procedures. They must change them daily or hourly. That is a very different dynamic.”
Kanevski, who recently spent six weeks speaking to banking executives around the country, says his audiences were eager for solutions to help them respond to the growing threats and ever-evolving forms of fraud. “They’re saying, ‘We need a technology that can help me respond more quickly.’ Bankers have to make sense of the noise to respond more quickly.”
In response to the crisis, Kanevski expects a burst of fraud-protection innovation to roll out over the next 12 to 18 months. “Bankers will make their bets in the next year to year and a half as to where they are going to go with fraud protection and with whom they plan to invest.”
Edmund Lawler is a BAI contributing writer.
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