20 years ago, we were still shopping in the department stores, driving 20 miles away and picking up the goods in monthly or weekly basis. We started to enjoy surfing the internet and choose our favorites from eBay or Amazon since early 21st century, after work in daily basis.
Today we are sliding the smart phones and refreshing the shopping apps for every single hour or even minute. Our shopping behaviors have been changing so much for the last decades. It becomes much more frequent and digital. The direct result of these changing behaviors online leads consumers to use digital currencies, payments as well as online banking services. We are seeing these changes now. More and more banks are giving up physical branches and providing so called “digital retail banking” services.
So, what is the next coming thing? The new “IoT” (Internet of Things) will eventually connect all the physical objects around you to the internet. In the near future, you might be able to Google your clothes, food or even furniture. When the time comes and the world has enough information and computation power, you will be able to spend and consume not just in minutes but in a continuously time frame.
The power of industry 4.0.
Imagining you are going to the restaurant in the future. You might be able to pay a small fee to choose your favorite seat either near the window or with a sea view. If you are driving, it is always ok to choose a faster lane anytime by paying extras. If you are buying a car, you are able to configure every part of the car with color, engine or even whether compatible with IOS or Android or not before it was manufactured. You are able to track the productions and expected delivery date with a accuracy to single minute. This is the power of industry 4.0.
Now you will need the banks to provide you a “continuously” financing for your huge numbers but small amounts of financing needs. Moreover, instead of financing your whole thing, you are able to finance your vehicle parts by parts. You may choose the different rates for your different behaviors or parts of your products as the future digital banks might have their own preferences. Maybe at that time, your bank or Google might know you better than yourself.
Having enough storage and computation power for such huge amount of the information, the cost of accessing the retail clients would not be much higher than corporate clients but with a much higher margin. The cut-off of the retail clients and corporate clients becomes blurring.
Does it sound incredible but a little bit far away? The truth is that: it might not be as far as you thought. Amazon fulfillment grants the retail customers to delivery their goods to others with a corporate level efficiency of logistic. The retailers are able to track their individual and small amount of the goods in real time. Amazon is responsible of tagging those goods and turn into “IoT”. Meanwhile, Google is partnership with Calvin Klein to design the fashion by top key words result. Another sample is that Alibaba is working with banks to issue Letter of Credits for their customers’ trade finance business. This is a formal commercial and corporate business but managing them in a much smaller micro level.
The consumer behaviors changed the traditional retail banking services into the digital banking one. “IoT” and Industry 4.0 will eventually enhance the changes to commercial, corporate and investment banking business. Things are happening now but still, we have a chance to catch up as most of the recent developments are still piece by piece. P2P lending, crowded funding, digital wealth management and .etc are moving ahead without a general bank’s framework. Where are we now? How will the digital banking impact the corporate banking business in the future and where is the real digital bank? I will discuss these topics in my next articles.
Yeung Yeung
Corporate and Investment Banking, BBVA Compass
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