Over the last few years as technology has become increasingly cheaper, faster and accessible by all through the cloud, Artificial Intelligence has never been far from the headlines. When you think of AI you probably think of Robots and the Terminator films or maybe autonomous vehicles however it is much wider than this. Today AI is incorporated in no end of devices and already it is showing up in game development, autonomous vehicles, chatbots, robo-advisors, digital assistants (Alexa, Siri, Cortana etc) to name but a few. The overall research goal of artificial intelligence is to create technology that allows computers and machines to function in an intelligent manner. The general problem of simulating (or creating) intelligence has been broken down into sub-problems and these include topics like Machine Learning and Natural Language Processing. ML (Machine Learning) is also fast becoming the litmus test of forward thinking companies although adoption is currently low outside of the technology sector and there are few large scale deployments.
Today most data science is completed by actuaries and in house data analysis teams where the past is studied to predict the future. However in this changing world this is no longer just the answer as AI can make predictions in Real time and looking into the past will not predict the behaviour expected from events like Brexit, Global Warning, tensions with North Korea, immigration increases etc as they have never happened before. Also as wider data sets available to all are leveraged non-traditional players will start to enter the market. Also just think if somebody created an app store to sell algorithms to solve problems across all industries which did just this. The only differentiator would be the incumbents own data sets.
There are hundreds of applications for AI which will improve service, create efficiencies, reduce cost and provide competitive advantage and at the moment incumbents are best placed to leverage the widely available data sets merged with their own. However numerous non-traditional players are using technology to create or crowdsource big data sets of their own and IDC (International Data Corporation) forecasts worldwide revenues for Cognitive and Artificial Intelligence (AI) systems will reach $12.5 billion in 2017 and raise to $46 billion by 2021. So it may only be a decade before AI becomes fully mainstream so everyone will need to embed Machine Learning at the core of their business to ensure they are best placed to take advantage of in future.
Do you remember when you wanted a fixed telephone line in your house or mobile just to make telephone calls rather than access the Internet? The world has certainly changed in the last 17 years since the rollout of Broadband in the UK and so has the enterprise’s position on their offerings. Now most companies are moving to become a Data Provider or Creator with the net result that calls/texts are now becoming free and consumers only paying for the data. This new data focus is certainly consumer driven however consumption patterns are changing too as technology preferences stabilise.
In a recent report entitled “future in focus 2017” by Comscore (although focused on the US market) it highlighted a range of interesting statistics. The US Smartphone market is reaching saturation at 81%; desktop usage is declining and the tablet market flattening (this is in direct correlation to the increase in 4.5inch + mobile sales).
Since 2013 Smartphones have seen a +99% increase in usage, Tablets +26% and Desktops -8%. The average person is now spending 2hrs 51 minutes a day on their mobile which equates to 71% of their digital experience (61% in the UK) and the biggest increase in apps are ones which improve real time behaviours i.e. hailing cabs, traffic navigation, making shopping/selling fun, mobile wallets etc. (Waze, Uber, Wish, Venmo, Lyft etc).
However even though everyone is favouring mobile the sales conversation rate is still lower than traditional or tablet channels (although Mobile is the only medium seeing constant growth) so it may be a few years before smartphones take the lion share or possibly not.
Remember mobiles have only been finding their footing over the last few years and have now come of age. It is claimed that certain markets have now reached saturation and the processing power (the new 2017 handsets will be able to handle AR/VR) being offered is similar to PCs. Also with the increased form factor (4.5 inch +) we will suddenly see smartphones displacing tablets upon replacement. Don’t also forget that the increased security (Biometrics), waterproofing and high end cameras are making these devices a one stop shop. Therefore the time is right to start developing for mobile, in the past responsive sites were top priority, however this probably explains why purchases are still being made on traditional channels. We constantly talk about the digital native and then design applications which are responsive and as we know “one size does not fit all”. In the future advances will be seen by those whose customer journey is built from the bottom up with small form factors in mind and not the desktop. There are very few sites that really get it right today so the opportunity if out there for the taking
The thought of changing ones perception and entering a Virtual or Augmented Reality is not new. However over the last few years the technology has advanced to where the price point is now within everyone’s grasp. Back in June 2016 I wrote about AR so this time I will provide some insights into VR.
Virtual Reality as we know it today originated from Science fiction and its first reference is believed to have come from the 1935 short story “Pygmalion’s Spectacles” by Stanley G Weinbaum where he described a goggle-based virtual reality system with holographic recording of fictional experiences, including smell and touch. Since then there have been numerous products which have lead us to today and I imagine everyone has used something that tried to enhance reality (Back in 1939 View-Master stereoscopes were introduced) or seen a Program that glorified the Technology (In 1974 the Holodeck made its debut on Star Trek. ). In its infancy VR mainly resided in the gaming community however recently it has fragmented into multi price point options accessible by all.
At the low end we are seeing headsets which range from Cardboard to Googles Latest Daydream View where Apps can be downloaded onto your phone and the phone used as the viewing platform. Just search VR on the Apple or Google App stores and see the options; they are not just games.
At the high end however even more Innovation is being seen. With the likes of the HTC Vive and the Oculus Gear or Rift suddenly enterprise grade headsets are appearing that can solve enterprise problems. Applications are now being created where the headsets can be used for immersive, education, engineering and medical procedures. In the Business environment you just need to forget the gaming angle and suddenly the possibilities are endless. Any Digital process which can be changed in real time could be viewed via a headset and changed in seconds to enable Agile development. Think of the Marketing opportunities and how the sales process could start before the final product is finished. As the technology matures over the next few years and its price point moves to a consumable item everyone will be embracing Reality 2.0.
Over recent times great advances seem to have been made with the technology behind Intelligent Personal Assistants like the Amazon Alexa however this has been brewing for at least 15 years since search improved from knowledge based and semantic to Artificial Intelligence using natural language. Only now however are we entering a period where this technology can be leveraged across numerous product lines offering a seamless experience.
One of the starting points on this journey dates back to 2002 when Google launched “Google Voice Search” which enabled users to access the internet via voice commands and later in 2007 True Knowledge launched its Knowledge Answer engine. In 2011 we saw the launch of Siri by Apple and in 2012 True Knowledge launched a major new product called Evi which was an artificial intelligence program which could be communicated with using natural language (The company was acquired in 2012 by Amazon and the technology became a key part of the Amazon Alexa assistant which debuted in the Amazon Echo). Over the next few years the full set emerged which we know today (Google Now 2012, Microsoft Cortana and Amazon Alexa in 2014 and Samsung Bixby in 2017) until the technology found a new home outside of the mobile handset.
The issue with the Intelligent Personal Assistant technology however was that it was handset dependant so you were reliant on carrying your mobile device when you needed that injection of inspiration. One solution was the creation of an always on device which could be placed in open spaces like the Amazon Echo and Google Home. These however are also reliant on placement but if situated in a prominent place in the house with them constantly listening for command words they certainly can start to bridge the gap although instead of being a mobile device with software loaded they are now a speaker. So where will this technology go next? Alexa is already being placed in alternative objects like a lamp (GE Sol is launching the C which is a lamp with Alexa built in – although Dyson may be interested in the similarities to the Cool Desk Fan) and numerous other devices which are Alexa compatible like the Ecobees thermostat are entering the market. Amazon is also launching a new device called the Amazon Look which also has a camera although initially I am sure there will be concerns on its placement and if this could be hacked like a PC camera to spy on you. The premise however is that you can take selfies or videos and one use could be to show you how you look in an outfit or for security.
The Innovation is also not coming just from the usual suspects either and the Israel-based Intuition Robotics is developing the virtual assistant specifically for the elderly called ElliQ to deal with users who may experience social isolation and physical inactivity where it will suggest a walk when the weather is nice or say when it’s time to take medication.
Even though the technology is now moving at a tremendous pace there is still one hurdle to overcome before it migrates to the mainstream; verification. Because the devices are located in open spaces, constantly on and linked to a user’s account with no bio-metric verification unless you live alone you would not want to link the devices to sensitive information like financial or health as anyone could request information. However once voice verification is cracked the uses will be endless and in addition to the previous what if you could connect to wearables, specific IOT devices and pay for things from nominated accounts, everyone would want one. This day will not be far away though so dust off those Business Cases and think of the possibilities.
Much has been written over the years about the digital transformation of governmental and health services in the UK and US however very little disruptive change has been seen. Whereas over the last 8 years India has made leaps and bounds with its governmental vision “To empower residents of India with a unique identity and a digital platform to authenticate anytime, anywhere” . Did you realise that over 1.1 Billion Indian residents have now been issued with an Aadhaar number (ID Number) which contains the owners demographic information and is protected by their biometric information? (and not just a single fingerprint but Ten Fingerprints, Two Iris Scans, and Facial Photograph).
This Aadhaar number was also only the first phase of their India Stack project whose mission is to create APIs that allows governments, businesses, startups and developers to utilise an unique digital Infrastructure to solve India’s hard problems towards presence-less, paperless, and cashless service delivery. Since the Aadhaar introduction an aggressive delivery schedule has ensued and the following platforms also now exist.
- In 2011 the Aadhaar Payments Bridge & Aadhar Enabled Payments System was launched which uses Aadhaar number as a central key for electronically channelising the Government benefits and subsidies.
- In 2012 eKYC was launched to allow businesses to perform Know Your Customer verification process digitally using Biometric or Mobile OTP.
- In 2015 eSign launched as an open API to facilitate an Aadhaar holder to digitally sign a document
- In 2016 a Unified Payments Interface launched to revolutionise digital payments in India
- In 2016 DigitalLocker was launched as a secure dedicated personal electronic space for storing the documents of resident Indian citizens. The storage space of 1GB is linked to the Unique Identification Authority of India (Aadhaar number) of the user, which can be utilised for storing personal documents like University certificates, Permanent account number (PAN) cards, voter id cards, the URIs of the e-documents issued by various Government departments. Over 5 Million users already access this service.
In addition to India Stack project the government also banned (Nov 2016) the country’s largest currency bills to try to stem the flow of counterfeit money and to take aim at terrorist organisations that rely on unaccounted-for cash. It is also expected to help the government clean up a system that has relied on cash to pay bribes and to avoid taxes. This ban on large bills is very likely to hasten India’s transition away from cash as about 78 percent of all transactions in India are made by cash, compared with 20 percent to 25 percent in the United States, Britain and other countries (according to a report by Google India and the Boston Consulting Group).
The above now places India in a perfect position to embrace digisation as once you have subscribed to the above no longer does a Regulated entity, Bank, Payment or Wallet provider need you to provide your identity and Digilocker has been an accepted location of proof for even your driving license with police to negate your need to carry it.
Currently Smartphone penetration is only 28% in India and all of the current digital payment systems work on 2G to ensure that India Stack is embraced by the masses no matter what mobile handset they have. However with the emergence of companies like PayTM (Pay Through Mobile) Launched 2010 (2015 saw Investment from Alibaba and its Launch in Canada in 2017) you can see this quickly increasing to 100% especially as this is an enabler for all transactions to be made using biometrics through a mobile device and negate the need to carry cash.
It is predicted that Sweden could become the first cashless society by 2030 but could this crown be stolen by India? just think what advances could be possible when 100% of future generations are 100% digital?
If you ask anyone about Fintechs they will inevitably refer back to the Dot Com bubble (1995 – 2001) which fuelled the rapid growth of the Internet.
However, back then the investment was funding the building blocks of web technology with the most of the money going into Web Infrastructure, Security, Portals, Consulting, Marketing and Content. Unbelievably during this time there was no broadband and we were all having to deal with “Dialup” (In the UK Broadband was first introduced in 2000 and even by 2006 it only had 13 Million users compared to 2016 where 87.9% of adults have access i.e. 45.9 Million users), no real smartphones or tablets existed (The first iPhone arrived in 2007 and the iPad in 2010) so the main access to these technologies was via the desktop. The frenzy also saw massive investments in companies who were filing for IPOs without any revenue.
If we skip forward over 15 years we are now seeing an enhanced level of funding once again in FinTechs however this time its very different. In 2015 we saw the total level of Global deals reaching $14.8Bn and by Qtr. 3 2016 this had increased by 27% (this is in sharp contrast to only 5 years prior where only $2.59Bn was invested (2012)). In the UK $191m was invested in 2012 and by 2015 this had also increased to $1Bn (60% of investment in the UK are going to Challenger Banks, SME Financing, Money Transfer, FX, Digital Currencies and Blockchain). Also companies filing for IPOs are now showing revenues in excess of $100m.
So why is it different this time? There are numerous reasons why a perfect storm is brewing and I will explain a few below.
- FinTech Technology – During the Dot Com Bubble you needed to procure Servers, understand security and have funding to support and develop your offering. Now with the rise of Cloud Service like AWS, Azure, Google etc. anyone can build an application with a credit Card and pay by the hour.
- Building Block Technology – Fintechs no longer need to create everything as you can plug and play the payment, billing, map software etc. (Think UBER)
- Consumer Technology – During the Dot Com Bubble the barrier to entry was also on the consumer side as you needed internet connectivity (Dial up) and a Desktop. Now technology is widespread and its commonplace for people to carry multiple devices all with Internet Connectivity (Tablets, Smartphones, Wearables etc.)
- Generational Changes – During the Dot Com Bubble 40 Million Gen Xers came of age. Now there are 85 Million Millennials, all of whom are digital natives.
- Global Social Community – We are all now a global community over one world wide web
- Regulation Changes – The regulators are now embracing emerging technologies and offering sandboxes and incubation to start-ups
- Data is King – With the emergence of data Science and open data initiatives, Big Data and new modelling techniques are changing how we cost propositions and offer/sell insight.
In a recent report from McKinsey & Company entitled “Bracing for seven critical changes as fintech matures” they cite 30 emerging areas which are seeing Fintech growth.
So what should everyone do? Another article from Mckinsey & Company Cutting through the noise around financial technology suggests to some of the capabilities Banks should be making.
It’s all not doom and gloom though for the incumbents. Anyone can adopt FinTech methodologies and the Financial Services industry still needs regulation, oversight and to engender trust. Everyone therefore needs to become fighting fit, embrace change and not forget a lot of these new technologies will come with a lower price point and enable greater automation with insight for the future.