The Bank of Things

How the Internet of Things will

transform Financial Services

Contents
Evolving into something new and exciting
The Internet of things
The changing role of the bank
The Bank of things: Three scenarios
The Bank of things: Making it real
Critical capabilities of the Bank of things
The future will be here before we know it
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Evolving into something

new and exciting
Advances in digital and mobile technologies
are driving fundamental changes in customer
behaviour and expectations.
Todays customer Customer 3.0
cannot be defined by traditional
demographic factors such as age, gender or
income. Customer 3.0 is hyper-connected,
highly informed, very demanding and spoilt
for choice. They expect to be engaged as
individuals, and on their terms when,
where and how they want.
In response, banks are searching for
ways to transform data into insight to
better understand their customers
and use that knowledge to deliver an
outstanding customer experience.

At the same time, a new information

revolution known as the Internet of
things is unfolding. This revolution will
create unparalleled opportunities for
financial services firms to deliver finely
tailored advice, products and services
in near real-time. By harnessing the
power of the Internet of things, banks
will be able to change their role in
the life of their customers and evolve
into something new and exciting.
We call this new reality, the Bank
of things.

The new customer paradigm: Customer 3.0

Ability to use technology

to meet individual needs

Knows what exceptional customer

experience feels like and wants that
level of experience in every interaction.

Highly connected,
particularly through
Social Media

Wants to be engaged with as an

individual through advice, offers and
recommendations tailored to their
unique, specific tastes and needs.

Trusts the crowd

Wants answers in real-time at a time

that suits them.

Well informed
and very
demanding

Wants to be engaged with through

the channel of their choice.

The Internet of things

It has taken only 25 years for the

Internet to completely transform our
lives. Today, more than 10 billion devices
are connected to the Internet, enabling
us to work, share and collaborate more
effectively than ever before. Over the
next 10 years, another 1020 billion
items will be connected via sensors, from
household appliances to heavy machinery,
crops and livestock. Each will provide a
steady stream of data to enable greater
understanding and better, faster decisions
making the Internet of things a reality.
Recent innovations allow us a glimpse
of this future. We can now control
thermostats and household lighting
through smartphones. A Dutch start-up
has discovered how to connect cattle
to the Internet to enable farmers to
monitor their health.1 Connected devices
can measure the sunlight, heat, water
and fertiliser levels of plants and crops.
Driver-less cars and pilot-less aircraft
are no longer the stuff of science
fiction. The potential of the Internet
of things will be limited only by our
imagination and our appetite for risk.
For banks, the Internet of things will
deliver an unprecedented level of data
and data-driven customer insight.
This will allow banks to provide their
customers individuals and businesses
alike a truly bespoke experience, with
insights, advice and offers that reflect
the day-to-day events in customers
lives. The Internet of things is the key
factor that will enable a bank to fully
transform into a Bank of things.

The changing role of the bank

To deliver the experience Customer 3.0

craves and demands, and to optimize
the opportunities the Bank of things era
will provide, banks need to capitalize on
the enormous amount of customer data
they already have and integrate it with
insights gleaned from social media and
other data sources. Analytics will enable
banks to use this data to develop a better
understanding of each customer, allowing
them to deliver a more tailored experience.
Banks must understand what makes todays
customers different and innovate and
transform to better anticipate and meet
their needs.

2. The value aggregator

As shown in Figure 1 below, banks

must play three roles to become and
remain an indispensable, relevant part
of their customers everyday lives:

Banks must become a key part of their

customers ecosystem and social community.
They will achieve this by developing special
alliances and partnerships that enable
them to provide exclusively priced offers
that appeal to value-seeking customers.

1. The advice provider

Banks must retain their traditional place
as a trusted advisor. But in the future they
must strive to deliver tailored, personalized
advice that meets the customers financial
and non-financial needs when and where
the customer wants it.

3. The access facilitator

Banks must use their relationships with
customers to connect them with other
service providers from insurers and
health practitioners to airlines and hotels
that deliver relevant, tailored offers that
support customers needs and lifestyles.

Figure 1: The Extended Banking Ecosystem2

Electronics
devices

Food

Electrical appliances

Fuel

Textiles & footwear

Real estate Pets

(buy or rent)

CONSUMER GOODS

Electricity & gas

AS
NK
A
B

Auto
(buy and repair)

AN

HO
M
E

Buying
Suggestions

Transportation
& parking

Furnishings

N
T IO
TA
OR

Home cleaning & care

TR

SP

Home repairs

ADV ICE PROV

IDE
R
Comparator

Target
Ads

AV
E

Events
Hotels

D-Market
Place

OR

L&

L EIS

BA
URE

Sport
activities
Leisure activities
Restaurants & bars

NK

AS

TIO
IC A
N
U
O MM

AT O R

FO
RM

FL

EA
G

O
S T R AT I O N

GRE G

E DS

N
IO

CHE

LU
TR

Flights

D S S IS F A
AT

VA

FA

CI
L IT
AT

Car insurance

OR

CT

Newspapers,
magazines and
books
Training activities
and education

IN

CT IO

Ticketing

EE

NE

UT

ON

FE

FS

S OL

S
ES
A CC
BA N K A S
N

Personal
and family
insurance

ROTE
HE ALT H & P

Health services

AT IO
N

Couponing,
Vouchering,
Loyalty

Polymorphic
Payments

& EDUCAT ION

Home security

Phone & internet

Ecosystem-based service
Large corporates
Retailer/SMEs/corporates

The Bank of things:

Three scenarios
Powered by the Internet of things vast data flow, the Bank of things
will be an ever-present part of customers lives and daily routines.
The Bank of things will anticipate
customers needs and respond to their
changing circumstances, offering timely,
relevant solutions that assist them to
achieve their goals. It will remain a trusted
advisor, facilitator and value aggregator
for its customers yet it will do so with
an almost intimate understanding of
each customers needs and preferences.

Personal banking with

the Bank of things

1. Personal banking

Arriving home, Yumi pulled out her phone

and opened her bank app. At a glance,
she could see the budget would be tight.
Her bank continuously pulled data from
her smart fridge, electric meter, water tank
and other appliances, her smartphones
digital wallet and even her car to
provide a real-time snapshot of her
spending, saving and budget activity.

Accessing the data captured by smart

devices of all kinds will enable the Bank
of things to provide customers with a
holistic view of their personal finances,
updated in real time. Banks can use their
data-driven insights to anticipate customer
needs and offer advice, products and
solutions to assist customers make smart,
financially sound decisions. In this way, the
Bank of things becomes an ever-watchful,
always useful advisor and facilitator,
building customer loyalty and increasing
the likelihood of additional business.
Already, US-based auto insurers Progressive
and Travelers are using telematics devices
to monitor customers actual driving
behavior and adjusting their premiums
accordingly a first step towards a world
where accurate, customer-centric pricing
is the norm. In the future, we may well see
home insurance coverage and premiums
regularly adjusted based on data streams
from household contents and smart devices.
Elsewhere, Turkish bank Garantis
iGaranti mobile app alerts its customers
about special offers on their favourite
brands; offers saving suggestions; and
estimates month-end balances based
on spending patterns. It is yet another
early indication of what the Bank
of things will be able to deliver.

Tokyo, Japan 2019

Yumi Sato needed to take her car to
the mechanic. Her car flashed an alert on
its dashboard while she was on her way
home from work. She wondered how shed
pay for the expensive motor repairs.

As she looked over the figures, an alert

from her bank popped up on-screen.
The bank knew her car needed repairs
and here it was with two mechanics
quotes and available appointment times.
As though reading her mind, the bank also
provided Yumi with suggestions on how to
finance the repair: she could find the funds
by reducing her vacation savings for six
months, or raise her credit card limit by
the amount of the repair. The bank had
factored in the latest reduction in her
auto insurance, based on the cars
recent data about her driving habits.
Yumi decided she could stay a bit closer to
home for this years vacation, checked her
calendar and booked the repair. Instantly,
the screen updated her vacation fund goal.

2. Business banking
The successful business banks of the future
will be those that help their customers
achieve superior commercial results.
By accessing data from across their business
customers value chain, from suppliers
to distributors to retailers, the Bank of
things will be able to develop much deeper
customer insights. This will allow banks
to provide financial analysis, products
and services that enable their business
customers to gain a competitive edge in a
highly connected, hyper-competitive market.
Analytics will be one of the Bank of things
most valued product offerings for business
customers. Banks will, for example, combine
their demographic and market segment
data with their business customers own
data-led insights (e.g. insights into consumer
preferences, regional market differences
or demand fluctuations) to help those
business customers refine pricing models.
Another example of how the Bank of
things will better serve business customers
involves transport. As more and more
transportation data becomes available,
manufacturing companies will be able to
see which transportation methods, carriers
and routes will result in a higher proportion
of damaged or lost goods and adjust
inventory values in real time. A Bank of
things could aggregate this data with that
of other business customers to identify
the relative risk of various transport options
and tailor the pricing on their insurance
offerings accordingly.

Business banking with

the Bank of things
Guangzhou, China 2020
Medical device maker Hawkins + Weill
(H+W) is just like most manufacturers
around the globe: the supply chain is its
lifeline. Managing their supply chain well,
operationally and financially, is essential
to the companys well-being in a world of
rising expectations and thinning margins.
Each day, data streams into H+Ws head
office, painting a finely detailed picture
of the companys inventory as it makes
its way from supplier to container to
truck, and from factory to warehouse
and distributors. At any point in time, the
company can pinpoint its products and
their constituent components helping
the company plan delivery, manage the
value exchange, and minimize inventory
levels so as to control infrastructure costs.
The same supply chain data also
makes its way to the companys bank.
The bank uses this data to build a deeper
understanding of H+Ws balance sheet
and stock turnover, and dynamically
adjusts the inventory financing it makes
available to the manufacturer. A few
months ago, the bank anticipated that
H+W could have a cash flow issue; with
supplier payments due before key sales
were made and pre-emptively offered
the company terms for delayed payments.

3. Primary Industry banking

The Internet of things will allow agricultural
businesses to track their performance with
unprecedented accuracy. Real-time data
feeds will allow farmers and their banks
to continuously and accurately assess the
health of the farms crops and livestock;
and more accurately gauge expected yields,
property and overall business value.
No longer will farmers and their
banks need to rely on past performance
as a guide to financing and payment
schedules. Data will allow the Bank of
things to calculate flexible, proportionate
repayments based on current conditions
and the resulting forecasts even taking
into account unforeseen events such as
natural disasters. The result? A better
financial position for the farmer and
a stronger relationship with the bank.

Agricultural banking with

the Bank of things
Harden, New South Wales,
Australia 2021
John Martins family has been growing
wheat on their farm for over 100 years.
The technology has changed, but the
concern with cash flow has stayed the same.
Yet John is confident about his finances,
because his bank is an integral partner
to his farming business.

Each day, John connects to his bank for the

latest update on his farms financial health.
His bank uses the wealth of data from the
farm to assess the value of the farm property
and equipment and potential yield value,
continually adjusting the loan financing
available to him. Over the past couple
of years, the banks analysis of his farm
data has uncovered several opportunities
to improve the value of the land, not to
mention the farms financial position.
John is keen to replace his aging harvester.
While online, he sees that hes been
pre-approved for the requisite equipment
loan; clicking on the message takes him
to a simple online application, and within
minutes he can see that the funds are
available and the impact on the farms
balance sheet has already been recorded.
The new harvester, John knows, will provide
a steady flow of data on its usage and
condition, allowing him and his bank to know
its value at any time. More important to John
is how this data can be used to determine the
flexible, usage-based loan repayment with his
bank. His bank will talk to the new harvester
to determine its usage and calculate the
portion of farm income attributable to it, and
adjusting Johns loan payment each month.

These days, minute sensors monitor all

aspects of his farms day-to-day operations
soil and crop conditions, fertilizer levels,
livestock health and even the usage of
the farm equipment and Johns truck.
John uses this data to better manage his
farm, and his bank uses the same data to
provide him with the best advice possible.

The Bank of things:

Making it real
The Bank of things scenarios we describe are not as far-fetched as
you might think: Internet of things-related technology and services
revenue is forecast to grow from US$4.8 trillion in 2012 to US$8.9
trillion by 2020. The future is coming fast and to capitalise on
these opportunities, todays banks need to invest in developing the
ecosystems and capabilities that will drive tomorrows Bank of things.

Creating a Bank of things ecosystem

To bring the Bank of things to life, banks need to focus on three key areas to establish
a business ecosystem that will support this new model.

1.

The right partnerships

Need to collaborate with ecosystem
partners to extend reach and integrate
products into all areas of their customers
lives. These partners could include other
financial services institutions, mobile
payment innovators, utility companies,
telecom companies, retailers or
technology firms.

2.

Collective data analytics

Customer insights drawn from bank's
internal analytics structures will continue
to form the backbone of strategic business
decisions, however the Bank of things will
only be able to deliver a truly complete,
personalized and integrated customer
experience when it aggregates data with
all ecosystem partners.

3.
Connectivity
Create a seamless, consistent experience
across multiple channels to deliver a
superior customer experience and drive
enhanced revenue opportunities. The Bank
of things will build on this, integrating
new external distribution channels and
developing an interconnected network
reaching beyond traditional, bank-owned
channels of today.

Critical capabilities of the

Bank of things
The Bank of things will need to navigate immense volumes of data, access
a huge number of customer interaction points and serve as a vital hub that
coordinates a host of activities designed to meet customers financial and
non-financial goals.
To do so successfully, banks will need
to invest in developing several critical
business capabilities:

1. Analytics
Banks are already searching for unique
ways to use the customer data they already
possess and external data such as social
media feeds to help them anticipate
customer needs and deliver timely offers.
In the Internet of things era, the volume of
data available will explode. Banks need to
continue investing in analytics capabilities
that will allow them to process and make
sense of all of this new data in order to
deliver highly individualized, valuable
and actionable offers to their customers.
Consistently delivering the right products
and customer-centered advice will drive
customers to engage their bank on a more
regular, everyday basis as their valued,
trusted, and personalized financial adviser.

2. Tailored pricing and

product development
Banks are moving away from static,
inflexible pricing models and one
size fits all products. Today, proxies,
estimates, trend analysis and customer
segment analysis are all used to develop
a range of pricing models and product
features. The Internet of things will allow
banks to evolve this further, allowing
banks to tailor products and determine
prices dynamically, in real time.

The Internet of things will provide banks

with the opportunity to take product
development to an entirely new level.
Equipped with a vast amount of granular
detail about each customer behaviors,
usage, daily life events tomorrows Bank
of things will need to design and provide
products tailored to a specific customers
needs at price points reflective of that
customers overall financial position.

3. Distribution
To seamlessly embed themselves in
their customers daily lives and avoid
becoming an intrusion banks will need
to be absolutely precise in the choice
of distribution tools, applications and
methods used to communicate with each
customer. A data-driven understanding
of individual customers needs and
preferences will be essential. In some
cases, banks take their customary centre
stage in the interaction; in others, they
will find themselves playing a pivotal
background role in an interaction between
the customer and an ecosystem partner.

4. Agility
The Internet of things will be characterized
by continually changing technology and
infrastructure. Banks will need to invest
in developing their agility and capacity for
change, so they can evolve and adapt to
these shifts. High-performing organizations
already recognize that change capability
is a core competency and an integral
part of all business activities. Banks that
can train themselves to be more agile
will be able to respond to technology
changes rapidly and flexibly and as
a result maintain market relevance.

5. Continuous innovation
Innovation is a key driver of business
competitiveness and profitability in every
industry. The transformation from bank to
Bank of things will be an ongoing process,
one that will demand continual innovation
to anticipate and respond to the everchanging needs and demands of tomorrows
customers. Developing the capacity to
innovate rapidly and successfully will enable
banks to grow their customer base and
increase customer value while fortifying
their market position going forward.

6. Digital risk management

Todays banks use a range of credit
models to manage their risk profile:
from tri-dimensional scoring to optimize
the balance between approved and
rejected; non-performing-loan clustering
to identify groups of customers with
higher propensities to default assess
potential exposures and devise recovery
strategies; to real-time, adaptive
estimations of collateral values in the
event debt recovery is required.
Banks will still need to invest time and
effort to manage these credit models in
the years ahead but they will also need
to prepare for the future. The Internet of
things will enable banks to collaborate with
their customers to better understand their
needs, financial position and collateral
value while automating much of the work
involved in doing so. By gaining access to
the data of their customers daily lives,
the Bank of things will be able to refine
their credit models and improve their
overall risk position on an ongoing basis.

The future will be here

before we know it
The Internet of things
era is coming. Soon,
even the most mundane
appliance will provide a
steady stream of data
that can be analyzed
and acted upon.
To thrive in this new world and build
and retain a sustainable competitive
advantage, todays banks will need to
continue to invest in data gathering
and analytics capabilities. Moreover,
they will need to invest in building
new partnerships with a wide range of
organizations to ensure they can obtain
the data they need to deliver a true
Bank of things experience to each and
every customer. Those who embrace
these opportunities will stand the
best chance of becoming a ubiquitous,
central player in their customers lives.

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About the Author

References

Ian Webster is a Managing Director,

Financial Services Strategy and
Transformation. He has worked in
Financial Services for over 15 years and
leads the Accenture distribution and
marketing stream for Asia Pacific.
Email: i.webster@accenture.com

1 http://www.theiet.org/sectors/
information-communications/hot-topics/
internet-of-things.cfm
2 Accenture: The Everyday Bank

About Accenture
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collaborates with clients to help them
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fiscal year ended Aug. 31, 2013. Its
home page is www.accenture.com.

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