Rise of the Machines?

By Monica C. Meinert

Pepper the robot greets an HSBC customer in New York.

At HSBC’s flagship branch in New York City, there’s a new face waiting to welcome customers when they arrive. Its name is Pepper, and it’s the first-ever robotic financial services concierge. Standing about four feet tall, the humanoid robot can greet customers, answer questions, provide basic information about the bank’s products and services—and even dance.

Pepper’s arrival at HSBC’s Fifth Avenue branch is just one of many new innovations that the bank will be rolling out in the coming months as it works to redefine the branch experience, says Pablo Sanchez, regional head of retail banking and wealth management for HSBC in the U.S. and Canada. “What we’ve done is try to create a philosophy at our branches around really being customer-centric, understanding that branches—while they do fewer transactions today—are still an anchor point for the relationship with the customer.”

Since joining HSBC in 2015, Sanchez has been working to bring his vision for the “bank branch of the future” to life. At the core of that vision is the desire to build the “best retail experience in banking—period,” says Jeremy Balkin, HSBC’s head of innovation, who was challenged by Sanchez to seek out innovations that were fun and exciting, but would also create real value for the bank. One of those was Pepper—the friendly, interactive robot delivered by Japan’s SoftBank robotics.

Working in partnership with SoftBank, the robot was customized to house a wealth of knowledge about HSBC’s products and services and tied into various APIs that allow it to communicate and interact with humans in a highly personalized way, from giving tutorials on remote deposit capture to talking about the weather.

A key strategic goal for the robot is to reduce customer wait times and improve overall the experience customers have when they step into the always-bustling Midtown banking hub. By providing customers with basic information and tutorials while they wait, Pepper allows HSBC employees to focus more time on having meaningful conversations with their clients.

And then of course, there’s the “delight” factor that Pepper’s presence brings to the branch atmosphere. From the initial test to Pepper’s official rollout in late June, the robot has brought a renewed sense of energy and excitement to the branch—and that’s evident in the smiles of both customers and employees.

Ultimately, all of the dialogues and journeys customers can go through with Pepper are designed to end with a human interaction, Balkin adds—whether that’s a conversation with a banker, or the customer serving himself. “As an industry, we have a responsibility to be engaging with customers in the most meaningful, exciting, delightful ways,” says Balkin. “Retail banking does not need to be boring.”

With Pepper now active in the branch, Sanchez and Balkin will gain valuable insights about the types of interactions customers engage in when they visit the branch. The data Pepper collects about customers’ needs and preferences will help the innovation team as it continues to forge ahead with future advancements in Pepper’s capabilities. For instance, while Pepper is currently not able to process transactions or handle any personally identifying information, it’s not hard to imagine a future where a customer could, for example, use Pepper to learn about a new credit card product before applying for one on the spot.

“We certainly haven’t tapped into all the capabilities Pepper has available to us yet,” Sanchez says. “But we will get there.”

Eyes in the sky, wheels on the ground

Robotics technology is on the rise, as systems have become smarter, faster and cheaper to produce in recent years; the International Federation of Robotics estimates a 13 percent growth rate in the supply of industrial robots between 2017 and 2019. Many banks are exploring their applications beyond the branch; in Rhode Island, Citizens Bank saw an opportunity to leverage autonomous machines to support its physical security operations.

In August 2016, the bank broke ground on a new 420,000 square-foot campus in Johnston, R.I., just outside of Providence. With multiple buildings that will eventually house thousands of Citizens employees, a parking garage, walking trails and ball fields, the complex provided a unique challenge for SVP Bert Oliveira’s physical security team.

Citizens Bank is testing robots for security monitoring.

“It was a great opportunity for us to take the leap [and] start to look at new technology,” Oliveira says. “This is a brand new building, we’re taking ourselves to the future here, so let’s look at some technology that’s out there that can help us from a security perspective.”

The bank chose to incorporate both drone and robot technology into its security strategy for the campus, to help with situational awareness and parking lot management. Both the drones and the robots operate completely autonomously, and are monitored by the bank’s 24/7 onsite security force.

Using drones to patrol the campus “minimizes risks to guards, because we see things in advance with the drone and are able to react to them more appropriately,” Oliveira notes. The robot—a motorized, 400-pound bullet shaped device equipped with 360-degree camera capabilities built by robotics manufacturer Knightscope—will patrol the parking lots assisting with parking lot management and monitoring for suspicious activity.

While the drones and robots are only in use at the Johnston campus currently, Oliveira says the bank hasn’t ruled out the possibility of using them elsewhere, and will continue to evaluate other types of technology that can enhance its security program.

“I think the industry needs to look at technology continuously for security purposes,” he says. “In my dealings with my peers, I see a lot of interest in [this kind of technology].”

Advancing automation

When Hurricane Harvey made landfall in Texas in late August 2017, it dumped nearly one trillion gallons of rainwater, flooded cities and towns and left a trail of destruction in its wake. As severe winds and rains battered a number of coastal and inland communities, more than 34,000 residents were displaced, thousands of homes were damaged and financial damages were estimated at upwards of $100 billion.

As the storm clouds began to move out, something else took to the skies above communities like Rockport, Corpus Christi and Houston: drones, dispatched by insurers to begin the long and grueling process of assessing the damage.

For San Antonio-based USAA, drones were part of a post-hurricane strategy that also included the use of manned aircrafts and satellites to gather aerial imagery, helping the company piece together a comprehensive picture of the damage. The drones themselves assisted on a case-by-case basis as insurance adjusters began inspections of individual homes.

“When we’ve got a high volume of claims coming in, we can facilitate that claim a lot faster when we don’t have to climb onto a two-story or a three-story with a steep roof,” explains Jay Mullen, USAA’s strategic innovation director. Instead, claims inspectors will use a small drone (typically a Phantom 4 Pro—a small, consumer-grade quad-copter aircraft with an attached high-definition camera) to fly up and capture an overview shot of the entire property, and several more detailed, close-up shots from different angles to help identify damage.

Flying the drones is usually an autonomous process, where the adjuster simply programs in the property perimeters, physical attributes of the home and any obstacles. But Mullen notes that all of USAA’s drone pilot adjusters have an FAA Part 107 remote pilot’s license, and have the ability to take over control of the drone at any time.

USAA’s drone for disaster damage assessment.

USAA has a number of full-time employees on the innovation team that are licensed drone pilots, as well as many employees working in the claims department and as field adjusters in the bank’s markets across the country. The bank also has a partnership with a drone pilot network that it can leverage to perform inspections and send imagery back to internal adjusters for review.

“We’ve taken it from a very strong aviator mindset in implementing every stage of this” that starts at the top of the organization, Mullen adds—USAA CEO Stuart Parker himself is a former Air Force pilot. And in terms of risk management, “we’ve taken that head and shoulders above what we see the rest of the industry doing” when flying drone capabilities.

As a recognized innovation leader in the financial services space, USAA was early to begin exploring drone technology nearly a decade ago to improve the insurance claims process.

“It has really become a perfect example of what innovation is,” Mullen says. “The drone story here hasn’t been a rapid uptake of a new technology that’s solved the world’s problems by any means.” Rather, it started as most innovation projects do—with intense research, a careful evaluation of pros and cons, and lots of learning along the way.

For example, Mullen notes that a key piece of the drone project wasn’t about getting the drones into the air, but improving the overall insurance assessment workflow.

“Coming out of last storm season, we found that drone inspection did speed up [the claims process]. But often times, the onsite inspection time savings was offset by the time needed to process and analyze the high number of photos taken by the drones.”

This prompted the innovation team to incorporate cloud-based analytics and machine learning to improve the backend workflow process. “Once that imagery is captured, the imagery automatically goes to a server and analytics begin,” which assists the adjuster with highlighting potential damage.

Using drones to help automate parts of the insurance claims process is just one of many possible use cases for automated technologies, and the market for these innovations is growing. For example, a 2016 report by Goldman Sachs forecasts that drones will be a $100 billion market by 2020, as they become more widely adopted by everyone from government agencies to farmers to filmmakers.

From a banking industry perspective, drones and robots can assist with a range of different tasks, including asset inspection and physical security. One Russian bank—Moscow’s Sberbank, which serves a geographic area that spans 11 time zones—is even piloting a program that uses drones to securely deliver cash. While it’s unclear if such a use case would ever be practical in the U.S. banking system, as technologies continue to develop, one thing is clear: banks will continue to find innovative uses for them.

About Monica C. Meinert

Monica C. Meinert
Monica C. Meinert is deputy editor of the ABA Banking Journal and a senior editor at the American Bankers Association, where she oversees ABA Daily Newsbytes.
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