Our thesis at Daily Fintech Advisers is that consumer banking innovation is coming from two poles – the UnderBanked and the PostBanked.
Wearables impacts the PostBanked. These economies are characterized by high productivity, high labor costs and plenty of disposable income. So people in these countries a) have the money to buy wearables and b) have the motivation to save time, even small amounts of time.
We call the final phase PostBanked because while banking is still very much needed, it becomes invisible, just part of the fabric of our every day life.
Of course, every country has people with high productivity, high labor costs and plenty of disposable income. However the big changes come with network effects when the majority switch to using these new services; as Clay Shirky puts it in the brilliant Here Comes Everybody, technology becomes interesting at a societal/economic level when it becomes technically boring (i.e when it’s a commodity that “everybody” has). Thus countries where the majority of people have high productivity, high labor costs and plenty of disposable income are where this kind of change happens first.
Examples are the Nordics (Denmark, Sweden, Norway, Finland) and Switzerland and maybe Luxembourg, Germany, Austria, Japan and Netherlands.
My brick is the new laptop
My “brick” is what I call my iPhone 6 Plus. It is powerful enough as a communication device that I can often leave my laptop behind. So my laptop becomes the new desktop and my “phone” becomes the new laptop.
But my brick is big and a power hog. I can lose it and it can tear a hole in my pockets and I am a slave to power outlets.
If somebody made a smaller form factor with weeks of battery life that served as a good communicator, my brick would be left behind more often.
As we described in the opening post on wearables, this is still science fiction. There is as yet no product that tempts me to leave my brick behind.
The point is we don’t need more power, so Moore’s Law turns to smaller and cheaper. So this new form factor will come. Then the new small form factor (watch, glasses etc) will need some Smart Filters and Augmented Intelligence.
Smart Filters and Augmented Intelligence
A new small form factor means we need something to filter all those notifications that every service wants to send us because that is how we get the attention of consumers. That means smart filters (which we will set using a big device like a laptop) plus cognitive computing to deliver us really useful information when we need it and in context to what we are doing.
That will enable the next big change – when a bank comes to us.
Consumer Banking 3.0 when the bank comes to us
The evolution of Consumer Banking is:
- Version 1: We physically go to the bank (branch or ATM)
- Version 2: We digitally go to the bank (website or mobile App)
- Version 3: The Bank comes to us, in context to what we are doing.
The 3.0 iteration can be done using a smartphone brick, but it is done better using a smaller form factor that we never leave home without and rarely have to recharge and that looks nice and has some useful services.
Today we see payment via wearables e.g. iWatch. The next step is a PFM app that helps us keep track of spending and we are seeing these emerging.
This is still early days in the use of wearables for consumer banking, but the potential is significant. When these services go mainstream, cash will become a relic a bit like vinyl records. However it is still very early days.
Innovation by Banks in Wearables:
The only startup offering something that I can envisage using today is GustPay, with a niche around payments at live events. They impressed me when I saw them launch at Barclays Accelerator two years ago. However, per Crunchbase they only raised $100k and that was 2 years ago, so traction maybe weak.
I note a lot of activity in 2014, less recently. Some tech takes time to get real market traction.