Making banks and asset managers more user-friendly in a digital age
The financial industry is undergoing a profound transformation, propelled by technological advancements. Amongst these innovations are extended reality (XR) technologies including virtual reality (VR) and augmented reality (AR); these immersive technologies have the potential to revolutionize customer engagement within the banking and asset management industry by creating captivating experiences in the metaverse. However, despite this potential, significant challenges persist ranging from ethical considerations to regulatory hurdles and technological complexities. Nonetheless, XR presents a promising pathway for banks and fund managers to re-imagine customer interaction and pave the way for a digitally immersive future in finance.
Extended reality transforms banking and managing money by offering immersive experiences that deeply engage customers. Citi Research forecasts the XR market to reach $2.16trillion by 2035, with AR adoption also growing rapidly. Furthermore, Gartner predicts that 25% of people will spend an hour daily in the metaverse by 2026. With AR platforms such as ARKit and ARCore, banks can create immersive journeys accessible globally, so strengthening customer relationships and positioning banks as tech innovators. In fact, the COVID-19 pandemic accelerated XR adoption, in turn revolutionizing industries from retail to healthcare. In the meantime, this year the XR market is projected to reach $300billion, including in areas such as:
· entertainment and gaming - extended reality (XR) offers immersive gaming experiences, allowing players to deeply engage with virtual environments and interact with digital characters.
· healthcare - XR assists in medical training, educating patients and facilitating remote consultations, thus improving the provision of healthcare services and enhancing patient outcomes.
· education - XR transforms the educational process by enabling virtual field trips, interactive simulations and practical experimentation.
· retail and eCommerce - augmented reality (AR) enhances the shopping journey by enabling customers to preview products in their own surroundings before committing to a purchase.
· workplace - XR encourages remote collaboration, virtual training sessions and heightened efficiency, especially in hybrid work environments.
· defence - XR technologies serve military training, simulations and improvement of situational awareness, thereby strengthening soldier readiness and operational efficiency.
· travel and tourism - XR enables immersive virtual tourism experiences, allowing individuals to explore destinations from the comfort of their homes.
Correspondingly, both AI and XR technologies are revolutionizing banking by:
· tailored experiences - chatbots and virtual assistants powered by AI provide individualised assistance, whilst XR enriches financial visualisation with immersive features and so enables banks and asset managers to offer mass customisation.
· virtual banking - XR technology allows for virtual branch visits and VR banking apps, enhancing accessibility for clients.
· fraud prevention - AI algorithms identify suspicious activities, with XR complementing this by offering immersive security training sessions.
· financial literacy - AI-driven platforms deliver personalised financial education, enhanced by XR to create interactive and engaging learning experiences.
A survey by Accenture ascertained that “ four out of five asset managers state that ‘customization for the masses’ will be a key growth driver over the next five years”, seemingly indicating that mass customisation is on its way due to it becoming increasingly harder for asset managers to find ‘alpha’ i.e. outperform other funds. Meanwhile, in the retail industry, AI, VR, and AR are revolutionizing the commerce landscape, delivering tailored experiences and elevating customer interaction. AI can function as a personalised ‘shopping assistant’, forecasting preferences and managing inventories, with 82% of businesses leveraging AI for online customization. For instance, AI algorithms power individualised recommendations akin to having a virtual personal shopper at one's fingertips with VR facilitating virtual ‘try before you buy’ encounters, immersing shoppers in digital storefronts and so driving sales - take Pictofit by Reactive Reality, which allows customers to test outfits from home. Furthermore, AR enables virtual garment fittings and product visualisation in real-world environments - for example, on-line fashion shop, Zalando, employs AR for inventive sizing solutions. Meanwhile, chatbots offer instant 24/7 support, enhancing customer service and contentment; Tidio offers AI-driven chatbots tailored for small and medium-sized businesses, boosting customer satisfaction through prompt responses. Conceivably, these technologies can forge deeper bonds with customers, fostering increased sales and brand allegiance amidst the evolving ecommerce landscape - here are some further use cases where VR and AR are being used.
With XR technologies, investor engagement and retention is enhanced by providing captivating immersive experiences. Through interactive AR applications or VR simulations, businesses can deepen their connections with potential investors, creating a unique selling proposition (USP) and fostering brand loyalty and affinity. Whether leveraging AR for product visualization or MR for interactive advertising, banks and asset management firms can differentiate themselves in competitive markets and leave a lasting impact on consumers. Additionally, virtualised processes and services enabled by XR technologies offer potential cost savings by reducing physical infrastructure and operational expenses. Finally, the invaluable insights obtained from XR interactions allow for tailored personalised offerings, driving both customer satisfaction and business growth. However, when dealing with existing and potential investors, the adoption challenges of XR technology face several obstacles:
· high costs - implementing XR demands considerable investment and technical know-how, dissuading widespread uptake.
· complexity in content creation - developing XR content entails substantial time and effort, alongside ongoing expenses for updates.
· uncertainty surrounding outcomes - many initiatives stall during proof-of-concept stages due to unpredictable returns on investment.
· security concerns - worries regarding data privacy and potential misuse necessitate robust safeguards.
· regulatory compliance - meeting regulatory standards can prove to be challenging when implementing immersive banking experiences.
· technological hurdles - compatibility issues and infrastructure requirements impede the seamless integration of XR solutions.
Addressing these challenges is vital for ensuring responsible and secure adoption of XR in banks and fund managers. Yet, despite obstacles, ongoing innovations and investments signal progress towards overcoming these hurdles and fostering safer, more efficient personalised and immersive investor experiences. The global landscape of extended reality (XR) adoption showcases diverse approaches and ambitions - for example, in:
· The European Union (EU) - with a comprehensive strategy encompassing technology integration and metaverse-specific plans, the EU aims to foster XR development. However, there is a notable gap in addressing metaverse security concerns, posing potential challenges.
· The United Kingdom (UK) - the UK collaborates closely with the private sector, focusing on cyber-physical infrastructure opportunities and challenges. A consultative approach emphasizes cybersecurity principles, reflecting proactive measures in managing XR issues.
· South Korea and Japan - these nations demonstrate significant investments in XR, aiming to accelerate adoption across various sectors. South Korea's "Digital New Deal" and Japan's commitment to digital transformation underscore their dedication to XR integration.
· China - noteworthy for its ambition, China aims to dominate the XR supply chain and international standards. However, concerns arise regarding data security and potential military applications, necessitating strategic responses to safeguard national interests.
As countries pursue XR advancements, then cooperation, competition and regulatory considerations will shape the evolving XR landscape globally. Efforts to balance innovation with security and international collaboration are certainly crucial for navigating the complexities of XR adoption and ensuring responsible development. Extended reality (XR) holds immense potential for banks and asset managers to revolutionise investor engagement and reshape the financial services landscape. But, despite challenges such as high costs, content creation complexity and regulatory compliance, XR offers opportunities for mass customized experiences fraud detection and financial education. Furthermore, the XR market is projected to grow substantially, with industries across the board embracing immersive technologies for enhanced customer interactions. So, as countries worldwide invest in XR adoption, balancing innovation with security and regulatory considerations will be crucial for ensuring responsible development and reaping the full benefits of immersive banking experiences in the digital age. Whilst challenges such as high costs and regulatory hurdles remain, the benefits of XR adoption in banking and asset management are immense, promising a more inclusive and digitally immersive future. Therefore, as financial institutions navigate this new landscape, they must balance innovation with responsibility to unlock the full potential of XR and create meaningful experiences for customers and investors alike.