The smart city is not a new concept, but it is a new capability. In essence, smart cities are enhanced spaces that can quickly, flexibly, and intelligently evolve to meet the needs of the people using them.
Smart cities require a way to track, store, and analyze huge amounts of data. Companies like IBM and Cisco offered these services to multiple municipalities, but the response has been lukewarm at best.
Does that mean smart cities are a pipe dream? Not necessarily. It simply means governments are not the logical drivers of this evolution. It is more likely that private enterprise will transform the cities of the near future, and banks are in a unique position to lead that charge, with payments data leading the way.
The very nature of local governments — a collection of loosely connected, heavily siloed departments — should make this a not-so-surprising outcome. Plus, the tech required to integrate departments in a way that makes even the most basic features of a smart city possible requires a huge investment of time and capital and a shift in culture.
Consumers are banks' greatest asset, but not because they pay fees and make interest payments. It’s because they willingly provide you with information about behaviors that are fundamental to their lives.
For example, take Sally, a longtime customer. Think about what a bank already knows about her through payments: what she likes to buy, where she likes to shop, how far she is willing to travel to make a purchase, and how much she is willing to spend. Sally’s spending habits tell you a lot about her.
Dig a little deeper into the data and you can predict how many kids Sally has, where and when she plans to vacation, where she likes to eat, and what kind of car she wants to buy. Financial status is a primary driver of human behavior. As a bank you have deep insights about Sally’s status.
Put another way, banks possess the payments and other transaction data that municipalities do not. That means banks can provide the kind of intelligent services and personalized information consumers yearn to have.
Banks already have huge repositories of customer data. Forward-thinking banks will use this information to offer “concierge” services targeted specifically at a customer’s wants and needs.
Financial institutions can, for instance, simplify complicated purchases such as finding an affordable plane ticket. They will deliver customers deals and offers that are relevant to their locations and purchasing goals and leverage their expertise to streamline the financing process. Sally is already looking for these kinds of services; banks are just a step or two away from providing them.
Unlike usual predictions about branches of the future, physical facilities will continue to play an important role in a successful bank’s digital strategy. Instead of closing branches, innovative banks will leverage them as hyperlocal information hubs and community search engines. In this new model, local retailers and members will communicate, consult, and recommend services through their local branches as proxies.
If any doubt exists that this is not only possible but necessary, consider the example of Uber. In just a few years, a tech-based startup completely redefined the way people think about urban travel. There is no reason to think that banks are immune to this kind of disruption.
Ask yourself two simple questions. First, would you as a consumer benefit from smarter cities? Second, would you as a banker benefit from developing high-touch, around-the-clock relationships with your customers?
If the answers are yes, it’s time to get serious about new approaches to data.