The Rise of The Invisible Bank

Banks will power experiences, but everyone will ignore them.

Inspiration for this blog title comes from Jerry Neumann, the author of the blog Reaction Wheel, who wrote in 2015 that ‘software eats the world and everybody ignores it’. Neumann also observed that ‘information and communications technology becomes ubiquitous but invisible’ – in other words, embedded in every product.

History shows that paradigm shifting technologies disrupt how we think, engage with and experience different products and services.

In fact, the last big shift for the retail banking sector was internet banking, known now as simply ‘banking’. Another example is the electric broom, more commonly known as vacuum cleaners…

We believe we’re entering another paradigm shift at this very moment.

A shift that will drastically change the face of personal banking.

The key trends driving this paradigm shift is the decoupling of the customer experience from the banks, the democratization of financial advice and planning with the advent of AI (in which the marginal cost of delivering and executing financial advice can be reduced to zero), and the top-down change created through open banking.

This will unlock a new era of empowered finance, where individuals can access on-demand, hyper-personalized and tailored financial guidance at their fingertips, or right before their eyes with the aid of hyper-reality devices.

As we move from one paradigm to the next, banks will need to reimagine how they interact with customers – going as far as to redefine who their customers are. This is because as the customer experience decouples itself from the banks, customers may find themselves using an independent intermediary. More than this, with the emergence of new devices like Apple Vision Pro, this intermediary may not even be human to access banking products & services. And as these devices grow in popularity, the financial experiences, location, and medium in which advice is delivered will continue to blur.

The future will almost certainly see an array of new ways to embed phygital* financial experiences so that banking services become ever more submerged within a broader, more digital, connected way of working. The more embedded they go, the more invisible they become to the customer.

*Phygital refers to blending the benefits of physical banking infrastructure with the advantages of modern digital technologies.

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Insight and early signals.

Founded in 2017, Sir Tim Berners-Lee’s innovative exploratory company, Inrupt, is forecasting a future where data is connected to the person and people can leverage generative AI to have personal assistants and digital agents working on their behalf, much like agents or lawyers – or perhaps financial advisors.

To be clear, robo-advisors are not new. We have already seen a Cambrian explosion of financial management startups that have unlocked wealth management for scores of the global population. But Berners-Lee’s work shows early signs of what’s to come.

Forecast.

In fact, within the next decade, GlobalLogic forecasts the emergence of a new generation of hyper-personal AI financial assistants that are as ubiquitous in the lives of their owners as electricity or connectivity. But within this decade we forecast the emergence of a new generation of hyper-personal AI financial assistants. They will be as ubiquitous in the lives of their owners as electricity or connectivity and will be owned or subscribed, living alongside people, not sitting within the bank core systems.

To help paint the picture, we have conceived a fictional product called ‘Penny’, a conceptual consumer-side, AI-powered personal finance assistant that represents the future of how we see people interacting with the banks of the future.

Introducing Penny

Our vision is that Penny will provide a path to wealth, green living, and personal security, and will be a trusted independent partner in confident financial management. Key to Penny’s appeal will be its independence from banks.

Penny's focus will be on 4 core areas:

1. Long Term Wealth Creation:

Penny empowers users to build wealth by providing tailored financial advice, investment strategies, and personalized recommendations to maximize returns and reach financial goals faster.

2. Real Time Financial Advice Your Way:

Penny combines the power of physical and digital interactions. Users can interact with Penny through innovative touchpoints like augmented reality, voice assistants, or smart devices, receiving real-time financial advice and personalized guidance tailored to their unique needs.

3. Sustainable Green Lifestyles:

Penny’s green purchase recommendations leverage spending patterns and preferences to suggest responsible alternatives, helping users make environmentally conscious choices that align with their values.

4. Delegated Access, Permissions and Security:

Penny has an advanced understanding of its users’ financial situations, spending habits, and risk tolerance to deliver personalized security measures. It ensures the highest level of data protection, safeguards assets, and provides peace of mind in an ever-changing digital landscape.

Confident that the advanced understanding of individual financial situations, spending habits, and risk tolerances enables personalized security measures and better financial health, people may decide to delegate their entire financial lives to Penny. Thus allowing themselves to break free from the toil of financial management.

More than convenience, the era of invisible banking will be about creating secure, trusted financial experiences and elevating people's financial wellbeing.

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Strategic Implications

To be successful as an invisible bank, banks must undergo a major shift. Technology and business teams need to embrace flexible interoperability, platform-centric thinking, and modern software architecture.

They will need to understand how the rise of applied AI, open finance platforms, and phygital world technologies will play a crucial role in enabling the future of banking and they must strategically focus on all of these to deliver smarter, greener, and fairer financial services to their customers.

The rise of the invisible bank will lead to a profound transformation of the retail banking industry. We will continue to watch banks' power experiences behind the scenes, with the focus shifting from the institutions themselves to the seamless integration of financial services into our daily lives.

With the emergence of AI-driven assistants similar to Penny and new devices, the future of banking for the customer holds promises of hyper personalisation, better security, and greater empowerment.

As Carlota Perez notes: “in periods of paradigm shift there is a window of opportunity for real catching up as well as for forging ahead”

Are you ready?

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Ready to shift?

If you want to discuss the future of the retail banking industry and explore how you can compete as an Invisible Bank, reach out to ​​Juan Bello, Business Head, LATAM for a chat.

Let’s find that window of opportunity to forge ahead together.

Start today.

Juan recently delivered a talk on The Rise of the Invisible Bank at America Digital, Mexico. If you ask nicely, he might even share his slides!
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More about the author:

David Backhouse is a Solutions Architect with GlobalLogic’s Financial and Consumer Business Unit