Invisible banking is a relatively new concept with the goal of making banking a seamless and natural part of everyday life without ever physically visiting a branch. This concept integrates financial services into websites and apps you already use, making banking easier and more convenient. While it began with personal banking, invisible banking has gradually expanded into the business banking world as well.
The invisible banking fast track
The pandemic created a frenzy of banking customers jumping on the bandwagon to access online features because physical branches were inaccessible. I was able to experience this firsthand as customers who never wanted online banking were suddenly in a huge rush for the bank to set it up.
Since nearly every customer is now accustomed to accessing banking services electronically, it’s only natural we move on to the next level of banking technology. Invisible banking is clearly the wave of the future.
Familiar uses for invisible banking
There are many forms of invisible banking used today that we may not realize already fit into this category. In these applications, funds are automatically deducted from your account without any human intervention. It’s exciting to watch this technology come to life right before our eyes. Some examples include:
- Subscription services:Â A family has movie night every Friday evening. They subscribe to Netflix, Hulu, and Prime Video. Since this is a subscription service, the funds are automatically deducted from their account, making movie night possible without anyone having to send payments manually each month to keep the subscription active. This happens in the background without human intervention.
- Tap to pay:Â A mom visits a warehouse store to purchase supplies for her children, who will return to school in the fall. She has her cell phone with her but decides not to bring her wallet. Since she has a digital wallet with Apple Pay loaded on her phone, she can use tap to pay at the checkout instead of searching for her debit card.
- Automatic transfers: A couple happily welcomes a new baby into their home. After doing a little research, they decide to start saving for college tuition while the baby is young so they will be ready when it’s time to pay. They set up an automatic transfer that happens each time their paycheck posts to their account to move funds without them having to remember.
- Instant offers:Â After graduation from college, a student wants to buy his first car. He has been shopping at dealerships and checking loan rates. An alert is automatically sent to his phone with a special loan offer and a rate discount based on his good credit history.
- Voice banking:Â While on vacation, a bank customer realizes it’s time to pay their mortgage payment. They initiate a bank transfer using voice command, asking a virtual assistant to make the payment on their behalf. The transfer is made and the bill is paid.
Up-and-coming forms of invisible banking
- In-car payments:Â Easily pay for tolls or gasoline by simply touching a button in your car to make payments invisibly. Technology like vehicle identification and integrated banking technology built into the car automatically make the transfer sending the payment directly to the vendor.
- Location-based discounts:Â A location-based discount is also known as an instant offer. If GPS is activated on your phone, an offer can be extended based on your location. If you are shopping at a specific store, you may suddenly get a coupon for an in-store discount.
- Embedded Finance:Â This refers to embedding banking services into non-financial applications you already use each day. This allows you to borrow money or make payments without ever visiting a banking application.
The key components and technology of invisible banking
For banking to be invisible to the customer, technology must fill the gap where the human touch ends. Many forms of technology are used to make this possible such as:
- Internet of Things (IoT):Â There are many forms of IoT. The two that apply to banking specifically are wearables and analytics.
- Wearables could be smartwatches, smart rings, smart bands, smart clothing, or smart glasses. Financial data can be embedded into wearable devices that can be used to pay when visiting brick-and-mortar stores.
- Analytics can analyze trends and patterns to help you with money management such as saving money or investing.
- Artificial Intelligence (AI) and Machine Learning (ML)Â are necessary for an invisible bank to function seamlessly.
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- Artificial intelligence (AI) is used to detect patterns by analyzing data. This allows it to make predictions for financial spending and ultimately offer suggestions.
- Machine learning is also used often in banking. One of the most important is fraud detection. By analyzing large amounts of data, machine learning can pick up on unusual patterns and spending irregularities and block transactions that hit fraud filters embedded in the program.
- Open Banking Application Programming Interface (API):Â Open banking API is used by developers and third-party applications for money collection. Some sites use services like Plaid and Stripe as third-party money collection services to securely collect funds for those making purchases online.
- This works because the application can share data between platforms. When a request is sent, an answer is returned, making online purchases more secure due to data encryption. This opens up the connection between payment processors, gateways, and banks.
- Voice Interfaces and Natural Language Processing (NLP):Â Voice and language technology enables users to access and manage their finances using voice identification and voice commands. A user can verbally ask a virtual assistant to process a transfer or send funds to a certain party without ever opening an online banking application.
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- 5G wireless network:Â 5G provides a secure connection for wireless devices to transmit data for quick payment transmission. 5G also provides high speeds which can deflect a fraudulent transaction. 5G is also strong enough to allow millions of devices to connect simultaneously.
- Cloud services:Â Allows banking services to operate in the background while providing storage for banking documents and transaction information that can be accessed at lightning speed. Cloud-based analytic tools can also be used to analyze customer patterns and behaviors allowing the bank to offer more personalized products.
- Robotic Process Automation (RPA):Â Automates many back-office tasks, allowing banks to provide data quickly and process transactions without any customer interface. This can allow users to communicate with wearable IoT devices, receive instant customer service, and process automated transfers instantly.
- Chatbots:Â After analyzing conversations and data, chatbots create a customer profile to provide solutions and products that are more likely to be needed by the customer and to pre-determine whether a customer meets the qualifications for a certain product or service.
- Data science:Â Banks can use data science to analyze and predict if a customer is unhappy with the bank service and is at risk of leaving the bank. This can give a clearer picture of customer satisfaction and make it easier for the bank to correct any issues before the account is closed.
Invisible banking vs traditional online banking
Invisible banking and online banking have a few similarities and also a few differences. The main differences are noted below:
Invisible banking | Online banking | |
|---|---|---|
Accessed electronically | âś“ | âś“ |
Virtual version of in-person banking | âś• | âś“ |
Used to pay for goods in person | âś“ | âś• |
Requires human intervention | âś• | âś• |
Primarily uses AI to make decisions | âś“ | âś• |
Frequently asked questions (FAQs)
Invisible banking is a method of banking that primarily uses AI and machine learning to process payments, predict customer needs and behaviors, and simplify the customer experience without any human intervention.
Invisible money can be used to pay for goods at a store by using the Tap to Pay feature from Google Pay, Apple Pay, and PayPal.
An instant offer can be extended by using the GPS service activated on your smartphone. A good example could be shopping at Best Buy and suddenly you receive a coupon for an in-store discount on a large-screen TV.
