Geolocation is the use of technology to identify the real-world location of an object or a person. Global positioning systems are an example of geolocation, as is the use of mobile phone signals to identify a phone’s location — a system which has been crucial in a number of criminal trials.
But geolocation technology is also starting to change the face of banking. From fraud detection to improving customer service, there is plenty of potential for geolocation to transform banking as we know it.
A changing context
We all know that banking and financial services are changing. We see it every day in the way that we access services: we do our banking online, often on mobile and on the go. We want to be able to check our balance before buying, take out loans rapidly and easily, and access everything on demand. We also want more personalisation in our banking services: a better understand of us as individuals, and services and products to meet our needs.
At the same time, banks are facing increasing competition from online-only financial technology start-ups. Struggling to maintain revenues, many have closed bank branches, making us turn even more to mobile and online services. This might sound promising, but despite the competition from fintechs, many banks are still trying to stick with the same old services, just provided online rather than face-to-face in a branch. As a result, they are losing customers to fintechs with a better understanding of customer wants and needs, and a willingness to supply financial services more flexibly.
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New services and products
Consider the new services now available to consumers from fintechs. Customers can now pay for goods using mobile phones, via Apple Pay and Samsung Pay. These systems allow customers to maintain a virtual wallet of both payment and loyalty cards, without having to carry more than a smartphone.
More simply, geolocation enables customers to find their nearest ATM or bank branch, together with directions to get there, making it easier to use bank services. Smartphones and geolocation are also being used to give potential customers access to relevant offers as they walk down the road. The shops in London’s Regent Street, for example, use beacon technology to target customers with specific offers outside particular shops. It’s surely only a matter of time before fintechs get in on the act, and customers pausing outside designer goods’ shops are offered credit lines, with those who buy expensive items being sent proposals for new insurance products.
Behavioural analytics offers the potential for banks and financial services providers to hold a personal data dashboard for each customer. This would show what they typically spend on particular items or classes of goods, including food, leisure, and fashion. It would also show when they are most likely to buy, and therefore help retailers to target offers more appropriately. Their bank could get in on the act by offering access to credit at the most suitable moment. Of course banks and retailers will need to spend time making sure that these offers are appropriate and ethical, rather than tempting people to spend money they don’t have, but the potential is enormous.
The benefits to banks and merchants go well beyond extending credit. US Bank, for example, is already using smartphone geolocation to check customers’ locations against card transactions, reducing both fraud and the potential embarrassment of declining a card unnecessarily.
The benefits, however, have to be balanced against the serious risks of new entrants getting in on the act, and the increased competition that results. Intermediation companies like Paypal and Apple Pay, which allow customers to create a virtual wallet or pay by methods that do not involve carrying cards, are reducing the need for direct banking services. And customers like the security of not carrying a card, but instead using a password to access payment.
Telcos are also starting to offer banking services, such as Orange Bank in France. Facebook and other popular apps are looking to exploit their ubiquity, and provide new services to their customers. These are likely to include financial services, drawing on the levels of trust that they have developed.
The bottom line
The bottom line is that customers’ demand for instant access requires different ways of delivering services. If banks are prepared to move with their customers, then inertia is likely to ensure that they retain the majority of their existing clientele. If, however, they do not take advantage of technologies like geolocation, they are likely to lose out.