The World of Finance is under pressure. Tremendous pressure. In fact, it’s difficult to imagine a time when there was so much change happening so quickly. From the stability of the global financial markets to increasing regulation and scrutiny, and most recently, the relentless march of consumer-focused, technology-fuelled businesses chipping away at what’s been a traditional and unassailable market. All this and more. The latest in a long line of technologies taking a run into Financial Services is the much heralded Internet of Things.
What is the Internet of Things and why does it matter? Well, put simply it’s a measure of the physical world. From simple devices that measure location, temperature, and blood pressure etc, through to emerging technologies that measure ‘intent’ and behaviour using sophisticated algorithms, the information produced could well change the World. With estimates of 100’s of billions of sensors coming on-line we can assume that every aspect of our surroundings and behaviour is likely to be known – if only you can get access to the data, process it, and understand it.
So what’s the impact of the IoT on the Financial Services industry in all of this? Well as scary as this might sound it presents the industry with a few unique opportunities.
I. Getting to know your customer. By now we are very familiar with Social Media sites such as Facebook where we can easily see what people are saying about themselves and their environment. This is all ‘declared behaviour’ but if we can understand their ‘observed behaviour’ - how they live their life in their home, how they commute, where and when they work, what leisure activities they enjoy and how healthy they are - we can see the real customer. Setting Data Privacy to one side just for a moment, this information would allow supremely tailored products and services that customers would love.
II. Fraud protection. No one wants to be the victim of fraud – neither the customer nor the provider. The IoT provides a unique digital behavioural fingerprint that can underpin new methods of authentication. For example, if someone inserts their card into a cashpoint, their phone is with them (at the cashpoint) and been unlocked by fingerprint in the last two mins then you have a greater certainty that this is your customer and not a cloned card.
III. Pre-authorised loans, products, insurances – new information gives you the ability to anticipate, predict and act. If you knew that someone was searching for new cars and arrives at a specific dealership, you could ping them a message that says ‘you are pre-authorised for a loan “just get the dealer to call 01234 56889” and we’ll get you driving off today in your new car’. Move from being an inactive supplier to being pro-active partner for the customer, tackling issues as they arise before they become problems for the customer.
What next? Well there are three recommendations:
1. Take action now
2. Be entrepreneurial
3. Put the customer at the centre of the proposition
The first is easy…just start. Starting is no guarantee of success but procrastination is a guarantee of failure. Even the regulators recognise this with the UK FCA recently launching a regulatory Sandbox to allow ‘experimentation’ of new consumer propositions while protecting consumer interests. The purpose of starting is to learn what the technology might do, how your business might benefit, and how it adds value to the customer.
Secondly, be entrepreneurial. Entrepreneurs think differently. They simply do not pay attention to the blindingly obvious evidence that tells them that “it cannot be done”, they ignore all the people saying “it’s high risk”, and most importantly they take action. The rebuttal that we hear most often is that asking a conservative, regulated industry to ‘take high risks’ goes against the very fibre of their organisational tenets. But Banks and Insurers have three key weapons that are at their disposal – their customer base, their P&L and their Balance Sheet.
A large customer base means you already have the potential to access huge amounts of data and just need to find a way of doing this. Deploy the P&L to fund innovation outside the core business. Deploy the Balance Sheet to invest in / acquire companies that gain traction. Focus on your core strategy and place strategic ‘bets’ with a Chief Innovation Officer. In 2016 Insuretech investment has reached significant levels with M&A and partnerships becoming a strategy of choice for many insurers.
Thirdly, put the customer at the centre of your thinking. Take a simple example; if I have an accident in my car and claim from my insurer, they will repair it to a high standard using their authorised repair centres at highly competitive rates. But if I have the same accident and decide not to claim I am on my own. Not only do I not claim but the insurer has no idea to what standard the repairs have been made – this in itself induces further risk in the policy.
Putting the customer at the centre would say, “even if you don’t claim, for a flat fee of £50 we will coordinate the repair for you through our network.”
Let’s also address the gnarly issue of Data Privacy that was set aside earlier. There are two elements at play here – regulation and intent. Regulation is on the increase and the use and protection of data needs to stay within the boundaries of the law. However, the ‘intent’ is a massive source of competitive advantage. Today we all ‘give away’ our data to the likes of Google every time we search for something and they know more about us than we do about ourselves. But this relationship is one sided and we don’t trust what these companies will do with that data.
By establishing truly customer centric propositions, openly stating what we will / will not do with the data and how our customers can benefit from it, we can create wonderful, compelling businesses. When customers trust you they value the services that are provided. And when this happens, that ‘value’ can be monetised as a trusted financial partner.