CBA’s Rajasingham: “IoT and AI will create self-sustaining market places with autonomous robotic agents as our clients”

• Meshing of emerging technologies creates powerful value propositions 
• Internet of Things affect how future market places are run, maintained and serviced
• Collaboration with all players in a broader ecosystem is the future to develop emerging technologies

Banks aim to stay market competitive by identifying and experimenting with emerging technologies that may one day become ordinary. Leading banks have institutionalised this process by allocating distinct resources to the future of finance. A case at hand is Commonwealth Bank of Australia (CBA), where a team around Dilan Rajasingham, head of emerging technology, aims to understand new technologies and how they work in the context of real business problems.

Currently, the bank’s focus in the emerging technology space includes augmented reality, blockchain technology, Internet of Things (IoT) involving drones and artificial intelligence (AI) projects, cybersecurity, process automation and quantum computing.

“We look at technologies that will be commonplace in the next five to 20 years, experiment with them, find their best usages and from that develop new products, insights and capabilities that we will need to address future customer needs; not necessarily those that are presented today,” explained Rajasingham.

“One would argue that IoT is predominantly consumer technology. However, if we take this a step further, and we think about different types of financial services such as lending, asset leasing, and trade finance, we don’t have a sufficient amount of information to make real-time decisions. IoT provides a unique opportunity to better meet customer needs real-time,” he added.

CBA’s cotton trade as a proof of concept for emerging technologies

Rajasingham argues that real-time is not only about location but also about the quality of a product. A case at hand was a real experiment with IoT and blockchain in October 2016. CBA, Wells Fargo and Brighann Cotton conducted the first cross-border trade transaction using blockchain technology. The trade transaction was a cotton shipment bound for China with a value of $35,000, which CBA demonstrated as proof of concept combining the emerging disruptive technologies of blockchain, smart contracts and IoT.

According to CBA, the trade involved an open account transaction, mirroring a letter of credit, executed through a collaborative workflow on a private distributed ledger between all parties. The trade introduced a physical supply chain trigger to the terms of the transaction to confirm the geographic location of goods in transit, before a notification is sent to allow the release of payment. The tracking feature adds a new dimension, providing all parties with greater certainty compared with traditional open account and trade instruments like letters of credit, which focus on documents and data.

The use of blockchain technology created transparency between buyer and seller, a higher level of security, and the ability to track a shipment in real time. The advancement from paper ledgers and manual processes to electronic trackers on a distributed ledger reduces errors and accomplishes tasks in minutes what used to take days.

The IoT played a key role; the trial included a GPS device to track the cotton’s movement. All parties could see when the shipment left port, where it was on the seas, and when it left the ship. This linked payment and risk to the actual physical flow of goods. Historically, these were linked to the paper flow. It takes days, even weeks, to physically move the documents advising the exporter that the importer has the necessary funds to pay for the goods. The importer undergoes a similar ordeal awaiting notification of the goods’ arrival at their destination before authorising payment. Funds and insurance are therefore unduly tied up at both ends, but IoT provides real-time signals as to when funds can be released and insurance is needed or no longer required as specified in the contract.

In future, those traders could leverage IoT to measure the quality of the cotton in real time. “Take the shipping container, for example. Rather than merely monitoring location you can deeper integrate this with AI and IoT so that one can provide ahead the best insurance payout in relation to a customer’s history. Let’s say if the quality of the cotton would drop below a certain level, IoT could trigger in real time an insurance policy rather than waiting to discover the drop of quality of cotton at the port, receiving the letter and then filing the claim through a lengthy paper based insurance process. If you start meshing these technologies together you are really getting a powerful value propositions,” he said.

Still, for Dilan, it’s not just about insurance claims or internal process improvements in offices and data centres. IoT’s impact is more fundamental in how future market places are run, maintained and serviced.

Rise of autonomous market agents

“One can take that a step further; if devices are connected with AI as a means to view the outside world, it has the potential to become a marketplace where it can be self-sustained. What does this mean to us as a financial institution when you create sufficient autonomous agents? Imagine you have a technology device that is somewhat a sentient information processing system which is self-sustaining. What does this mean for service companies as AI systems gain more knowledge and start becoming part of an ecosystem as an autonomous robot? For example, does a robotic customer equal the financial consumption behaviour of a person? Can we – and should we – provide lending facilities to sustain their activities?”

“These are some of the critical questions we will face as IoT can significantly alter the way we interact with our environment,” Rajasingham added.

He believes that all organisations in the market, whether they are banks or car manufacturers, need to think like technology companies to understand the risk involved. Where IoT devices are easily pluggable in the broader digital ecosystem, banks need to improve the customer experience without compromising security and privacy.

Most banks are still discussing what bet they should take in IoT and other emerging technologies. Rajasingham’s advice: banks should not wait to deploy IoT solutions until this technology becomes more mature. Setting up a capability where a bank can experiment and understand this technology for the betterment of its customers is the first step.

“What we are trying to do in CBA is work with banks across the world to experiment and learn from each other. We do it as part of an ecosystem. IoT and other emerging technologies encourage banks to come together to look for collaborative opportunities, because not one bank but all can win. This is the future. It’s going to be less about process efficiency, and more about the experiences we can provide to a customer in collaboration with a larger ecosystem of players. That ecosystem approach is the future in banking.”