Going Digital

Three reports this week show how incumbent financial institutions grapple with going digital. Taking the certainties of studies at face value:

1. Bank branches will continue to add value to customers while incorporating more technology
2. Insurers will accelerate investments in digital technologies
3. Central banks will face a decision on whether to issue cryptocurrencies

Here are the week's links:

Digital Bank Transformation: The Evolution of Branch Banking

Although bank's are closing branches, the future of the bank branch is bright, report Synechron and Efma in a global report and survey. Some 88% of respondents believe physical branches add value to customers and will play a role in the future of banking.

The future will include roles for both people and technology, with 63% of respondents a planning to change their branch model in line with digital transformation. The report includes case studies of the café branch and describes in-branch, self-serve techniques.

"The answer to what Branch 2.0 should be, is not what services and advice can be served through paperless solutions and digital channels, but rather that customer delight is best achieved when you hand the power to serve the customer back to those sitting in front of the customer," concludes David Horton, Synechron's head of innovation

Underwriting transformation in the digital era

Insurers are planning to accelerate and expand their investments in digital transformation technologies, according to EY’s 2017 Digital Underwriting Survey. The report finds:

• Predictive analytics, big data, underwriting trading platforms, and geographic information systems (GIS) are the most mature technologies.
• Blockchain, robotic process automation (RPA) and sensor-based technologies are all high priorities for the future.
• Insurers currently measuring early-stage investment performance report strong returns, with most meeting or exceeding expectations.
• Insurers and brokers agree that underwriting and pricing capabilities are the most important and potentially valuable in terms of future technology investments.
• Actuarial has benefited the most from predictive analytics and machine learning, while policy processing has been the focus of RPA initiatives. Product management capabilities have benefited from big data and automated portfolio management.

Central bank cryptocurrencies

The Bank of International Settlements notes that central banks are entering the cryptocurrency fray and implicitly concludes that digital currencies issued by central banks are coming. "While it seems unlikely that bitcoin or its sisters will displace sovereign currencies, they have demonstrated the viability of the underlying blockchain or distributed ledger technology (DLT)." The BIS report presents a taxonomy of money based on four key properties, as shown below:

Cash may be the only current form in which the public can hold central bank currency, but that is starting to change. "Whether or not a central bank should provide a digital alternative to cash is most pressing in countries, such as Sweden, where cash usage is rapidly declining. But all central banks may eventually have to decide whether issuing retail or wholesale CBCCs makes sense in their own context."

BLOCKCHAIN WATCH

Pitchbook's 3Q 2017 blockchain report gives the following summary of recent events:

• Regulatory statements in China and the U.S. have yet to temper market enthusiasm for the red-hot cryptocurrency and ICO market.
• SEC recognition that some tokens are securities and some are not is a sensible approach that will encourage the best ideas to continue in a sandbox, while less-innovative projects will face more scrutiny.
• VC investment in blockchain companies has remained relatively flat, even as the ICO market has exploded.
• Only half of valuation step-ups in blockchain companies have outpaced the price increase of bitcoin in the same time period.

Bitcoin mines. Quartz published a cool guide to digital gold. The center of the bitcoin goldrush is China even as the "country’s exchanges have been all but closed by a government crackdown, in a significant challenge to bitcoin’s core premise: That it’s beyond the reach of any government." Everything you wanted to know about how the bits become coins.