Morpheus and The Matrix introduced virtual reality (VR) to a mass audience, and the technology — once largely the domain of the entertainment industry — is now poised to reinvent a range of industries, from healthcare and the military to education and financial services.
VR technology appeals to industry because it has the potential to improve the user experience by transforming uninspiring or complicated content into a vivid, immersive experience. This opportunity is particularly relevant to the financial industry, because it represents a new channel for financial services providers -– such as wealth managers, brokerage firms and personal bankers — to deliver financial content in a novel and easily consumable visual format.
The generation driving greater adoption of VR technology is the same generation that grew up on video games and films such as The Matrix and Minority Report — millennials. This new generation of consumers is known for its willingness to embrace new technologies, as well as the risks they bring. Roughly one in every three U.S. workers is a millennial; by 2025 they will make up 75 percent of the national workforce. These workers are now using their newfound wealth and influence to drive change in many industries, particularly financial services.
There are 84 million millennials in the U.S. alone, making it the largest generation in American history. According to the Millennial Disruption Index, a three-year study that surveyed 10,000 millennials about 73 companies spanning 15 industries, the banking sector was found to be at the highest risk of disruption.
Millennials have deep-seated issues with the retail-banking customer experience, according to the study. Whether it’s applying for a loan or signing up for a credit card, millennials aren’t particularly inclined to visit a bank branch, especially now that they can do most of their banking on a mobile device. However, they will likely still need the professional financial advice for key life events, like taking on a mortgage or establishing a family trust.
This loss of confidence in the traditional pillars of the financial system has seen many millennials voting with their wallets by taking their business to non-banks and startups.
VR, with its ability to immerse the user in a rich, lifelike experience, offers one possible passageway to help long-established financial institutions fight back against the erosion of their core, wage-earning customer base.
This shift has put banks and other financial services providers under considerable competitive pressure, but it has also presented them with an opportunity to re-evaluate the way in which they engage younger consumers. VR, with its ability to immerse the user in a rich, lifelike experience, offers one possible passageway to help long-established financial institutions fight back against the erosion of their core, wage-earning customer base.
There is ample evidence that customers are willing to engage more with their banks if provided with a better overall level of service. VR technology has the potential to function as just such a benefit, augmenting traditional brick-and-mortar banking activities, while implanting the customer in a highly immersive environment.
Several financial institutions have already taken the first steps toward adopting VR technology. In late 2014, the R&D lab of one firm launched an investment tool that combines VR with data visualization. The experimental investment app is designed to improve the customer experience by transforming blocks of data into a more immersive trading environment, with the portfolio representing a city and each position representing a building.
Another prominent investment bank is applying VR technology to wealth management with the release of an interactive retirement planning application that helps users visualize their journey toward retirement. Early studies of the application are proving that consumers, when shown computer-generated versions of themselves at retirement age, are more willing to accept later financial rewards over immediate ones.
VR also has the potential to be a transformative technology for banks entering emerging markets. Rather than investing time and capital building brick-and-mortar branches, they can improve efficiency and engagement by bringing VR headsets directly to target markets. This way a customer in an emerging market can enjoy the same banking experience as a customer in a developed market. One Asian bank is already exploring the potential of VR technology by creating a digital platform that allows customers to remotely carry out traditional banking activities.
Others in the financial space are using VR to help design new workplaces with a view toward making them more customer-friendly. One large firm that specializes in tax preparation recently built a virtual mock-up of a new office layout and invited customers and employees to put on a VR headset and test it out — not unlike stepping inside an architectural rendering.
Research conducted at Stanford University’s Virtual Human Interaction Lab has shown that making the cause and effect relationship perceptual, as opposed to theoretical, changes consumer behavior more than other interventions. This corroborates the frequently cited statistic from Dr. Albert Mehrabian that 93 percent of all daily communication is nonverbal, which shows that humans rely on multiple senses to better process information and make decisions. VR, if effectively applied, holds the potential to maximize customer engagement by emphasizing the visual elements of an interactive banking experience.
By transforming the consumer banking experience using VR technology, retail banks have the potential to stimulate greater — and potentially more profitable — customer engagement.
Fortunately for financial services providers, VR technology is among the few hot solutions that can boast awareness among millennials. The gaming industry’s early attraction to VR has created a crowd of early adopters, who will help evangelize the adoption of VR in banking. Already, there are many signs that the technology is climbing the adoption curve toward mainstream acceptance.
According to a recent BI Intelligence report, shipments of VR headsets are estimated to increase at a 99 percent compound annual growth rate between 2015 and 2020, making it a potentially $2.8 billion hardware market. The software market, which includes games and other applications, could be even larger. Supporting this growth is a handful of major manufacturers, each with the resources and experience necessary to scale the technology commercially and keep costs reasonably low.
In the Age of the Customer, empowered buyers can demand — and often receive — a new and improved level of personalized service. With VR technology now both affordable and functional, financial services providers should think of VR not just as an opportunity to showcase their ability to innovate, but also as an opportunity to transform the customer experience. VR banking provides a path for banks and other financial service providers — both innovators and technology laggards — to capture market share with millennials and future generations. Those who ignore this opportunity risk suffering the same fate as other companies and industries that were too late to adapt to seismic technological disruptions.
As Morpheus said in The Matrix, “There’s a difference between knowing the path and walking the path.” It’s time banks walk the path and accept virtual reality as a promising feature of the future banking experience.
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Source: Tech Crunch