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Who owns the customer in the internet of things?

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I’ve been talking the internet of things for a while as, after all, The ValueWeb is the internet of value that underpins the internet of things.

A key concept of the internet of value is how it supports your television, car, fridge, shoes, phone, computer and your partners’ and chidlrens’ things to buy and transact.  How do all your things pay when they order an episode of Game of Thrones or a page from The Times?  How does the system know that you’ve authorised those devices to make those transactions?

Those are good questions, but the really hairy question is the end-game where everyone has smart things on the internet.  Seven billion people averaging seven things each using the network creates a network of 50 billion things in the very near future.  50 billion things will be transacting 24 by 7 by 365, and they’ll be transacting in very small amounts.  Let’s say an average transaction will be for $0.25c on some devices, like a television ordering a pilot episode for a TV series.

Now magnify that to global scale, and you’ve got billions of people with smart things making trillions of transactions 24*7 in micro-amounts. 

The banking system will simply implode if it tries to support that system in the way it does today but, as mentioned on Friday, APIs will change the game and allow these systems and devices to interconnect and trade and transact.  This is the way forward, where any device can use a financial widget to transact.

The challenge then is who is allowing the interaction and managing the ecosystem?

It’s not the bank.  It’s Amazon Prime for my TV viewing; it’s Apple for my smart devices; it’s Tesco for my fridge; it’s Shell for my car; and so on and so forth.  These guys are all pushing the envelope when it comes to innovation through open systems and marketplaces, but they own those markets in many cases.  Can a bank become a marketplace where Amazon, Apple and Wal*Mart come to play or vice versa?  And if a bank just lets other wallets take over the trillions of transactions of small amounts, what happens to the banks role, purpose, brand and relationship?

These are fundamental questions and most bankers approach this from the start point of who owns the customer relationship?  I hear that question a lot, and not just from bankers but also from telco’s and other players, but it’s a flawed question.  In a marketplace, who owns the relationship?  The customer of course.  The customer walks the market and picks and chooses what they like.  They don’t get locked into one stall, never to leave.  How bad would that be?  Just imagine a gate to each market stall and, as you walk in, some creepy guy locks the gate and won’t let you out again.


However, that’s the very way that most financial institutions see markets, because they hate the idea of the customer being able to just walk around and leave whenever they like.  Tough call in a future where all my things are trading and transacting non-stop and I’ve delegated their management to my favourite smart wallet.  Who’s the smart wallet?  Do they own the relationship?  And does a bank underpin that wallet and relationship?

Not really. The smart wallet sits there and is most likely to end up being an Apple Pay or Android Pay or Amazon Pay or AliPay.  Anything that’s an A-Pay way.  It is linked into a range of financial services that I use, from multi-card choices to multi-bank links.  Their aggregated structures allow my devices, along with the 50 billion others, to trade and transact all day in trillions of transaction of cents of value.

Does a bank really have any mainstream relevance in that future world?

Tough call as, in the scenarios I’m painting above, most banks will be just like electricity.  I don’t care who makes the electricity; they’re just a faceless supplier to my house and office.  Is that the way of the future bank in the internet of value?

Certainly there are many who believe that is the future of banking and refer to them as the dumb pipes behind the future world.  I would rather refer to them as smart pipes, as there is an opportunity to remain relevant if banks can mine that data and use it smartly.  That is why machine learning is the hottest topic in banking.  However, with old systems that cannot mine the data effectively, and core systems that would crumble under the weight of 24 by 7 transacting in real-time between devices, machines and wallets, it is another reason why banks have to reboot.

How they do that is something I’ve blogged about lots before, and will come back to again, but it is the driving force for change in financial services and the greatest threat that Fintech brings is possibly managing the reboot before the banks get to the gate.

Nevertheless, some banks are already getting there – BBVA, Saxo Bank, PrivatBank, CBW – so it is not all doom and gloom out there.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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