Do drones have a place in banking?
As other industries test drones as a delivery and surveillance mechanism, what value are banking providers likely to get from this controversial new technology?
Outside of financial services, drones are being used by journalists to capture footage, being tested out by DHL, Google and Amazon for delivery purposes, and even used by the Dublin fire brigade to gather information on emergency situations.
In addition, some brands have shown that they have bigger plans for drones within their overall proposition.
Amazon has recently revealed the next step in their ambitious strategy: flying warehouses. Hovering at around 45,000ft above ground, the idea is that these airships will be equipped with drones that are ready to deliver products.
US start-up, Zipline, is currently managing a project that uses drones to deliver blood to rural Hospitals in Rwanda, cutting waiting times from hours to minutes. This innovative initiative allows the drones to drop packages – filled with blood, plasma, and coagulants – attached to parachutes, thus removing the need for a delivery landing point. This small but important detail sets Zipline aside from other drone delivery examples, most of which have take-off and landing points at both ends of the journey.
Source: Zipline website
The value of these unmanned aerial vehicles is currently being defined, and it will differ depending on the user and the market in which they are operated. Goldman Sachs analyst, Noah Poponak, has even estimated that drones will make up an accumulative £100bn market over the next 5 years.
Assessing damage claims
Within financial services, insurance is the main area benefitting from the use of drones so far – where they are used to assess property risk, and damage, for claims.
One bank to explore drones for precisely this purpose is USAA, who wants to streamline home insurance claims whilst reducing its processing costs and waiting time for repairs. Manually checking for roof damages, for examples, takes a lot of time and effort.
Kristina Tomasetti, director of innovation strategy at USAA, comments: ‘It’s very time consuming and can be expensive.’ The use of drones to assess damage was tested out in a neighbourhood in San Antonio after a hail storm. When using the technology in conjunction with human inspectors, the bank has concluded that this process could result in savings of up to 50%.
Application beyond insurance?
In the not too distant future, we might also see the use of drones spread within financial services.
With the aspiration to provide the fastest and most environmentally friendly way of delivering debit cards to customers, Starling bank is testing out drones as a new delivery system for their cards.
The challenger bank, which is due to launch early next year, has admitted that they are yet to make any deliveries that are further away than 400ft. However, they are planning more work in this area and, if the decision is made to use drones, Starling bank would be looking to gain the approval of the government and the Civil Aviation Authority.
But, not everyone is as optimistic about the delivery aspect for drones. Poponak believes that it is less likely to take off in the next few years. He states that there still are challenges to overcome in bigger cities, which increase the risk of delivery failures. However, this has not stopped providers, such as Amazon and Starling Bank, from exploring it as an option.
We have previously noted a movement towards the use of ‘robots’ in financial services. Chatbots and AI are increasingly being integrated into banking propositions, mainly to deal with customer help and support, but some providers have placed AI at the heart of their offering. In insurance, Mapa has heard rumblings of providers anticipating that they’ll be able to use AI in insurance claim assessments in the future. This too is a long way off at the moment.
Part of the potential of drones, in financial services, might lie in improving reporting and reducing the process times of insurance claims; another may lie in offering the delivery of tangible aspects, such as replacing lost payment cards. With regards to the latter, we need to take into consideration that the digitisation of customer experiences aims to remove most of the physical aspects of banking. The question is, by the time the necessary air regulations have been passed, will there be enough of a return on investment to warrant the cost?
Chris Ward, Research Manager at Mapa, comments: ‘While drones certainly do offer exciting opportunities for ecommerce, their usefulness in banking is currently undefined. As more and more banking services go digital and virtual, we are moving further away from the physical aspect of banking. That’s not to say that there isn’t a great value in using drones. Perhaps there is an application in the home buying journey; could they be used to explore an area with a mortgage advisor? It’s probably a bit far-fetched, but nonetheless this is a space banks should keep an eye on as, whatever happens, drones are likely to play a role in the Internet of Things, a digital eco-systems banks are also going to be a part of.’