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1 November 1998

The Future for Finance - HotEcho

by Tony Harrington (HotEcho, published by Scottish Enterprise)
The financial services sector has been accustomed to leading the way in deploying innovative IT solutions. Now, as we approach the Millennium, along with the Year 2000 problem and preparations for EMU, the sector has the task of charting its course.

At the Bank of Scotland, the potential for new technologies to completely change both the nature of the services provided to customers and the Bank's business processes is taken very seriously. Stewart Stevenson, Head of Technology Planning at Bank of Scotland, describes the goal of his mission as to think the unthinkable.

"Accuracy is not necessarily the point of what I am doing. The idea is to stimulate thought - one of the big advantages of looking 20 years ahead is that very few people will remember what you got wrong!" he explains. One of the hardest parts of trying to think about the potential opportunities new technology may make available, Stevenson points out, is that people have a natural tendency to filter out whatever does not conform to current practice.

"The idea is to break out of the normal mind set, where we naturally just keep on adding to what we are already doing - a practice I call the confirmation bias. This is very important because the challenge technology so often sets is the need to grasp that the best way forward is not a modification of what we are currently doing but a radical departure."

Treating a new development such as the Internet as merely a new channel for the delivery of old products is not that useful, he points out. "The idea is to see what new products, what new relationships, these new channels enable us to provide for our customers," he explains.

 
Stevenson says that in his forward planning he finds it useful to consider change in terms of movement along five different dimensions -economic; social and cultural; political; competitive pressures; and technology. While these are all dimensions for change in the future, it is important to realise that the speed of change varies from category to category and change in any category can bring as dramatic and important consequences as technological change.

"If one takes the social and cultural dimension for example, who would have suggested 20 years ago that 50 per cent of children born in Dundee would be born out of wedlock, with all the implications that has for a changed society? Moreover, who would have predicted that the banks would be facing significant competition from the insurance companies and supermarkets?" he observes.

Stevenson points out that by comparison, much of today's technology was actually quite predictable 10 years back. "In many ways we can use what we know about the likely future of technology to project our thinking forward into the future on the other categories. We can then start to build some scenarios of the kind of organisations that might be around then. And from there we can foresee the kinds of steps we need to take to get there from here," he argues.

Stevenson gives three examples of technologies that he expects to bring about fundamental changes in banking practice in the near future. These are speech recognition, viable electronic money and the availability of higher bandwidth for communications generally and for the Internet in particular.

"The key point about these technologies is that when they become ubiquitous, they all have the potential to bring about a step change in the society generally. As the take-up of these technologies spreads to more and more people the cost of providing services based upon them reduces dramatically. They become an enabler for the whole society, and for the markets that will be built upon them," he comments.

As an example of how higher bandwidth might come about, Stevenson points out that as fibre optic communications moves from its current analogue base to digital over the next five years, it will automatically enable bandwidths for individual subscribers to reach approximately 6 megabits per second - some 100 times faster than today's modem technologies. Things could, of course, improve dramatically if the compression algorithms that drive rich data communications improve still further. Optic cable currently runs to within a few hundred feet of many of the country's house-holds, he points out, and the distance between the cable and the doorstep can be covered by copper wire for the short distances that are not covered by optic cable.

From the standpoint of the financial services industry, he points out, one of the most exciting things about these changes is that they will, as he puts it, "enable technology to disappear again". With pervasive speech technology the need to use a special device to talk to computers will vanish. When we no longer need keyboards and screens the computer can be embedded inside virtually anything. "There will be some point in the future where, as you visit your bank, your identity will be sensed by the door and the staff member you deal with will have all the relevant information about your account as you approach," he predicts.

Stevenson looks forward to a future where technology can be used to rebuild the relationship with the customer - a relationship which he views as having been broken by technology when it transformed customers into numbers that could be processed. "It will not be long before we can provide banking anywhere, at any time, and for anyone," he predicts.

Stewart Stevenson
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