„The Future in Banking & Payment“
POSTED ON 07. May 2018 BY HENRIK BÜTTGEN, DENNIS JÄGER, JANA SCHNEIDER
Trends come and go – this also applies to payment transactions. The drivers of innovation are often technological progress, regulations, costs and the customer. But what are the latest developments and research in this area? An OSTHAVEN perspective on the future in banking and payment.
Now, be honest, how many different passwords do you actually use for your everyday business? Studies have shown that a typical behaviour for users, on many devices, Internet portals or even online banking, is to use the same password. The human brain likes it easy and is lazy. So, the name of grandmother’s dog in connection with the own landline phone number as a password is very tempting. The risk of misuse of this password, however, is very high. A big trend is starting right here, and using new technologies, it is looking for ways to measure or identify the biological uniqueness of people and thereby enable a secure recognition. The science behind it is biometrics. First solutions have long since spread into everyday life. Unlocking a smartphone via a fingerprint has made it unnecessary for years to enter a code or password. In the meantime, entire payment transactions are triggered by means of a fingerprint. Apple has determined an error rate of 1:50,000 in the process of the Touch ID (apple.de). With the birth of the new generation of smartphones, face recognition has become socially acceptable and works very well. With the Face ID the error rate of 1:1,000,000 on devices with an apple in the logo is still clearly below the rate of Touch ID. The appearance of the mouth, nose, eyes and ears as well as the individual head shape and other features are unmistakable in combination and are ideal for authenticating. In addition to the techniques and procedures that have already appeared in everyday life, there are other possibilities that once sounded like science fiction but have now arrived in the midst of reality. In the search for distinctive human biometric features, a person‘s voice is as unique as its appearance. Barclays Bank has recognised this fact for itself. Customers can register via a voice scan. As soon as a customer‘s voice can be heard in the call centre, it is automatically identified based on numerous voice characteristics. The method of voice identification pays attention to another trend in the field of payment and banking. We are talking about „Voice Banking“. Since Amazon’s Alexa, Apple‘s Siri and other digital assistance systems have spread out in the living room and have simplified many things of everyday life, the desire of customers is to manage their bank account by voice and make payments almost by tongue.
Payment by „laying on of hands“ is also no longer a utopia. Another method that can be used for payment procedures is the so-called vein scan. Customers of the British supermarket chain, Costcutter, can pay for their purchases with this new biometric procedure. The vein pattern of their fingers is scanned and connected to the bank data. At the supermarket checkout, the stored data is then compared with the scan data. The customer actually pays by a „laying on of hands“.
OSTHAVEN is convinced that biometrics will become an increasingly important topic in banking and payment transactions. The new authentication methods especially impress with their high security factor and convincing practicability in everyday life. Another trend in payment and banking is Artificial Intelligence (AI). This is known by many as the „new industrial revolution“. AI does not stop at the financial sector. Since banking is more about services than about a physical product, and personnel is a significant cost factor, it makes sense to use artificial intelligence to automate processes more. Thus, in the past few years the Chatbot service has been introduced in direct customer contact in many houses. With the help of a good AI solution, the majority of customer inquiries can be answered directly around the clock, without human interaction. For banks there is a huge savings potential and more opportunities to increase customer satisfaction. However, AI is not only used in customer interfaces, but also in sales analysis. AI in combination with big data enables a customer to analyse and evaluate his data in a matter of seconds. In addition, we see possible applications of AI in fraud prevention or individual product recommendation based on the comprehensive analysis of customers‘ financial position. Especially in the financial industry there is a wide range of applications.
It is obvious that there are many parallel technical developments in all areas of human life. The potential benefits and theoretical applications seem to be unlimited. In addition to individual innovations and the use of different devices in the daily lives of users, the networking of these different technologies will become increasingly important in the future. The Internet of Things describes the rapid growth of Internet-connected, intelligent devices. The networking of physical and virtual objects is in the foreground. In the target vision, these objects should work seamlessly together through information and communication
technologies. There will be completely new application scenarios for payment transactions in the future. Imagine that every networked device can be used for cash transactions and thus become its own, individual Point of Sale. It is conceivable that garage parking and toll fees and petrol station tab could be paid contactless by means of „Connected Car“. The driver can stay comfortably in the car and save himself the trip to the cash register or to the ticket machine. What happens in this case with the petrol station shop sales? Car manufacturers, however, go one step further and change their business model by offering custom features, accessories and digital services in the connected car as „pay-as-you-go“ services. The resulting opportunities for car manufacturers are enormous and also the benefits of cost reductions and efficiency gains in production.
OSTHAVEN sees the increased customer requirements for the most secure but noiseless authentication as an opportunity to drive forward the bank‘s own digital payment solutions. In the context of new technical developments such as AI and regulatory framework conditions such as the PSD II, which encourage the design of new products, innovative forces can be released from traditional players on the market. What all approaches have in common, however, is the fact that the „customer“ and his needs for simplicity remain as the foci of interest and are drivers or obstacles to possible developments.